An already momentous year for convenience retail just got bigger with the news that Tesco-owned One Stop is to trial a franchise scheme for independent retailers.
Franchising is not a new idea by any means, and there are some successful partnerships of this type in operation in the UK. But this one is different, and retailers will look at it differently, because although the One Stop operation is a clear and distinct brand and business unit, it still has Tesco behind it.
Whether a One Stop franchise turns out to be a good option for independents in the long run will obviously depend entirely on the business model. Here, the history of franchising in the UK convenience sector is mixed, to say the least. Most franchise schemes to date have been modelled on taking a slice off the top of the store turnover, which has proved to be a very unprofitable formula for stores where tobacco sales are high: the more tobacco you sell, the more money you lose.
I’m reminded of a conversation I had a couple of years ago with a 7-Eleven franchise retailer in a prime spot in the centre of Chicago. I found it stimulating, and not just because of the 24 varieties of freshly-made coffee available. His business model was based on profit share rather than turnover, meaning the brand owner had an incentive to make him commercially successful, rather than just grabbing as much turnover as possible, regardless of the margins (hence all the high-margin coffee).
Perhaps it’s time for all of us to wake up and smell the opportunities.
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