In 2003 SumoSalad launched its healthy eating concept. The quest continues.
“Ten years is a huge milestone. I remember making winter soup by hand in our first store. When we started we said “Imagine if we get to 100 stores” as a bit of a joke, we never really thought it would transpire. It’s well and truly exceeded our expectations.”
Luke Baylis is reflecting on the growth of the Sumo Salad business he began a decade ago with friend James Miller. The pair had returned to Australia after time spent in the US, spotted a gap in the marketplace for healthy eating and set up an alternative fast food option to the traditional burger and fries menu.
So when did the growth become a serious proposition? “It was at about 20 stores and we thought, this could easily get to a few hundred stores. We were lucky, there were so many good retail locations then,” he says.
Sumo Salad had embraced franchising about the time of the seventh store opening, Baylis says. “We had aspirations just to run several stores in Sydney and own that market.”
But the enthusiasm of customers for the product, and for the store concept itself, persuaded them to look at franchising as a business model.
“We did due diligence on franchising and thought we’d give it a try. We had some really good franchisees to start with, people willing to take a risk on us.”
What have been the high points in the decade’s trading? “Some of the relationships and some of the stuff we’ve developed, in the domestic and international markets,” he says. And Baylis admits that “being recognised as the leading healthy fast food option by so many people” has been one of the biggest highlights.
In contrast, Baylis says “There’s not been a single day since we opened the business that we haven’t been challenged.”
Building a vision and taking it to market, getting people on board, each with his or her own ideas – all of this can prove a testing experience. Baylis has faced issues from compliance to consistency to product development, he says.
“Getting people to work with you to follow areas to follow components is a challenge.”
Now the business can look back at its achievements: more than 5,000 jobs have been created after starting out with just five key members of staff.
MILESTONES
“I think we’re at a point of about 98 stores, we have several being built, and that’s a massive milestone for us. But so was going international, and expanding out of New South Wales – that was huge for us at the time, four years in. Milestones are relative to where you’re at. It’s been a series of milestones.”
Baylis reports the sales growth has been three to four times the market average, up 15 percent, and cites innovation and marketing as key drivers for this growth.
While public relations activity has generated interest in new markets where the brand is relatively unknown, perhaps surprisingly little growth is achieved through social media.
“It hasn’t been huge for us; customers engage with the brand but we don’t use it to attract new customers.”
In contrast, loyalty programs have been very successful in sourcing new customers. The healthy market is growing so exponentially, even in blue-collar neighbourhoods. Baylis observes the less affluent suburbs are now “phenomenally successful”.
The next major step is to play with the big international brands. Baylis has Subway and McDonald’s in his sights. “We’d like to be biting at their heels in five to 10 years.”
To get there the company needs to step up, and has recently sold 60 percent of the business to the family owned Tulla Group, known for its longterm approach to private equity.
“The Tulla Group has no mandate to drive equity group and exit. They bring a lot in terms of strategy for the brand, they understand the importance of brand, and they have financial acumen.”
Baylis retains 40 percent, and the managing director position (co-founder James Miller – who died earlier this year – left the company and sold his shares last year) and will report to a board.
While Baylis is looking forward to the analytical nous the group will bring to the business, he is confident in the systems already in existence at the healthy eating chain.
Tulla’s investment is around funding, store openings and improving the brand. Further corporate stores will be added to the portfolio. “They contribute to earnings, keep us more connected , and we use them for trialling [products and systems] and to understand the market,” Baylis explains.
Broader adaptations of the main model have been piloted at some corporate stores and proven very successful, Baylis says. “We will be offering these as franchise opportunities.”
The plan is to open at least 15 new stores each year in high street and CBD locations. “SumoSalad will become more convenient than ever before and we’re really excited about what that means for people looking to make healthier lunchtime choices.”
Aussie chef Pete Evans will continue as an ambassador for the brand, helping to propel a healthy lunchtime movement.
“I am constantly looking for new ways to create healthy dishes that are fresh and tasty, so teaming up with SumoSalad made a lot of sense,” says Evans.
“Beyond the menu, the partnership has also meant that I can encourage people to make healthier lunchtime choices, something I am excited to continue throughout 2013.”
Looking ahead, Baylis predicts there will be more engagement from the fast food brands in the healthy eating space.
THE MARKET
“More people will diversify, the market will dictate that. McDonalds, KFC are brands known for their traditional fast food appeal, but their predicts are increasing diversity in the offer.”
On the other hand, he is predicting smaller boutique entries into the market, particularly focused on niche demands such as vegan or organic.
The potential of the market is one of the attractions for the Tulla Group. It might seem a long trek from the Group’s investment in a mining related industry to food retail, but chief executive Mark Maloney insists there is a parallel.
“We were involved in mining accommodation and if you take the room numbers into account, we were the largest hotel provider in Australia. And that involved providing 18,000 meals a day Australia wide, so we understand the food service side. We have a core competency.
“When we sold our last business we had a lot of cash and were looking to invest the money. We spent a year looking for three or four industries we wanted to be involved in and one of these was health and wellbeing. The growth over the next 20 years we believe will be quite phenomenal.
“In the US, we were talking to better performing private equity and hedge funds and health and well being groups were a large part of their portfolios.”
Maloney sings the praises of the company as well.
“We looked around Australia and offshore and SumoSalad was the biggest business and the most substantial, it has a great network as a base from which to build. The people and management team have done a great job building the brand and they are very passionate.
“It’s about backing the management team we want to support.”
There are no plans for a hands-on role for Maloney.
“Luke’s the CEO and he’s doing a great job. We’re just here to help with the bigger picture. We wanted to invest in a business that is kicking with the wind, not a declining industry.
“For me, health and well being has always been a passion. Business can’t be about money alone, it’s about making a contribution, having a purpose, and with the issues of diabetes, obesity and cancer, there’s an opportunity for SumoSalad.”
KEY ACHIEVEMENTS
2003 First store opens on Liverpool St, Sydney CBD
2004 Franchising begins
2006 Dubai is the first international venue; there are 25 stores in Australia
2008 New Zealand’s first store opens
2009 Mildura is first site of country town concept
2010 First outlet in UK and store count totals 83
2011 Four stores unveiled in Singapore
2012 A year of firsts: sub-franchised store, railway store, hole-in-the-wall store
2013 Australian stores total 86, with nine international outlets