Retail Boom

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• Business Franchise, February 2012
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With so much doom and gloom surrounding the economy at the moment and the high street affected by the rise of the internet, the idea of opening a retail franchise may seem crazy to some. But for anyone with the right franchise and with passion and the determination to work hard, retail can still be a sure-fire winner. The Zip Yard is a franchise system that started in Belfast in 2005 and deals with garment alterations and repairs. Within three months of opening, the business was able to take on a second unit, and by 2007 had launched its first franchise. It now has around 25 stores in the UK and Ireland and plans to open another 20 franchises this year.

"The concept of what we're doing is not driven by the economy," says co-founder Brian Kielt. "Before the downturn, with most of our shops, 80 per cent of our work was adjusting new clothes. But since the downturn, that's flipped right round and 80 per cent of what we do is repairs to old clothes." Brian points to a franchisee he met with recently who increased sales every month in 2011, sometimes by as much as 40 per cent month-to-month. By making its stores bright, clean and well fitted, with leather armchairs and TVs for customers, and by offering a high-quality service, The Zip Yard can charge more than its rivals, and customers trust the franchise with their garments.

Nathan Sermon, head of franchisee recruitment at Cash Converters, agrees that times are harder than they used to be. He says: "There are fewer people walking up and down the high street and they're careful where they spend their money."

Yet the franchises continue to do well by focusing on customer service, and judicious site location and choice of acquisitions. Cash Converters' revenue stream initially came from people selling their own household goods to the company for resale in its high-street stores. This has since been extended to personal finance and loans, with roughly 70 per cent of stores now offering these services. And while online sales are affecting the high street, the franchise has fought back - with its own website as well as trading on eBay, where franchisees place items they might not be able to sell through their stores.

And more franchises are opening all the time: South Wales is virgin territory for Cash Converters and Nathan has just held a roadshow there looking for franchisees.

Sandwich chain Subway is also finding ways to beat the slow economy and the rising cost of raw materials such as wheat. "At the moment, it is difficult, but we had a strong end to the year and we finished on an upbeat note," says Paul Heyes, a development agent at Subway. An innovation that helped the company achieve that upswing was actually proposed by one of its franchisees, the £3 lunch enabled it to position itself as a quality food outlet with a low price-point.

But one new trend, which Paul says currently applies to 150 existing stores but is set to treble in the next three years, is the 'store-in-a-store' - a Subway franchise located within another business such as a convenience store or a garage. These require less floor space and overheads, and rent can be spread across both businesses. He says: "Typically, it costs about £90,000-£100,000 for a standalone store, but a store-in-a-store is about 60 per cent of this cost."

There's even now the possibility of a 'store-in-a-store ... in-a-store'! Tutti Frutti is a popular frozen yoghurt franchise with 500 outlets worldwide and has just launched its first UK store in London, with another seven set to open across the capital before the Olympics. The company is currently investigating the possibility of opening franchises within other stores - including major fast-food outlets. Yusri Othman, project operations manager for Tutti Frutti, says that the company is looking a lot more at co-branding other companies, particularly those, "that do not have a wellknown dessert component, for example." Tutti Frutti is also keen to open stores in the suburbs, as well as kiosks in shopping malls, where the costs compared to the high street are smaller.

Here four franchisees explain how they have made a success of their retail franchise:

The Zip Yard
Richard McConnell opened the first English Zip Yard franchise last year in Altrincham, south Manchester

Why did you decide to open a Zip Yard franchise?
I'd been a driving instructor but I was working unsociable hours and bad weather meant I could have no money for weeks. Then I saw an advert in Business Franchise magazine for Zip Yard, my wife saw the potential and after I'd looked at five or six Zip Yard centres in Ireland, I was convinced.

Did you need to know anything about sewing?
No. To take someone and train them up would take years. Zip Yard provide you with your first few seamstresses and they're all high quality.

What sort of customers do you have?
All sorts. We even have celebrities, including footballers' wives, because we're in an affluent part of Manchester.

How have your first few months been?
Fairly stressful! It's a new business venture and we've just had a child so it's been a mad few months. But it's been 100 times better than expected. We've more than recouped our investment and we did that in week three. What other business can you go into and do that?

Tutti Frutti
Yusri Othman opened the first UK Tutti Frutti franchise in Covent Garden, London, at the start of the year.

How did you hear about Tutti Frutti?
One of the shareholders messaged me on Facebook. I was in hospitality for eight years, working in different hotels, including Selfridges, so I was experienced. But everybody has to have a turning point in their life when they can either change or stagnate and this was my time.

Are there any things that make Tutti Frutti different?
The franchisees don't get charged any royalties.

Did you need any training?
I knew the gist of how to run a shop but then Tutti Frutti gave me more specific training. The American head office sent over trainers for two weeks and they trained me in how to make the dishes, troubleshooting the machines and so on.

How have sales been so far?
Extremely good. It's our flagship store and very prominent. Covent Garden has plenty of tourists and it's business-orientated, too. I'm already looking for a new warehouse!

Subway
Mark Wilson is group operations manager for Frasers Retail and has two Subway stores based in the company's petrol stations, with more planned to be opened later this year

Why did you add Subway stores to your petrol stations?
We'd tried pizza and chicken stores-in-stores with some mediocre brands. They just sold us equipment and did a runner. Then we tried a company which was quite successful, but had limited growth unfortunately, and wasn't a recognised brand. So we inquired with Subway and their training was by far the most professional we'd come across, with good back-up and support.

What are the advantages of a store-in-store?
The Subway adds value to the overall offer. Someone may come in for food at Subway and end up buying a newspaper or something else. And it works both ways - it's a very nice, symbiotic relationship.

How have your Subways fared?
The first, Brize Norton, was a great site close to a local airbase and is now in the top 10 per cent of the busiest sites in Britain. The second is in Yarnton. It's a much smaller scale, but it's very successful and healthy. Subway has been a great success for Frasers Retail and we will continue to roll out to as many stores as we can get it into.

Cash Converters
Gary Lewy opened his first Cash Converters franchise 17 years ago and now runs 11 stores in and around East London.

Why did you decide to join Cash Converters?
I was selling office equipment as part of the family business. But the downside was we were delivering to companies going bust. Then we saw what Cash Converters had to offer and that it had a strong foundation, and my dad and a partner bought in. Eventually, I bought the partner out.

How do you decide where to open stores?
You need a mix of people in the catchment area - if it's very deprived, you can buy from people but who can you sell things to?

How have you adapted to the downturn?
The emphasis is still on good customer service, but we're not just buying and selling now. We offer loans and cheque cashing and have a Western Union. The majority of shops are now 1,000-2,000sq ft when the minimum used to be 2,000sq ft.

How much of your business is now on the internet?
About 20 per cent.

How different is running a Cash Converters from running another franchise?
You need experience of buying as well as selling. You get everything from the public, so you have to decide how much to buy it for, and where and how to sell it

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