In these relatively good times for the convenience channel – some would say booming times –where enticing offers from symbol groups are thick on the ground, what does the franchise retail model have to offer in addition?
Mike Fitton is the man to ask. He joined Southern Co-op with a remit to turn its Welcome franchise into a formidable presence. Fitton has vast retail experience, having worked since 1990 with the multiples and afterwards with Budgens, Nisa and Spar, and he can cast a weathered eye over the sector when judging what will and will not work – and especially what retailers will and will not be happy within the somewhat more stringent franchise model.
Southern Co-op was established in Portsmouth in 1873, and is a big presence in the southern counties from Kent to Cornwall. The Welcome franchise is expanding steadily but not hastily, successful wherever it goes. That is down to the model and the management system set up by Mike Fitton, who understands independent retailers and the competing expectations of the group and the individual.
What a retail club is to a symbol group, a symbol group probably is to a franchise model. In each case there’s a step up in terms of both joining conditions and accrued advantages. To be a franchisee, at least with Welcome, which is closely affiliated to Southern Co-op, even down to the staff uniforms, you need to sign up for the whole package. Mike admits this is not for everyone, and everyone is not for Welcome, either. It’s all about finding the right people and the right relationships. Mike says he started to learn about that with Budgens.
“I joined Budgens in 1996,” he says.“That was my first introduction to independent retailers, once we decided to go the independent route. When I joined Budgens it was a company owned group, and then we decided to start doing some franchise stuff. And then eventually Musgrave saw what we were doing and bought the company and then sold it onto Booker’s.”
A new system
Welcome started as part of Southern Co-op when it acquired some stores back in 2007, and Mike was brought on board in 2012 to organise and develop the operation – something that went steadily but pretty slowly until about three years ago, mostly due to technological issues.
“I was taken on for that role – heading up the Welcome operation and pushing it forward. It was using the EPoS system that Manchester Co-op used for their company-owned stores, which is a great system for store managers, but it’s not so great for independent retailers.”
It was OK for a time “because that’s all there was”, he says.“And the retailers were mostly ex Alldays [bought by Co-op in 2002]. So joining from Alldays, they ended up getting the access to all the fruit and fresh, chilled, own-label and so on. Having an EPoS system that wasn’t brilliant for the independent retailer, they could live with, because their sales were going straight up, from the ex-Alldays offer to what the Co-op offer was.”
What the EPoS system didn’t offer was the flexibility needed to attract new independents to the franchise.
“I started getting a lot of them saying things like, ‘Mike, can we have this, can we have some of this?’” he recalls.“But when they saw the EPoS system, because they already had the benefit of fresh food and things like that, albeit not the same as a Co-op, they said, ‘We can’t use this system. It’s just not for us.’”
The problem was that the company-wide EPoS tech could not give cost price and lacked the ability to price skus locally, which is what a regional organisation needed to give it the flexibility for success.
Mike says it slowed things down and there were not many new retailers added to the Welcome signage.
So two and a half years ago, they dropped the old Co-op system and installed a different one. “It’s a new EPoS that we got from a company called VME, who also deal with other Cooperative societies,” he explains. And it was this which proved the turning point in perfecting the offer to prospective Welcome retailers. As Mike says, the system was already in use by a lot of other Co-op societies, and vitally, it details local depots and allows margins to be adjusted.
“And since then, we’ve managed to get all those retailers that wanted to join that hadn’t so far. And that’s been the start of our growth in the south.” he says. “In the last two years, we’ve added 28 new stores. And that’s basically doubled our estate.”
That’s an explosive rate of growth, achieving in a very short time what Welcome had previously barely managed over more than a decade.
“We opened another store last Wednesday in a place called Carshalton, and we opened a store two weeks before that in Taunton, and one before that in in Colchester, and about that same time, one in Faversham in Kent,” Mike happily reels off the latest members of the franchise family.
The Welcome journey
“We don’t just open a store and you might see somebody eight weeks later,” Fitton says of the “bespoke” route of acceptance into the Welcome family.
And on top of that, the regional location and identity seems to be vital. “We can only go so far and then our support starts dropping. I’ve had people reach out from all over the place saying, for example, can we do a store in Manchester? No, sorry, we don’t go that far.”
“We could do because we go off the back of the Co-op depot,” he answers.“The Co-op has depots all over the country. But how do I get an area manager to come and support you? My big point of difference, that I always play on – and it’s sort of my history as well when I worked for other companies – is the support we give our franchisees.
“These are people, these are independent retailers, the money they’re earning is for them and their families. And we understand that. So anything we can do to help them, we will do that. And the level of support we give them is far better than anybody else can.”
The key is the personal relationship and the physical presence – regular, nearby – that means an eye is constantly kept on the business and problems can be addressed immediately – something you can’t do from the other end of the country.
“We are there. So for example, before we opened Carshalton and Taunton, the first thing we did is talk to them: Do you want to join? They might say, ‘Yes, we do.’ And then one of my operations managers will get in touch and we’ll hold their hand from then onwards. We will then look at the layout and suggest things for them. We don’t just say,‘Look, come on board, join us and sign there and you’re another number.’”
Mike says he cannot imagine getting to the point of having 300 stores, (“I can’t see that happening in our area”) and adds the proviso that the stores have to be the right type. That doesn’t just mean they must be at least 1600 sq ft with a weekly turnover of at least £24k. Those are minimum requirements, beyond which there are further benchmarks in terms of presentation and service that must be met before a retailer can qualify for a Welcome sign – a bit like SAS selection for retailers?
On the contrary: Mike says that although it might not suit every retailer, the model is not exclusive or elitist but instead concerned with finding the right fit. He stresses that the selection procedure is for the retailer’s benefit, too, accepting that there are always niggles and objections, so it’s best to have them out in the open, “so the retailer knows us,” he says.
“We’d normally say to them to go and talk to our franchisees, and we would give them two or three addresses. And then they come back to us and say, ‘You know, we spoke to that person, we’re really happy.’ And then we’ll say, okay, nobody’s perfect. Let’s just go through some of the things that might annoy you with us.”
He says that for example, no EPoS system is perfect. “Every single one’s got this little bit of a problem here or there: ‘Why did you do it that way?’ So we always say that if you come on board, you’ll see this, this and this, which might not be you are used to but you’ll find it works, because all our 53 stores say they’re happy with it. We’re as upfront as possible so there’s as few little surprises as possible.”
It is a strategy that is paying off.
“I was head of sales for Nisa, I was retail director for Spar Blakemore, I was head of franchise support for Budgens,” he says. “So I know how all those other companies will work. The difference between us and a fascia is that we give more far more support. And they will operate the stores under a lot more discipline.”
Too much disciple, though, will put people off and kill the local character of the store – flexibility is needed, as Mike goes on to explain.
“We are not a McDonald’s franchise,” he stresses. “But we’re not a symbol either. As you know, a symbol operator could join with a fascia, and then buy ten per cent of their stock from there, then go and do whatever else they wanted. With us, if we stock it in our depot, you have to buy it from us. But they have freedom to look at their retail prices, look at the range, get in local products, and then we are there to support them.”
The McDonalds example is a good one: join up and head office dictates your every move; the burger will taste the same here as in Beijing or Boston.
“Some people want that,” says Mike.“But if you’re a McDonald’s franchise you can’t sell fish and chips in a wrapper, even though it’s a great idea, because it’s not part of McDonald’s.
“With us, if you’ve got a local version of fish and chips, for example, you can sell that in-store as long as it’s ethically correct.”
How far does the tolerance or encouragement for local variation extend and what are the criteria?
“If you had a local supplier for, say, factory eggs from hens in battery farms, you can’t do that,” Mike answers: it’s a standard sku that would come from depot, so you use the Co-op. “But if you’ve a local supplier who’s got eggs from the local hatchery or a small producer, then they can sell as long as they are farmed correctly.”
Local. Ethical. It strikes me that the more paternalistic overtones of the franchise model are leavened by the flexibility.
“The store in Taunton that opened two or three weeks ago sells plants from the local nursery,” says Mike. “They’ve got greetings cards from a local supplier, they don’t go with the big boys, they go with the local ones. And part of that is because they already had another store in Taunton, for ages, which swapped to Welcome as well last year. But they’ve had the same card supplier for 20 years. So why would you keep that out?”
It’s an viewpoint that has really caught the spirit of the past year, which has seen the opening of 15 new Welcomes despite the pandemic (“and the year before that we opened 13”). The local aspect has been magnified by the lockdown, strengthening ties between the stores and the local producers when there were national shortages.
“Yes,” says Mike, “we found that where the franchisees have gotten these long-term relationships with local suppliers, the local suppliers stepped up to the plate. It was a lifeline both ways.”
Mike says he knows that not every chain could have pulled off such logistical gymnastics. “There’s a big tranche of stores out there couldn’t have done anything with those local suppliers.” But because they’ve done it, new relationships have been forged and new friends made for the future. What is more, “They’ve got more kudos in the local community, because they kept that going. And our franchisees love it.”
How not to wear out a Welcome
Discipline makes everything work, and you can tell that Mike Fitton is a disciplined fellow. He knows exactly where he is coming from as a Co-op man but he understands what he can offer to the right retailers who can live with his rules – and what he can accept in terms of their individual variation within the franchise identity.
“From our point of view, from a Co-op point of view, the fact that the Co-op’s got the buying power that it does, it can develop new products, it can change ranges when it needs to, the Grow range, which I’m sure you’re aware of came out about a year ago, that’s grown – excuse the pun – that’s been growing a good percentage. And [Welcome] couldn’t have done that on our own, you need that buying power,” he says, acknowledging the big guns of a national organisation.
But Fitton’s ambitions for the Welcome group are not unlimited, and that is the secret of both its character and its success. Knowing the limits as a regional force safeguards against over-reach and the dilution of the personal element that makes everything work.
“For the next quite a few years, we’re still going to be a certain size. We’re going to grow quite nicely every year in our area where we can, with the right sort of stores, but also still give that personal touch where we know everybody. So if we’re if we’re high single, low double figures then that would be okay with us. And it’s very much very much quality over quantity.”
Mike admits he is not really sure how many other groups there are in the country that could manage it. “Booker, Nisa and so on – they are all one big company, they don’t have the secondary levels underneath them. The nearest you get to that, I suppose, would be Spar, with their separate wholesalers, and so all of those offer different spins on the Spar.”
Welcome sounds like a great club to belong too, but it is strictly limited membership. What are the other essentials a retailer needs to have to be in with a chance?
“They need to be in our area, of course,” Mike nods.“If you are south of the M4, if you are within the M25, we’re happy to help. And they need to be a quality retailer. So when I do go and see them, I will go in their store, unannounced, and just see how their standards are, and if their standards aren’t quite right, we will not be having the conversation!”
Everyone’s got flexibility within the umbrella of the Co-op, he says, but only so far. “Our promotions, for example, are the same as the Co-op, they all come down every week, you cannot stop that. If one of our franchisees wanted to increase the price of a product, they’ve got the freedom to do that. But they can’t turn off the Co-op promotions. So whereas with most other symbol groups, they could say, ‘I don’t want to run that promotion’, with us, you cannot turn it off because you want to make a bit more margin. Sorry, you’ve got to buy in the whole thing.”
Buying into the whole ethos is the philosophy, as Fitton sums it up. People come because of the Co-op, so make the most of the opportunity:
“Embrace it, be part of it. And we don’t look at individual products, we do cost price, not wholesale price, right? So the way that works is we can’t then give franchisees a ‘What’s your price on this compared to what I’m paying currently?’ We say no, you can’t do that, you need to look at the overall margin, not the price of cigarettes, or a can a drink or another product, which is what most people normally do – they give you the top 20 and or whatever, and say, ‘My price is cheaper and that’s cheaper’. No. You have to embrace the whole thing. You’re running it differently, you run it as an overall store, look at the overall margin for the shop and spend the time running the shop, and serving your customers and not looking at individual products. Just look at the overall margin and 53 franchisees growing by 15 stores and 13 sales for last two years. They can’t be wrong.”
To cap it all, last year Welcome became a full member of the British Franchise Association, which is even harder to join than Welcome itself.
“We had to show all our processes, and they did an anonymous survey of all our franchisees, with a questionnaire on what they thought of us,” says Mike. “Currently, we’re the only retail chain that’s got full membership with the BFA. And we’re quite proud of that,” he adds, with justifiable pride.
And finally, what’s the biggest complaint about Welcome?
“Why won’t you sign me up?” he laughs.