How to stand out in the competitive convenience market
While the convenience trade in Australia held up relatively well in the midst of the global financial crisis, the latest Nielsen Convenience and Impulse Report shows that growth was slow in the year to March 2010. The Report also highlights continuing challenges, including rising credit card fees, competition from small format groceries, a desire for healthier foods and competition from retailer chains selling fuel. The good news is that there are also key opportunities for growth.
“Convenience retailers need to constantly fine-tune their offerings in the face of increased competition from other channels while never taking their eyes off the basics of cleanliness and efficiency,” says Kosta Conomos, executive director, Nielsen Retailer Services.
For franchisees, the level of support they receive can be critical. Here’s how three of Australia’s leading convenience franchisors are helping them overcome inevitable obstacles to make the most of opportunities to build a thriving business.
Caltex Star Mart
Caltex Australia operates one of the largest convenience retail and fuel networks in Australia, with both franchised and company sites operating mostly under the Caltex Star Mart brand.
“Over the past 20 years, we have transformed our business from service stations to convenience stores” says retail operations manager, John Dulgaro. “In the process, Caltex has become one of Australia’s biggest franchisors, with over 85 percent of our retail network operated by independent franchisees.”
Caltex Star Mart offers franchisees a successful retail business model with proven systems, tools and processes. They complete an initial intensive training program and are supported in their business by a retail execution program and merchandising strategy. There are also experienced field staff across Australia.
“Attracting the right franchisees is critical to our ongoing success,” says Dulgaro. “We are actively seeking high-calibre retailers with business acumen who have a passion for convenience, are prepared to work hands-on in their business and who share our vision of being a world-class convenience retailer.”
Caltex Star Mart offers a complete business package, including a full range of convenience products and services in the shop. There is a growing focus on both fresh items and offers aimed at a growing market segment of time-poor, health-conscious, consumers. “Our franchise model is royalty-based for shop turnover,” says Dulgaro. “However, as Caltex either owns or leases the majority of its sites, fuel is increasingly being supplied under a commission agency arrangement with the franchisee.
“As Caltex owns the fuel until it is dispensed into a customer’s vehicle, franchisees don’t have to invest significant working capital in maintaining underground fuel stocks. Instead, they receive a set commission from Caltex for each litre sold.”
Caltex claims to have set the standard for convenience retailing in Australia with the development of the 21st Century Caltex (21CC) store format. “This embraces the latest global retail initiatives and trends,” says Dulgaro. “The new and contemporary design features innovative island chillers and merchandising pods which showcase the offers and provide customers with a more open environment for browsing through the store.”
According to national franchising manager, Paul Stevens, a 7-Eleven franchisee buys two things: first, a brand name that’s recognised around the world and, second, a successful business system with particularly high levels of support.
“7-Eleven was recognised by the Franchise Council of Australia as Franchisor of the Year in both 2008 and 2009,” he says.
In the first instance, in-house teams choose the sites, secure and manage the lease, design the layout of the store and fit it out with all the equipment needed, including a proprietary Slurpee machine. All new franchisees also complete a comprehensive six week training program before opening their store. This takes account of different learning styles by integrating computer-based, hands-on and classroom training along with one-on-one coaching.
“We also have an online learning tool for both franchisees and their staff,” says Stevens. “New training modules are constantly being developed and uploaded to ensure franchisees and their employees are up to speed with all they need to know to operate their store successfully.”
From the beginning, a district manager works with franchisees on a regular basis to help them build their business. There are state and national conferences and workshops, typically a couple of times a year. And, if a franchisee has a question or problem, he or she can ring the 7-Eleven support centre at any time, day or night.
“We believe that the three key building blocks of a successful retail business are great customer service; excellence in-store and stock presentation; and staff motivation and leadership,” says Stevens.
“So that our franchisees are free to focus on these we take the pain out of some of the tasks associated with running a small business such as equipment maintenance, bookkeeping and reporting, payroll, lease negotiation and management.”
The 7-Eleven franchise model is unique in Australia in that income is derived from gross profit, not a sales royalty. “This provides the comfort for franchisees that we are always working with them to grow their profitability because, in turn, it grows ours.”
For someone starting a business, perhaps for the first time, the level of recognition associated with the 7-Eleven brand can bring a sense of security. “7-Eleven is the world’s largest convenience store brand and has 40,000 stores globally across 16 countries. It is also the world’s largest retailer based on store numbers,” says Stevens.
The ideal franchisee has an optimistic outlook, great stamina and a drive to succeed. “They will demonstrate great skills in personal organisation and presentation, and will always be looking at themselves, as well as to us as their franchisor, for ways they can grow.”
Like all successful franchisors, NightOwl is on the lookout for franchisees who are passionate about the business and the brand – and also hardworking. Franchise sales and development manager Joel Douglas believes that, while a good brand will provide the security and confidence of a proven system, it is the amount of work a franchisee is prepared to put into a franchise that will determine its ultimate success.
“We also look for candidates who are good with people – not only customers, but also their own staff,” he says. “We want to ensure that our customers will experience the best possible transaction every time they walk through our doors, so staff engagement and training are paramount. That’s why our comprehensive training program includes staff as well as franchisees.”
Before opening the store, every new franchisee receives five weeks’ full induction training which covers the system itself, merchandising and convenience retailing. Ongoing support includes regular visits from a dedicated retail development manager who provides training, help and advice on point-of-sale and back office management systems, business management tools, budgeting and financial training as well as discussing business plans and opportunities for enhancing both top end sales and bottom line results.
NightOwl supports innovative thinking in its franchisees – for example, within the agreed product lines they’re free to tailor their stock to the local market. “While the fundamental aspects of the core business need to stay consistent across the entire group there is still room for entrepreneurial spirit,” says Chris Booth, national franchise recruitment manager. “We like it when people walk into their store every time thinking about what they can do better. We’re prepared to help our franchisees to implement their own ideas and achieve their personal goals, and I think that’s something many of them appreciate.”
NightOwl has a number of franchisees who have owned a single site for 15 to 20 years and others who have gone on to own multiple stores. “We like being able to show incoming franchisees that they have the ability to grow, that you can make money and, if you have ambition, you can use that money to expand,” says Booth.
Another drawcard is an extended range of grocery items. While service station convenience outlets typically stock between 2500 and 3000 lines, NightOwl stores offer around 5000. “While some national chains are downsizing we’re considered a true destination for both impulse and top up shopping,” says Douglas.
Since Adam Adams took over as franchisor in 2007 he has been driving the growth of the business through an ambitious store expansion program. “We want to become the customers’ choice for convenience retailing and a franchise system that delivers this offer consistently.”