SWEET SENSATIONS
Five dessert franchisors consider what’s on the plate for the sweet treats market.
Fresh ideas and fabulous flavours are just the icing on the cake when it comes to operating a great dessert franchise. Behind the scenes it’s the marketing, the costs, the customer trends and the capacity to be agile that drives a successful business.
CHOCOLATERIA SAN CHURRO
MARK ATTARD, marketing director
The Spanish-inspired chocolate chain has invested time to find out what consumers really want right now in a world where social media is more important than the experience of enjoying a dessert, and Instagram is the crucial tool to communication.
“It’s tough. You’re dealing with trends around the world. Something pops up in the US and consumers expect it in Australia next week. That’s even more challenging on scale.
“It’s a challenge the way they are wanting to share, and how rapidly you have to change. We used to have time to prepare, to analyse trends, to decide what to leap on and what not to leap on,” Attard says.
San Churro has invested heavily in product development, now employing three full-time staff in what used to be just a part of the marketing manager’s role. Behind the scenes, the team is sourcing, working with chefs, analysing trends, measuring results, testing product.
Accommodating dietary needs is important, and can be more challenging when a diet shift strikes right at the heart of the niche sector – think gluten and sugar.
“We probably overestimated the impact of gluten-free. We worked really hard to do this because we are working with flour all the time. The uptake on churros is slow. But we had a sugar-free bar now do sugar-free hot chocolate.
Sugar-free is not going away.”
Attard says it’s easy to make a mistake if the business is driven by doing what works operationally, what is convenient for the store, which means the customer is coming last.
“We survey customers. We trial, not necessarily in the most efficient way, then work on operations,” says Attard.
A turning point in product development which took the business into a new areas was the conveniencebased share-a-snack pack. It was takeout, Instagram-friendly and not just the usual product in-store, he explains. “We weren’t very good at takeaway before that.”
Premium chocolate is a fundamental ingredient for the chain, so there is little flexibility when it comes to controlling the costs. However, the product team spends a lot of time on cost of goods, guaranteeing minimums and pricing.
“We’ve just launched Ruby chocolate – it’s gone really well, we sold out our mid-September container. Unusually in retail we went crazy with that, people wanting to gift. We have a degree of exclusivity with that through our purchasing power.”
The fixed cost of a lease is the biggest factor in success. “There’s science behind it. We say no to a lot of sites. We’ve become a lot better at getting it right and understanding the mix.”
Against a backdrop of increasing rents, fixing the location site to a commercially viable size opens up the opportunities for franchise success. The first San Churro store was just 47sqm, now a site can be up to 450sqm.
Today, there are fewer diverse products with a merchandise focus on core product and a more realistic 200sqm.
“That’s the sweet spot, it tends to work. I’d rather have a few people queuing up than have empty seats in busy times. We’re looking at smaller locations,” says Attard.
THE CHEESECAKE SHOP
KEN ROSEBERY, managing director
“It’s a competitive business. To gain any advantage, you have to be keeping an eye on trends and be able to respond with product.
“We do market research – typically every two years – commission primary research that might include focus groups, insights into customers and entertaining, birthdays. We also attend trade shows, Fine Food and Healthy Food and see what’s going on. You watch your competitors.
“I don’t think it’s ever easy, I think things always appear easy in hindsight. We recognise we need to keep working on that – franchisor marketing and product, feedback from franchisees. In the end, we’re in it for the long term, customers in it for the lifetime.”
Rosebery reports that customer profiles are changing. Men are now buying – couples who both work because life’s busy. “It’s not as clear as it used to be.” And the transition is reflected in marketing, which has added a more metrosexual tone.
Traditionally the go-to store for celebratory cakes, The Cheesecake Shop is observing the emergence of another
consumer, the grocery shopper.
“We’ve certainly had increasing success, with more breadth in our range,” says Rosebery.
Party cakes are now baked in mini size, full size and the most popular, the midi size. For a dessert, the focus is on everyday and that can mean a smaller size – even a single portion dessert cup.
The Cheesecake Shop does have a presence in shopping centres, but the strip location is its more natural habitat. That comes with advantages – a far less volatile environment than the shopping centre, says Rosebery.
“We have leases with multiple options, in location for 10 to 20 years. The brand is established, landlords are happy to have us there. That’s the strength of our business and it keeps rent down.”
The size of the chain makes it a big player when it comes to supplies, and that allows the business to wield some power.
“We’re a big outfit in Australia in terms of ingredients, We have steady contracts, big buying power, just some fluctuations because primary production is affected by weather. We look at pricing once a year generally, and our pricing and COGs is pretty stable.”
The business has been trading for 21 years and continues to innovate to stay competitive with consumer taste trends, and with in-store operations.
“We are working on some great things, we’re launching product for
2019. Eggless sponge is one. We do have lower sugar, flourless and vegan options in development. These are small but important needs that we have to supply, even if they are not profitable.”
The company is developing facial recognition to run across POS to time sheets.
“We’ve done a lot over four to five years to get closer to real-time profitability and what we need to run a franchise.
“We care about profitability. If franchises don’t understand, there is a greater emphasis on franchisors to take care,” he says.
GELATISSIMO
FILIPE BARBOSA, CEO
Gelato is getting indulgent at Gelatissimo, as the company launches a deluxe range and focuses on flavour combinations with lots of inclusions such as brownies, cookie dough and real fruit pieces.
“We utilise social media to engage and entice our audiences and are careful to ensure our gelato not only tastes delicious but looks ‘shareable’. Our internal and external digital marketing team closely monitors brands throughout Australia and internationally to stay on top of trends and engages social media influencers to ensure we’re getting in front of new audiences every day,” says Barbosa.
“We make sure to spend plenty of time at the coalface of our business, at all levels of the organisation. This enables us to talk to our customers and understand what they are seeking. In addition we are always on the lookout for new ingredients and keep strong relationships with our suppliers, which have the benefit of seeing many different perspectives.
“More and more customers are becoming increasingly flexible with their dietary choices, and we must consider this as part of our evolving product range.”
Gelatissimo late in 2018 introduced a vegan range of gelato (see page 73).
Another challenge is leasing costs. The current retail climate is without doubt difficult, but success ultimately comes back to basics and doing them well, he says. What counts is amazing product presentation, excellent in-store standards and great, engaging customer service. “The businesses that do this better than their competitors will thrive, and those that don’t will inevitably perish. Continual training and communication with our store network on the importance of these basics is key.”
When it comes to managing the ingredient supply chain, Gelatissimo has fostered long-term relationships that allow the business to benefit from the variety and quality customers seek but at an acceptable price.
In today’s competitive environment the challenges of site selection are common, and Gelatissimo is not unique in facing tough retail rents.
“Sites on prime ant trails come with big-ticket rents, and we have to be careful to ensure that we are not emotionally connected to a site decision,” says Barbosa. “Our natural growth will be in regional or outer suburban areas in coming years so in a way this is a good way to find good sites without the huge CBD. In addition, these upcoming areas are looking for new retail experiences, and thus our offer is a perfect fit.”
A common response to rising location costs is to adopt an alternative business model. Barbosa says the business is exploring a few ideas but nothing is set in concrete. “In the next 12 to 18 months, we will inevitably pilot an extension or new concept,” he says.
BASKIN-ROBBINS
BEN FLINTOFF, general manager
It has offered customers more than 1000 ice-cream flavours since its beginnings in the US in 1945. Baskin-Robbins is part of the global Dunkin Brands group and claims to be the world’s largest specialist ice-cream chain.
“Baskin-Robbins brings a premium ice cream to the world unashamedly. We do not position ourselves as an everyday food, and our guests enjoy the indulgent sensation we have to offer,” says Australia GM Ben Flintoff.
“We have had a broad gluten-free offer for several years and have launched successful dairy-free and no-sugar-added flavours in our history, with more to come. Today’s guests want us to address a variety of diet, health and allergen concerns, and we choose to actively listen to our guests via website feedback and through the use of social media, and have focused on offering more choice through menu and product innovation.”
Flintoff highlights the transparency of nutritional information, including allergen information, on the menu, something the business has supported for many years and backs up with allergen training.
“We conduct stringent allergenhandling training and place allergencontaining products in particular locations throughout our display to minimise risk of cross-contamination. With our standard process being followed, a guest need simply advise the team member of their concern and be assured of a high duty of care,” he says.
“As a global brand, we remain committed to producing high-quality, premium products, sourcing our ingredients and materials responsibly, managing and improving the footprint of our operations and positively impacting the communities we serve,” he says.
As other franchisors attest, there are particular challenges in operating a big-brand business in a niche within the current food retail climate.
“As an after-meal or indulgent offer, our biggest opportunity remains in our guest experience. We have a known and trusted brand with a quality product offering, however it is simply not necessary to have dessert in the same way we need to have three main meals,” points out Flintoff.
“That motivates us to create great engagement with our guests through positive in-store experiences and imaginative marketing campaigns to ensure when ice-cream lovers are looking to treat themselves, BaskinRobbins is top of mind. Challenges are faced by most brands in our “time-poor” society and these observations are also in line with our recently activated homedelivery channel.
“We need to ensure we provide convenience to our guests and an experience and value offering which will see them return and tell their friends.”
A strong product backed by excellent marketing still needs to be backed by good ingredient prices and reliable supplies. How does Baskin-Robbins achieve this?
“Our high-quality assurance standards mean that our ice-cream is produced from a single factory with a long lead time. Clearly, demand planning is a critical skill in that regard and we have a highly experienced supply chain managing that for us.”
Flintoff is confident that good planning and a stringent approach to financial viability means the business is solving the retail puzzle.
“High-rent locations are usually related to highly desirable foot traffic counts. So in some cases there is a reason to write a big rent cheque.”
Flintoff points out that rent sharing and minimising footprint through clever operational design have delivered significant advantages to franchises over the past two years in particular.
“Recently, our highest-volume store halved its footprint in a radical store refurbishment that directly impacted the bottom line for years to come for that franchise partner. In addition, while we may be presented with locations that are a perfect fit, the rental costs sometimes mean that the only winner would be the landlord, so we make a conscious decision to politely decline the opportunity,” he says.
Refurbishment is a crucial process to ensure stores maintain a contemporary look and feel. It’s challenging in such a fast-moving industry. Flintoff says the business has taken it one step further.
“Over the last five years, BaskinRobbins Australia has been very careful in requiring capital expenditure by our franchise partners outside of the usual refurbishment at renewal. This has worked well, with over 85 per cent of our network proudly displaying the current look and feel (known, of course, as Happy 1.0).”
There are other innovations too, he reveals.
“In 2019, we’ve targeted a product category in our menu with great upside that will see an introduction of some exciting technology into our store network. The investment will be low, the return on investment very high.”
What about new business models? “We already offer support to our network through two business models – royalty-based and earned equity. In the case of the latter, we were recently able to lift up a corporate store manager from our own portfolio and partner with them into a location. A fantastic opportunity for both sides.
“As the retail environment changes, so will our model, and we are currently reviewing kiosk models for high traffic locations, alongside mobile units that can visit events and community occasions.”