PULLING ALL THE STOPS

Con­ve­nience stores have moved on from be­ing a source of emer­gency gro­ceries. They are now des­ti­na­tions in their own right, with a broad of­fer­ing that caters for busy life­styles.

Inside Franchise Business - - Contents - By Do­mini Stu­art

Con­ve­nience stores con­tinue to change to cater for our busy life­styles.

When Aus­tralia’s first 7-Eleven store opened its doors 40 years ago, con­ve­nience meant hav­ing a few shelves of ba­sic gro­ceries for cus­tomers to fall back on when the su­per­mar­kets were closed. It was a new ver­sion of the cor­ner dairy, which faded into his­tory as su­per­mar­kets took hold.

“Today, con­ve­nience means food-onthe-go choices across more oc­ca­sions in­clud­ing ready meals, bak­ery items, snacks and healthy op­tions such as sushi,” says 7-Eleven Stores FM for cor­po­rate af­fairs Clay­ton Ford.

“We are also tri­alling con­ve­nient ini­tia­tives such as par­cel ser­vices, de­liv­er­ies and the use of dig­i­tal tech­nol­ogy.”

NightOwl’s “Store of the Fu­ture” con­cept adds health­ier al­ter­na­tives and hot bar­be­cued chick­ens and chips to its tra­di­tional range. The stores also have a com­pre­hen­sive health-and-beauty sec­tion, a mo­bile-phone ac­ces­sory unit and a “Fun Wall” for frozen bev­er­ages and ice creams.

“We un­der­stand that today’s cus­tomers want a one-stop shop for ev­ery­thing from a snack or a quick fam­ily din­ner to over­the-counter medicines and party items,” says the com­pany’s di­rec­tor of fran­chis­ing, David Mor­riss. “Easy-to-nav­i­gate in-store dig­i­tal tech­nol­ogy with LED screens stream­line the shop­ping ex­pe­ri­ence.

“Peo­ple in dou­ble-in­come house­holds, where both part­ners work long hours,

have lit­tle time to buy gro­ceries, run er­rands and pre­pare meals,” adds Karen Bozic, gen­eral man­ager re­tail op­er­a­tions at Cal­tex Aus­tralia. “The con­ve­nience model must also be con­stantly chang­ing to keep pace with evolv­ing cus­tomer needs. For ex­am­ple, by 2020, mil­len­ni­als will be the largest-spend­ing group in our econ­omy. They ex­pect speed and ef­fi­ciency, so dig­i­tal en­able­ment will be fun­da­men­tal to our fu­ture store de­sign and of­fer­ing.”

Con­ve­nience re­tail­ing is both fast-paced and highly com­pet­i­tive.

“In­ter­nally, op­er­a­tors com­pete with other play­ers on the ba­sis of price, prod­uct range and prox­im­ity to key mar­kets,” says IbisWorld se­nior in­dus­try an­a­lyst Lau­ren Mag­ner. “For fuel re­tail­ers, sales of non-fuel prod­ucts such as con­fec­tionery, food, drinks and to­bacco ac­count for a sig­nif­i­cantly larger por­tion of profit than sales of fuel and re­lated goods, which means they also face in­tense ex­ter­nal com­pe­ti­tion from su­per­mar­kets.”

AR­EAS OF GROWTH

Some prospec­tive fran­chisees see this as a bar­rier to suc­cess. Others thrive on the chal­lenge, em­brac­ing op­por­tu­ni­ties for growth.

“Key ar­eas of po­ten­tial growth in­clude col­lab­o­ra­tions be­tween re­tail­ers and sup­pli­ers, in­no­va­tion through store and con­sumer of­fers, and dif­fer­en­ti­a­tion across brands,” says Mag­ner. “Con­ve­nience stores can also en­hance prof­itabil­ity by be­ing in­no­va­tive with their prod­uct range which, for some com­pa­nies, in­cludes pri­vate-la­bel prod­ucts.”

Ford agrees that dif­fer­en­ti­a­tion is crit­i­cal to the suc­cess of each fran­chisee’s busi­ness and the com­pany over­all. “7-Eleven is con­tin­u­ously ex­pand­ing its range of ex­clu­sive prod­ucts, brands and ser­vices,” he says. “We need to en­sure our of­fer sets us apart and gives our cus­tomers what they need when they need it.”

Other in­dus­try-re­lated ben­e­fits can in­clude a min­i­mal bar­rier to en­try with­out pro­hib­i­tive start-up costs.

“Store mer­chan­dise is read­ily avail­able from a range of sup­pli­ers, and re­tail­ers can gen­er­ally de­cide on the ex­act prod­uct mix to of­fer their cus­tomers,” says Mag­ner. “New fran­chisees ben­e­fit from the mar­ket­ing sup­port and group buy­ing power that comes with a fran­chise agree­ment, and large in­dus­try play­ers have es­tab­lished strong re­la­tion­ships with sup­pli­ers to se­cure com­pet­i­tive prices.”

The in­dus­try it­self is thriv­ing. Lat­est fig­ures from the AACS (Aus­tralasian As­so­ci­a­tion of Con­ve­nience Stores) State of the In­dus­try Re­port show growth of 4.5 per cent last year.

“We have seen in­creases in both the num­ber of trans­ac­tions and the av­er­age spend of our cus­tomers, and we ex­pect this to con­tinue,” says Mor­riss.

In a good lo­ca­tion, a well-run con­ve­nience store of­fers a good re­turn on in­vest­ment. “Lo­ca­tion is crit­i­cal,” says Mor­riss. “Con­ve­nience is the num­ber-one fac­tor that drives vis­its to a ser­vice sta­tion.”

The num­ber of com­peti­tors in any catch­ment area will have an im­pact on cus­tomer traf­fic but, again, dif­fer­en­ti­a­tion is a key fac­tor. “Fran­chisees can to build their cus­tomer base by tai­lor­ing their of­fer through the qual­ity of their cus­tomer ser­vice, what they pro­vide and how they sell it,” says Bozic.

MAT­TER OF CHOICE

De­ci­sions about lo­ca­tion can also in­clude the choice of a new or ex­ist­ing store.

“Some fran­chisees seek out new op­por­tu­ni­ties in great lo­ca­tions where they can build store sales from day one, and re­ally con­trol the growth of the store in the lo­cal com­mu­nity,” says Mor­riss. “Others are keen to buy a well-es­tab­lished NightOwl with a long trad­ing his­tory, loyal and reg­u­lar cus­tomers and a strong pres­ence in the lo­cal mar­ket.

“With new fran­chisees it comes down to per­sonal choice, and we are here to help them make the right busi­ness de­ci­sion based on their re­quire­ments.”

This in­cludes re­search to en­sure any new store does not im­pact on an ex­ist­ing fran­chisee’s busi­ness.

“We also use spe­cial­ist de­mo­graphic and site anal­y­sis to as­sess the ap­pro­pri­ate­ness of a site for any new NightOwl store,” says

Mor­riss. “Many are near other na­tion­ally recog­nised brands, which all com­ple­ment each other. This cre­ates a strong des­ti­na­tion and im­pulse-based cus­tomer of­fer.”

Mean­while, NightOwl is ex­pand­ing from the east coast into West­ern Aus­tralia. “We have al­ways been keen to en­ter the West­ern Aus­tralian mar­ket, and form­ing a part­ner­ship with Viva En­ergy Aus­tralia has ac­cel­er­ated the plan,” says Mor­riss.

The cus­tomer lies at the heart of 7-Eleven’s busi­ness strat­egy, in­clud­ing how the fran­chise man­ages its prop­erty port­fo­lio. “We have a well-de­fined network plan, up­dated an­nu­ally,” says Ford. “This plan saw us open about 30 stores in the past fi­nan­cial year, with sim­i­lar rates of growth pro­jected for the year ahead.

“Early next year we will pass the mile­stone of 700 stores. Our growth is pre­dom­i­nantly in new sub­ur­ban fuel sites, as well as some key re­gional ar­eas.”

TRUE PO­TEN­TIAL

7-Eleven ha­ten­tial

Most new sites are opened as cor­po­rate stores. “This en­ables us and any fu­ture fran­chisee to as­cer­tain the true value and po­ten­tial of the site,” says Ford. “Once es­tab­lished, we may then look to sell it. There­fore our fran­chisees are gen­er­ally buy­ing into ex­ist­ing sites – ei­ther a re­sale or a cor­po­rate store – rather than a brand new store.”

There has been wide­spread public­ity lately about wage fraud un­cov­ered at 7-Eleven, Cal­tex and some other con­ve­nience fran­chises. No NightOwl fran­chisees were im­pli­cated. How­ever, for any­one con­sid­er­ing in­vest­ing in this sec­tor, this is bound to be a mat­ter of con­cern.

Both 7-Eleven and Cal­tex have set up pro­grams to com­pen­sate un­der­paid work­ers, and taken steps to en­sure the prob­lem will not arise again.

“These is­sues have had an im­pact on fran­chisees, draw­ing their at­ten­tion to the im­por­tance of keep­ing a close watch on their pro­cesses, record-keep­ing and con­trols, and iden­ti­fy­ing any op­por­tu­ni­ties for im­prove­ment,” says Bozic. “Po­ten­tial fran­chisees needs to un­der­stand the av­enues avail­able to them to clar­ify their obli­ga­tions around work­place leg­is­la­tion, in­clud­ing Fair Work tools, re­sources and both in-house and ex­ter­nal sup­port ser­vices. They must also un­der­stand the obli­ga­tions lie with the di­rec­tor or owner of the busi­ness to use these re­sources and en­sure their own com­pli­ance.”

RE­FORM PRO­GRAM

7-Eleven has been work­ing in part­ner­ship with fran­chisees to im­ple­ment a re­form pro­gram. “We are com­mit­ted to en­sur­ing that ev­ery 7-Eleven work­place meets the stan­dards we and our com­mu­nity ex­pect,” says Ford. “Our fran­chisees recog­nise that do­ing the right thing, and pro­tect­ing 7-Eleven’s brand and rep­u­ta­tion, is an im­por­tant part of grow­ing the value of their in­di­vid­ual busi­ness. That means they wel­come mea­sures that help them com­ply with work­place laws as well as en­sure the rest of the network is do­ing the same.

“We’ve now have mar­ket sys­tems in place in­clud­ing a cen­tralised pay­roll sys­tem sup­ported by multi-lay­ered bio­met­ric time-and-at­ten­dance records. Po­ten­tial fran­chisees can feel con­fi­dent that 7-Eleven’s sup­port sys­tems will make it eas­ier for them to en­sure they are com­pli­ant with work­place laws.”

At NightOwl, the mat­ter has not had any im­pact on in­ter­est from new fran­chisees, says Mor­riss. “Our fran­chisees have the full sup­port of our team at head of­fice. We are con­tin­u­ally in­vest­ing in fran­chisee train­ing and ad­vanced tech­nol­ogy and sys­tems to en­sure our fran­chisees un­der­stand their obli­ga­tions and re­main com­pli­ant with all rel­e­vant leg­is­la­tion so they are in the best po­si­tion to grow a suc­cess­ful and sus­tain­able busi­ness.”

7-ELEVEN

WHAT SETS YOUR FRAN­CHISE APART?

7-Eleven is con­fi­dent our full-ser­vice of­fer is strongly com­pet­i­tive, de­liv­er­ing brand strength, ex­clu­sive prod­ucts, a turnkey so­lu­tion and full train­ing. This is sup­ported by a glob­ally recog­nised brand and our full-ser­vice sup­port model. By tak­ing care of things that are a has­sle for a small-busi­ness owner, and pro­vid­ing our fran­chisees with sup­port ev­ery step of

the way, we leave them free to build their busi­ness by fo­cus­ing on their ser­vice. As part of our profit-share model we pay some of the large costs in­volved in run­ning a store in­clud­ing rent, util­i­ties, equip­ment, main­te­nance and IT sys­tems. We also pro­vide a min­i­mum-in­come guar­an­tee for stores.

WHAT DO YOU LOOK FOR IN A FRAN­CHISEE?

As 7-Eleven is a 24-hour, seven-day-aweek re­tailer, our fran­chisees need to com­mit them­selves full time to run­ning their busi­ness.

We are look­ing for fran­chisees who have a real fo­cus on cus­tomers, are born com­mu­ni­ca­tors and are nat­u­ral peo­ple lead­ers, and are wired for suc­cess with a real drive to suc­ceed.

They must also have an eye for de­tail, be able to adapt and learn and fol­low the 7-Eleven sys­tem to the high­est stan­dards. We also are look­ing for fran­chisees who are com­mit­ted to hav­ing a re­la­tion­ship with us for 10 years or longer.

INI­TIAL COST

An ini­tial in­vest­ment of be­tween $400,000 and $1+ mil­lion is based on the type of store, its lo­ca­tion and the re­turns from that busi­ness.

TERMS

The typ­i­cal term of the 7-Eleven store agree­ment is 10 years, un­less this is lim­ited by an ear­lier ex­piry of the prop­erty lease.

CAL­TEX

WHAT SETS YOUR FRAN­CHISE APART?

We are one of Aus­tralia’s largest con­ve­nience re­tail net­works, pre­dom­i­nantly us­ing house­hold brand names such as Cal­tex Star Mart.

We of­fer com­pre­hen­sive train­ing, head-of­fice sup­port, ven­dor al­liances and stan­dard­ised sys­tems, tools and pro­cesses. Our fran­chisees also ben­e­fit from the strength of the Cal­tex brand and be­ing part of a com­pany that, as a long­time mem­ber of the Fran­chise Coun­cil of Aus­tralia, re­ally un­der­stands the fran­chis­ing world.

WHAT DO YOU LOOK FOR IN A FRAN­CHISEE?

Cus­tomer fo­cus and en­gage­ment is key and, if this ap­proach is the fo­cus, fran­chisees can es­tab­lish and build their busi­nesses on a sus­tain­able ba­sis. It is vi­tal that fran­chisees un­der­stand the com­mu­nity they work in and their cus­tomers’ needs and ex­pec­ta­tions.

Our fran­chisees bring a head for busi­ness, a pas­sion for cus­tomer re­la­tion­ships, a keen sense of com­mu­nity and a driv­ing de­sire for suc­cess. And, as our Cal­tex Star fran­chise gen­er­ally works un­der a sin­gle-site model, our fran­chisees are ex­pected to be very much hands-on lead­ers on a full-time ba­sis.

INI­TIAL COST

Cal­tex has a ma­ture fran­chise network. Most sites have been trad­ing for over 10 years. The ini­tial in­vest­ment could be from $150,000 to $800,000.

TERMS

Ini­tial five year term plus one op­tion to re­new.

NIGHTOWL

WHAT SETS YOUR FRAN­CHISE APART?

NightOwl was es­tab­lished in 1975 as Aus­tralia’s first 24-hour con­ve­nience re­tail busi­ness. We started fran­chis­ing in 1987 and now have more than 70 stores through­out Queens­land and New South Wales, with five stores in West­ern Aus­tralia due to open next year. In Queens­land, NightOwl’s mar­ket share has grown to more than 35 per cent, which makes us one of the largest con­ve­nience fran­chise store chains in Aus­tralia.

NightOwl fran­chisees can run a sin­gle fran­chise or mul­ti­ple fran­chises within the group.

WHAT DO YOU LOOK FOR IN A FRAN­CHISEE?

Our fran­chisees are pas­sion­ate about the busi­ness and the brand, and also pre­pared to work hard. While a good brand will pro­vide the se­cu­rity and con­fi­dence of a proven sys­tem, the amount of work put into a fran­chise will de­ter­mine its de­gree of suc­cess.

Fran­chisees must also be good with peo­ple, both cus­tomers and their own staff. We want to en­sure our cus­tomers will have the best pos­si­ble ex­pe­ri­ence ev­ery time they walk through our doors, so staff en­gage­ment and train­ing are para­mount. This is why our com­pre­hen­sive train­ing pro­gram in­cludes staff mem­bers as well as fran­chisees.

INI­TIAL COST

From $300,000 + GST, plus start-up costs

TERMS

Ini­tial five-year term plus three fur­ther op­tions to re­new.

Night Owl

7-Eleven

Night Owl

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