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.
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.