Ready for lift-off

Unconventional but proven ways to boost stores

Franchising is an effective way for retail brands to expand and gain more market presence. For the brands themselves there is always a trade-off between speed of growth and quality of the business. Because underneath the outer layers, oblivious to the human eye but yet very tangible – at least implicitly – to any human act of interaction, lies a sense of purpose, an underlying and evolving nature that is the one to fuels new paths – or markets –, new discoveries – or offers –, and even new relationships – or channels.

Understandably, more often than not, it is this “logos” the hidden cause – either due to the misuse of it, an erratic formulation, or the entire lack of it – for the typical and common encounters between brand and dealer or franchisee. It is also the sign of the previously mentioned trade-off not being well balanced, adopting forms such as declining network revenues, languishing site profitability margins, and low brand value, among others.

We have dealt with situations where it was needed to provide this trade-off equation with the right sustain, the right claim, tools, and platform for the franchise to be successful with consumers. In essence, this relates to the setup of an end-to-end business operation, that of a consumer retail network encompassing convenience stores, restaurants, and fuel forecourts, including its franchise core set of practices. Sometimes it might be a venture from scratch, sometimes brownfield, but always it implies addressing the same type of challenges: what’s the value proposition to deliver to consumers? How to unlock operational efficiencies at site level and scale them up? How to structure the most suitable relationship for all parties involved in the franchise agreement? To name a few.

The ambition

The key element for success goes further than just the development of a full-fledged retail franchise out of an existing network of locations, although this sole task poses its own complexities derived from the traditional set of procedures to be put in place on any franchise of similar sort. It is to actually create a new concept of retail, blended into a sellable package, the franchise, that aims to deliver a clearly identifiable experience, making more of a logical combination of products and services than if they are being sold more reactively and in isolation. From selling a product to delivering a moment, and unexpectedly satisfying, easy to remember experience. To get to this point, the franchise needs to encapsulate a whole journey: starting from assortment procurement, warehousing, and distribution, followed by site management, including staffing, coaching, and training, and down to the delivery of the pursued experience on the basis of customized marketing, data management and intelligence. The endgame is to understand how to grow the size of the pie: to grow the retail EBITDA at site level by growing consumer revenues, far from just squeezing margins or improving costs.

Addressing it

When there is value out of a franchise proposition, the brand should perform well at the different locations, and each individual site should have the right ingredients to be profitable. If we apply this maximum, by dissecting all the functions that are executed on a retail site, the mentioned “ingredients”, we can combine different ways of delivering them based on some key variables: the level of proficiency – from basic to best-in-class – each function should be addressed with, the contribution of the franchise into each of them, and the resulting role the franchise should play. This exercise results in a set of alternative franchise arrangements that needs to be brought down to the preferred and most suitable one. This decision-making process is helped by a set of questionnaires that have the ability to lead the corresponding stakeholders into a preferred combination of the mentioned variables for all the functions. The answers come out from discussions held in ad-hoc working sessions specifically designed for this purpose. With this the design phase concludes, giving way to development, setup, and launch. They consist in the individual implementation and preparation for go-live of each function according to how they have been configured. This can be managed as stand-alone projects separate or within the franchise umbrella – i.e., customer loyalty programs, secondary transport, shared services, fleet management, etc – See other stories for reference.

Creating impact

From a collection of independent and autonomously run locations to a business entity with the capacity to deliver up to a twofold increase in network value, measured as retail EBITDA per site, in a period of 2 to 3 years. This comes as a result of a wide range of impacts, both qualitative and quantitative: A step change on the human side. Profiles adjusted to the method of operation, proactive compliance, brand attachment, employee loyalty and satisfaction. Standard, and at the same time fast-changing, way of operating. 33 retail functions being delivered across the network, with each of them constituting a source of value with its own contribution to the retail EBITDA. More customer coming more often. Understanding and management of the number of customers, with a 25%-increase in retail revenues in the first year, and a sustained growth of circa 15% on the following 2 years with the addition of the digital offer. A streamlined operation. Delivering 10%-15% of average cost and process efficiencies after the first 12 months. A fully operational enterprise. With the ability to be plugged and played into new markets, raise capital for better CAPEX efficiency, and produce more franchise royalties.

When the approach described is executed within the franchise umbrella, SophoFactory can deliver the franchise package post-launch, ready for operation, and can also take over the operation under a contracting scheme similar or equal to a master franchise type of arrangement with our BeJarvis entity – see www.BeJarvis.com for more details.