The Real Deal - Winter 2010

Date: December 15, 2010

Pandora, a Retail Success Story Bucking the Trend
by Tami P. Daniel

One of the brightest rays of light in today's long suffering retail market may be the launching in the United States of franchise concept stores carrying Pandora brand jewelry and accessories. The Real Deal recently met with John Jackson, Vice President of Operations for the Albert S. Smyth Co., the nearly 100 year old jewelry store business based in Timonium, Maryland, regarding Smyth's experience as a Pandora franchisee in several states. Mr. Jackson, a veteran of 22 years in the jewelry business, the last ten with Smyth and 12 before that with Sterling Jewelers, has been leading Smyth's efforts to expand from a locally operated full service jewelry store into a national mall retailer. The experience has been exciting, especially in these times when the retail industry outlook continues to be very cautious.

John talked to us about the timeline of major events in the history of Pandora. The company began in 1982 when a Danish goldsmith opened a jewelry store in Copenhagen. A couple of years later a jewelry designer was hired and the focus of the company quickly evolved from a retail business to a wholesale dealer within a few short years. A little over ten years later in 2000, the popular Pandora charm bracelet was launched, allowing customers to select from hundreds of unique charms made of sterling silver, 14K gold and Murano glass. It was not until 2003 that Pandora jewelry was sold in the United States and Canada, where it was distributed mainly in gift shops and later in jewelry stores. Today there are over 2000 jewelry and gift stores carrying Pandora bracelets, rings, necklaces, and earrings.

The next step was the formation of Pandora "concept" stores, selling exclusively Pandora jewelry and accessories, the first of which opened in Charlotte, North Carolina, in 2007. Today there are nearly 100 Pandora concept stores throughout the nation operated by several different franchisees, one of which is Smyth Enterprises, LLC, an affiliate of the Albert S. Smyth Co. The North American headquarters of the franchisor, Pandora, LLC, is located in Columbia, Maryland.

Smyth was a natural candidate to pursue a Pandora concept store franchisee opportunity since its Smyth jewelry store carried the popular merchandise for some years. According to John, among the factors Smyth considered in becoming a Pandora franchise included the benefits of relatively low start up costs and the fact that the line is "price protected," meaning that all retailers have to sell the merchandise for the same price. As of December 2010, Smyth operates nine Pandora concept stores in five states--Maryland, Texas, Virginia, Missouri and New Jersey. Smyth will open two additional stores --one each in Virginia and Texas -- in the spring of 2011, with another three stores to open later that year. Smyth, with input from the franchisor, selects on average 900 square foot sized stores in "A" malls, such as Towson Town Center, Tysons Corner, and Galleria Dallas. The target customer is a 35-50 year old woman who enjoys being her own jewelry designer. While the average price point is $30, at the upper end, individual items can range from $600 to $6,000.

The design of the concept stores projects a clean, simple, "Euro" look and feel, with substantially all glass or open storefronts. The average cost to build a store is $175,000, which includes the sleek fixtures that were originally made only in Denmark but now (thankfully, according to John) are manufactured in Florida as well.

We asked John what the biggest challenges are for his company in becoming a national mall retailer. Not surprisingly, the biggest challenge involves change. Among the biggest changes are the logistical adjustments required to the parent company's systems to absorb many new stores in many different states in a short period of time. Even more complex are the cultural changes that are necessary to adapt long-term Smyth-only employees to the new dimensions inherent in being a multi-unit retailer.

In addition to the internal challenges, there are always the risks associated with signing leases in what continues to be a below par climate for many retailers, a risk that can cause John a few (but not many) sleepless nights, since nearly all of the Pandora concept stores are exceeding sales' projections. The Pandora story gives us all reason to believe that the retail market is turning the corner.

Baltimore County Master Plan 2020 and Comprehensive Zoning
by John B. Gontrum

Last month, the Baltimore County Council adopted a new Master Plan to guide the growth and development of the county and the provision of county services for the next decade. State law (Article 66B of the Annotated Code of Maryland) requires local jurisdictions to review, and if necessary, amend or revise master plans and describes twelve "visions" which local jurisdictions are required to implement through the adopted master plan. In addition to addressing the twelve visions, the Baltimore County Master Plan 2020 articulates three goals: Continue the Success of Growth Management, Improve the Built Environment; and Strengthen Resource Conservation and Protection.

The Baltimore County Charter requires that a Master Plan be adopted at least every ten years and a zoning map be prepared at least every six years. State law now requires that such map be "consistent" with the master plan. In Baltimore County the map process actually occurs every four years in order for each elected county council to vote on the zoning map. This process will start in the fall of 2011 and will end in late summer of 2012, with the adoption of a new zoning map.

Much attention has been paid in recent years to the impact of the Court of Appeals' opinion in Trail v. Terrapin Run, LLC, 403 Md. 523, 943 A.2d 1192 (2008), and of the subsequent overturning of that opinion by the adoption by the Maryland General Assembly of Chapters 180 and 181 of the Acts of 2009, addressing master plans and zoning and development ordinances. A new Section 1.02 of Article 66B was adopted requiring "consistency" with a master plan when reviewing a special exception, or adopting zoning and development ordinances and regulations. "Consistency" includes development patterns, land uses, and densities or intensities. For example, new, high intensity industrial development requiring the extension of public water and sewer outside the Urban Rural Demarcation Line (URDL) in the rural area of Baltimore County could be deemed "inconsistent" with the master plan. Typically, when such zoning has occurred in the past, the URDL and the master water and sewer plan have to be amended in order for development under that zoning to occur.

Since 1978, the Baltimore County Charter has required that comprehensive zoning maps be consistent with the adopted master plan. The state regulations, therefore, are nothing new to Baltimore County. Moreover, the County Code Section 32-2-202, the resolution language adopting the plan, and the adopted plan itself, have all stated that the master plan is a "guide" to the development of the county. This use of the master plan as a guide to specific zoning has been repeatedly articulated in previously adopted plans and in numerous court decisions reviewing zoning maps. Little change, therefore, is anticipated in the relationship between zoning and planning from previous zoning maps.

What is very different in Master Plan 2020 is the proposal for transect-based planning to guide development. If adopted, this could dramatically change the zoning categories in Baltimore County and the way in which development occurs.

The 2011-2012 comprehensive zoning map process promises to be very interesting. The seven-member Baltimore County Council which adopts the zoning maps has five new members, none of whom have ever served as elected officials. Redistricting will occur prior to the zoning map adoption, so that the normal practice of individual council members reviewing zoning issues in their district will be stretched a bit because the districts in which they will be reviewing zoning issues may not match up to the districts in which they may be running for election in 2014. Finally, this master plan contains a very different approach to zoning and land use regulation from any previous plan, and whether legislation will be adopted pursuant to it, prior to, or during the zoning map process bears close attention.

We recommend that people with property interests begin to examine their options now. This zoning map process provides unique opportunities as well as challenges for job creation and responsible development. Waiting until the process formally begins in September 2011 may be too late to establish the necessary discussions among members of the council, county staff, and community and business groups. Once begun, the process moves quickly. The processing of zoning map issues is all about building relationships and working through issues as partners with various individuals and groups. Building those relationships and working through issues takes time, and waiting until the last minute may be too late.