Probably the most frequent question I have been asked by retailers, over the last 15 years, is whether it is better to have a branded shop or a non branded shop. Well what do you think? In my view it all depends on you, the dealer. Let me try and explain why I say this.
Firstly the upfront set up cost. These are halved if you build your own shop and fit it out with the fixtures and fittings yourself. This is especially true of any of the oil company branded shops. Over all the years of working with the different oil company networks, it has never ceased to amaze me at just how the choice of equipment, fixtures and fittings are made. Aesthetics are given the most weight while durability is way down on the list of priorities. Anyway, I digress here. So up front your costs are halved.
Secondly, if you have a non branded shop, there is no rent or franchisee fee to be paid. In some networks these have become excessive and onerous for the operator of these stores. How the rent or franchisee fee is calculated is also variable and perhaps best left to a discussion on this later.
So you save in two ways, once up front and then on an ongoing basis going forward. But herein lies the nub of the question – brand or non brand. Our customers prefer shopping at a branded outlet. Why? Because there is the feeling that if it is part of a recognised network, it will be managed better than a Mom’s and Pop’s store. So if you were considering buying a pie for lunch – where would you stop to buy this product? Mom’s and Pop’s or a branded store?
Across our industry, branded stores tend to have better turnovers and have a bigger basket of goods than a non branded store. However, I do know of some exceptions to this rule – and that is why I said up front, it depends on you the retailer.
Where non branded stores do well is when the retailer himself, has had retail experience and understands his market and his customers. They work very hard within the shop, doing the buying, pricing and are generally far more hands on, than the average franchiser, retailer out there. So if you have worked in this industry and are prepared to be very hands on – it can work. But in general, the turnover figures can be up to half that of a branded store.
Yes I know, if you take the franchisee fees away from the gross profit, for a branded store, you might very well land up with the same net profit in a non branded store. In other words with reduced turnover in a non branded store and without franchise fees, your nett profit in some cases may be very similar. But in my experience, your growth stagnates quite quickly in a non branded store whereas in a branded store your opportunities to grow are much better. This is largely because of the consumer brand building done by the large franchisors.
If you are looking for long term growth and some sense of certainty of customer support, then the only route to go is that of a branded retail outlet. In my next blog I will continue this discussion as there are some significant proviso’s to this point of view….
In the meantime take care out there