Embarking on a business without the figures on how it could perform might sound like madness, but Tony Pappadopoulus took the bold step of putting a Subway franchise into his Spar store in Burntwood, Staffordshire, despite the sandwich company's refusal to give any expectation of turnover.
But it was a bold step worth taking. While the franchise's turnover is 10% of the total store's turnover, its profit is 40%. "We had food to go before, but this is better," says Tony. "It brings people into the grocery side of the store as well. People come for a Subway and then buy some chocolate and cigarettes, or whatever, as well."
The Spar store is one of the first stand-alone c-stores with a Subway in England, and Tony decided to go for the franchise after seeing the company at one of its roadshows.
"Subway never gives out any figures at all, so it was a risk, - but everything is a risk," admits Tony. "I kept asking Subway but it wouldn't give us any indication, so we were going into it a bit blind. But we went to see other retailers, who were happy to give me a rough guide to what it could do."
While Tony says Subway is the easiest business he's ever run, the franchise comes with some stringent terms and conditions. He has had to commit to a refit in 2014, and the outlet is mystery shopped every month against 100 different categories. If it fails a health and hygiene-related category, it will be closed down immediately - any others, it's three strikes and you're out.
"The monthly audits are very good because I'm not here all the time, but staff know what they're being audited on. If we get a complaint from a customer, we have 48 hours to reply and have to give them a £10 voucher and grovel, even if it's their fault and they asked for the wrong thing. Subway is very big on service."
The training package also impressed Tony. "We went to Subway head office in the States for the training as part of the franchise agreement, which in itself is as thick as a telephone directory. The youngsters know the products and how to make them, but some of the older staff have needed a bit more training.
"It's such an easy busy to run," adds Tony. "Everything is delivered ready, you don't have to prepare in advance, so there's very little
wastage - there's no concern over 'how much shall I prepare today?' because they're made to order in front of the customer."
The Subway offer appeals to
everyone, but mainly the younger customers, says Tony. "All the youngsters buy them but not all the adults do." More than 1,200 customers a week purchase something from the Subway, and Friday is Tony's busiest day.
Subway does its own advertising and franchisees must contribute 5% of their turnover towards its campaigns, in addition to the 8% royalty fee. Franchisees are also obliged to do their own marketing, including the first day free. "We did the first day free on a Sunday and had run out within three hours of opening," Tony recalls. "People texted their friends, then they texted their friends, word got round very quickly."
Despite having the Subway franchise, Tony is still selling plenty of triangular sandwiches from the shop side. "If you have a Subway, you can't sell baguettes longer than six inches for 12 months, but we still sell quite a lot of Spar sandwiches - more than we used to before the refit and Subway. We used to make our own baguettes but we're doing four times as much turnover on our Subway than we did on our food to go before the refit."
The redevelopment, which started in March 2007, cost £350,000, including doubling the amount of refrigeration, and the introduction of the Subway. The shop closed for three weeks during July, reopening with Spar's 'store of the future' image, ranged to the neighbourhood affluent template, and an expanded selling space of 3,000sq ft, up from 2,000sq ft.
"We've tweaked the range but the store is a similar size to before the redevelopment; most of the new space went to the Subway," explains Tony. "I didn't want to spend that much money on the refit but that's how much it cost to have it how I wanted. I went way over budget but I had to do things like the floor otherwise it would have been half old and half new. The new
refrigeration, which goes all the way around the store, was a big investment but the previous cabinets were 16 years old."
a hive of activity
Sat on the corner of a busy crossroads, the Spar store is a hive of activity, with a constant stream of customers. It was one of the first to introduce locally sourced products through Blakemore's deal with Heart of England Fine Foods, and has a metre-long bay of chilled, and a metre of ambient, which is located just as you enter the store.
The shop has a mix of regular and passing trade, and is located not far off the M6 toll road, which Tony says has really put Burntwood on the map. To help attract 'white van man', large parking bays have been allocated in the car park. The store is open from 6am to 11pm seven days a week, and has 43 staff, of which 12 work across the store and Subway. The store now gets trolley shoppers as well as basket ones - so many that Tony once thought all the trolleys has been stolen from outside, when in fact they were all in use.
Sales on the shop side since the refit are up 20-25%, excluding services. Off licence sales are up 20%, grocery 25%, and fresh and chilled has increased by 10%.
"Services actually went down because we were closed for three weeks and we haven't got them all back yet," says Tony.
As with many store redevelopments, the refit didn't escape a few hitches along the way. A shock bill of £8,000 to get the electricity supply upgraded took away from some of the excitement. "We were without heating for three months," says Tony. "I had booked the upgrade far in advance but they never came to
The planning process was also problematic. It took more than 30 different plans to reach something Tony was happy with. "I couldn't settle on one plan. We had a lot of delays but that helped in the end because Subway came forward
Tony has traded from the site for 16 years but the store has seen several redevelopments over the years. "It was a little store at first, then we knocked it down and rebuilt it in 1991. Three years ago we bought the house next door because it had a bit of land and were able to use that to extend the store, and build offices upstairs. We were working from a tiny office but now we have a whole office suite."
While this is Tony's one and only store, that hasn't always been the case, and he's not ruling out other ventures in the future. "We sold a second store 10 years ago. The stores weren't struggling as such but they weren't running as I wanted, and I was a bit younger then. I want to open a stand-alone Subway, which my nephew Luke will run."
Taking on the Subway franchise has boosted Tony's retailing skills. "I've learnt a lot from Subway to bring to the shop side, mainly to do with figures and customer service. It's about chasing the pennies - it all builds up at the end of the year. If you regularly put in more cheese in a sandwich than you ought to, that adds hundreds of pounds to your costs over time."