This week I am putting forward some thoughts on retail food start-up businesses and can this be achieved. Although Napoleon was credited with saying that ‘Britain is a nation of shopkeepers’ – you have to go further back in time as this was probably first coined by Adam Smith in his 1776 book - The Wealth of Nations. The UK convenience sector is, as I have stated previously extremely buoyant and there are very many examples of successful retailers operating good businesses making substantial profits. How easy is it for a new entrant? The first point that needs to be made that no food retailer was ever successful by having the wrong location, by being average or not working hard. It is critical that the new entrant has an understanding of the retail food sector, a solid business plan and sufficient capital or financial backing to develop the business. An under-capitalised business is likely to hit a credit glass ceiling that is extremely difficult to break through and this can stall growth. Virtually every business needs capital and this is one area that is all too often overlooked in the scramble to open a site. More of this later. The old maxim – ‘location, location, location’ is paramount and time must be spent finding the right site. Is this to be freehold or leasehold? With a start-up business, the likelihood will be leasehold as this cuts the immediate cash outlay costs but on leasehold premises many retailers do not understand that signing a lease commits to paying rent for the duration of the lease or at least until a break point. Will the site to be a start-up from scratch in an empty shell or is this to be achieved through buying an existing business? With the former, this can be best way to build asset value providing that the right location is chosen. There are very many variables that must be taken into consideration, is the size of the store capable of delivering the sales that are required to bring in the gross profit needed? It is not much more difficult to run a 2,200 sq. ft. store than a 1,000 sq. ft. site – it could in some cases even be easier to run the larger site. What competition does the store have and are there other stores nearby that another operator could open as a c-store and take away the customer base of the fledgling business? Is there categorically a demand for a store at the location that is being considered? The symbol groups have varying processes to assess sites – having studied most groups’ output reports, in my opinion not all are credible nor do some really show a potential retailer the real picture and some purely desk top ones can leave too much information that can be wide open to interpretation for the new retailer to decide. Which symbol should the retailer join? Stick with the big ones that are showing real growth and that are the best. Look at the groups that have really successful businesses within their membership. Talk to the staff from the symbols to ensure that these are individuals that the prospective retailer would be comfortable working and will give the support that is needed. Talk to retailers in the symbol groups and ask are they happy with the packages, the cost of goods, promotional programme, back-up support, rewards and the overall profitability that the groups deliver. When it has been determined which symbol the retailer is planning to partner with and the financials have been shared and providing that the capital base and business plan is sufficient to establish a line of credit that will allow sufficient stock to flex purchasing as sales grow, the show is getting closer to being ‘on the road’. Refitting a store is critically important to the overall success of a store and the layout must maximise the potential sales and profitability. Most good symbols should be happy to provide three quotes from differing approved and accredited shopfitters all working to an identical specification that has been agreed with the retailer by the symbol group team. Costs can vary purely due competitive pressures and the amount of work that the shopfitters have on at the time and so be prepared to do some horse trading to get the best price. Staff, it is critical to select the best and never just the first people that come for an interview because they are a pair of hands, it is vital to have staff who are trained or want to be, intend to be with the business for the long term, are ‘people focused’ and are scrupulously honest. References must be checked with great care. Marketing the store prior to opening is crucially important to ensure that potential customers are aware of the opening – and when they come in they are not disappointed, every customer must be looked after to ensure that they not only come back again and again but they also tell their friends about the store. Quality merchandising and ranging that matches the location demographic is very important and the symbol group should be able to provide skilled teams to work with store staff to deliver perfection in these areas. On opening the store must be ‘packet perfect’ – and this should be the case at the start of every day of the week ongoing. Prior to opening day, extensively test that all of the systems are working properly and that every product in the store will successfully scan through the tills, there is nothing worse than a new store with big queues of unhappy customers waiting to pay and being blocked by a poor checkout service. So, in conclusion the answer is yes, it really is possible to do a start-up and be successful in the face of major multiple competition and there are many examples nationwide that prove this well. But, this is a long and hard journey, a good owner operator with passion, drive and customer focus will invariably outperform the bland and faceless multiples – and the end financial results are most certainly well worth the effort.
