What’s the deal about franchising? Far from being about restricting independence, retailers are saying that it is giving them new opportunities to trade successfully
A lot has been said about convenience store franchising. It’s working with the enemy, it’s sacrificing your independence for profit, it’s like being fitted into a retail straitjacket. But here’s the thing: retailers might actually need it.
Raj Sangha in Stoke-on-Trent certainly feels better for it. He’s been an independent retailer for 27 years, and until last year was with Nisa. But since November he has been a fully-fledged One Stop franchisee and feeling a lot happier. “In the past two years our business dropped by about 20%, but now it is climbing again,” he tells C-Store. “We have better turnover, a better margin, and an easier life. It’s like playing for Man Utd rather than Stoke City.”
In Raj’s case the conversion involved remodelling the store from a traditional heavily-stocked emporium to a more focused outlet, zoned around shopping missions. The till was moved and a huge number of lines managed out of the inventory. As an old-school independent grocer, Raj still dislikes the phrase convenience store. But that is exactly what the store has become, and if he encounters something he hasn’t seen before, he calls his area manager.
What One Stop retailers say
Raj Sangha, Stoke: “We never had any procedures before. One Stop trains the owners as well as the staff.”
Muhammed ‘Tony’ Riaz, and manageress Ayesha Ashraf, Stoke: “One Stop knows what to do. Everything is organised, everything is controlled.”
Stephen Green, Barlaston, Staffordshire: “It gives you the confidence that you are doing the right thing.”
“As wholesalers and buyers, Nisa are good at what they do, but if I had an issue I couldn’t get through to anyone. With One Stop, we get a visit every week for spot-checks.”
Nearly 100 stores are already trading as One Stop franchises, and the pipeline of conversions shows no sign of slowing down. And the concept is changing the retail landscape as significantly as it is changing the interior of Raj’s store.
Under the franchise scheme, there is a strict schedule of tasks to follow, such as gap checks and temperature checks, to make sure the store is trading to the required standard. And this discipline has been a blessing in a lot of ways.
“Staff know what they have to do now,” says Raj. “Before, once they had filled the shelves, they would just stand there. Now they have a guide to follow and they are always on the move, always doing something.”
Filling shelves was something of a problem previously, as One Stop told Raj he was carrying far too much stock, tying up working capital and aiming at the wrong market. “We stocked a lot of the 25p and 35p brands, but we’re not allowed to stock them anymore. It’s more the bigger brands now. Our warehouse used to be full all the time; now it is virtually empty.”
One Stop’s franchise director Andrew King is keen to stress that it’s a two-way street, and that terms and conditions of the franchise agreement have been tweaked, and new products listed, as a direct result of feedback from store owners.
In addition, the launch days of the new franchise stores have turned out to be huge draws for the local community.
“Franchisees are our conscience,” he explains. “The community bit is very important, particularly at store openings. Raj had a huge hog roast; we wouldn’t do that for a company-owned store.”
The launch and retail support teams are made up of former One Stop store managers who know the company’s systems and procedures inside out, and this has proven to be a key factor in the programme’s growth.
“When we built the model it was about brand proposition; we didn’t actually legislate for the importance that people would have,” says King. “Our team are passionate about supporting independent retail, and the people have driven a lot of the loyalty.”
While One Stop has grabbed much of the attention, it isn’t the only player in town. Bargain Booze has been running retail franchises for nearly 30 years, and a recent change of ownership under the Conviviality Retail umbrella has put it firmly on the path to expansion.
Ambitious for more
Chief operating officer Amanda Jones, who joined last year from Nisa, now looks after an estate of 590 stores under its various trading brands, and wants more.
“We are really keen to attract new franchisees,” she tells C-Store. “We strongly believe that our franchises have an attractive offer for both experienced retailers and for business investors without much of a background in the trade.
“Our heartland is the north west, but we have ambitions to grow into other regions such as the south west, north east and Scotland. We have 150 pure c-stores, and we are sure we have the potential to develop this into a really credible convenience offer.”
Like One Stop, the provision of a common IT platform is key to helping retailers with ordering processes and stock control. But it also allows the group to innovate, such as with its market-leading app ‘As if it’s not cheap enough’, which has 13,000 users. Every time a customer comes in, the app is scanned, and customers have access to exclusive deals and competitions. Plus it provides priceless shopper data.
“In a symbol group environment it is difficult to offer things such as this consistently because retailers are all on different technology platforms, but our technology allows us to be ahead of the game. As well as the app we are going to be launching a Click and Collect function in the spring.”
Jones rejects the idea that joining a franchise means relinquishing independence. “Franchising is not for everyone, but it is a model that can work for forward-thinking retailers. A lot of independents think the multiples are eating their lunch at the moment, and that they need to be slicker about space allocation, ranging and promotions. They recognise that they need our support.
“The franchise model gives retailers discipline and compliance, and retailers like that. We can talk about what’s on promotion, and how to execute it in store, and the engagement level we have with our retailers is very high. We have six-weekly meetings, with all the executive team present. It’s a true partnership: if they make more, we make more.”
As well as offering overrider bonuses for wholesale volumes, franchisees can own part of the business by earning shares in Conviviality. The group will also find sites for retailers looking to expand, which is one of the things that appealed to prominent independent retailer Jonathan James.
Jonathan has taken over 36 former GT Retail stores that Conviviality recently acquired, and is looking to build an estate of upwards of 100 outlets.
“I’m very comfortable with the whole idea of a franchise model,” says Jonathan. “I think that any model that helps with systems, procedures and disciplines, and can help independents raise their game, has got to be a good thing. I like to think of myself as a good operator, but we can all do better and I welcome the opportunity to improve.
“As an industry we need disciplines, and the franchise model allows you to be a slick operation,” he adds. And with Jonathan’s reputation as one of the best retailers in the business, perhaps doubters about the franchise model may have to think again.
What’s the deal?
What One Stop asks for from franchisees:
Weekly turnover of at least £13,000
Sales area of between circa 1,250sq ft and circa 2,500sq ft (or the ability to expand)
Implement One Stop’s daily routines
Commitment to purchase 95% of their stock through One Stop
The remaining 5% to be focused on true local products
Upholding and protecting the brand.
What franchisees get:
Prices and promotions delivering margins of 18-25%, depending on mix
Investment in their store up to £50,000, including a two-lane epos system
Same franchise fee, investment and cost prices for all, regardless of size or number of stores
No minimum order quantity for auto-replenishment facility
A Launch Support Manager spends a full week training in-store
Their dedicated business development manager visits every four weeks
The potential to earn a 1% rebate, based on store standards.