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What could be better than owning a convenience store, building it up to your own standards as a business, an employer and a part of the local community?
The obvious (but probably daunting) answer is owning more than one store. If you’re a profitable, successful retailer who wants to expand your business in 2013, this is a very real option which doesn’t need to be a massive headache.
Both Sukhdave Basra and Kash Jaffar are proof of this, owning over 30 stores between them. Mr Jaffar’s stores are spread around the Milton Keynes and Bedford areas, varying in size from 1,500sq ft to 10,000sq ft. Having started with one single store in 1997, he now owns 16, five of which he acquired from Musgrave in one go nine years ago.
Mr Basra, meanwhile, has developed the Bourtreehill brand, adding a third store to his portfolio in December in the Scottish town of Strathaven. Bourtreehill is one of a number of convenience store brands that his family own, and they have 16 stores in total. With this level experience both men have some sage advice for similarly ambitious retailers…
How do you find the right site?
Sukhdave Basra Finding a good site is about looking at a shop’s location and the surrounding neighbourhood. You should also look at the demographics of the area and whether this suits the type of store you want to develop and your business plan. We have stores that serve local housing schemes, stores on busy roads which get a lot of passing trade and stores in city centres.
Kash Jaffar My stores are mainly in local centres around other independent shops, schools and homes. They might never achieve very big turnover figures, but you don’t get very much competition like you would on a high street or in a centre. I have Tesco and Co-operative stores nearby, but they serve their own areas.
Should you look to buy a brilliant business or one that is under-performing but has potential?
SB There’s advantage and disadvantages to both approaches. If you take over a store that’s not performing you know you can make it a lot better. You can buy it for a good price and then double the turnover and the worth of the business. If you buy a business that’s already performing to the maximum and you don’t need to change too much, you’ll be paying top dollar for it.
KJ If you find an existing store, you have the capital (a few hundred thousand pounds) to buy it and the business plan is good you’ll be making money from day one, but might need to refurbish it in the near future. If you open a new store you can do it to a high standard that will last for 10 years, but it will take two or three years before you see a profit. Most of my stores are new builds which provides you with a blank canvas.
How should you approach financing a new store?
SB The best way to secure funding is to ensure that your current business is profitable, that you are generating a decent profit and that you can show the bank that you have a proven track record in the sector.
It’s about saying that you’re just adding another site to an already successful business and that you have a decent amount of money to invest in it. The rule of thumb is that the banks are looking for you to put between 30% and 40% in. Because we’re dealing with the same bank each time we add a store and developing our portfolio it’s a lot easier.
How can you ensure you’ve got the best deal from a bank?
SB The better the relationship you have with your bank, the less you’ll have to put in. If your existing businesses are already tied up with that bank you can use that as your down payment or collateral.
How long will it take to get a return on your investment?
SBIt’s as long as a piece of string. If you’re taking out a bank loan lots of people like to spread it over a 10, 15 or 20 year period. There’s other financing available and with the right amount of investment from a retailer it can be as little as three to five years.
What kind of legal advice will you require?
KJ All the issues around leases and contracts need to be looked at and we know a number of local firms that can help with this.
SB The main thing retailers need to be careful of is that employees now have to be taken over with a new store, which wasn’t always the case. It’s very important to know your rights, your employee rights and what you’re both entitled to. If you’re taking over their contracts you could have an employee that has been working there for 30 years. That’s the main legal issue around new stores these days, everything else is relatively straightforward. If you want to make changes to the building itself, I find that a good architect can explain and help you meet regulations.
Is it best to bring in managers and other staff from your existing stores?
SBIf you have a group of staff who’ve been working in a store, they’ll know it a lot better than anyone coming in from the outside. We will work closely with them so they can see how we want and expect the business to be run. In the store we’ve just acquired, the manager actually left before we took over and so we’re finding out if there’s someone in the team we can raise up to manager level. You can normally tell if it’s going to work out with new staff within the first few weeks.
Would you recommend retailers who own more than one store to work with a symbol group?
KJ Most of my growth came when I joined Budgens eight years ago. You get huge support from them. I work with Budgens from day one, even if building has only just begun on the store. Their project managers will support you first, then there’s a store opening manager who can provide guidance on getting the store ready before the whole team comes and gives you advice on range, how to merchandise and on particular areas such as fresh food.
SB We work with Key Store and Nisa and, although each one of my stores is different – some in housing schemes, some by busy main roads – we’re finding at the moment that the Bourtreehill umbrella brand works for all of these locations.
How do you organise insurance for a new store?
SB It’s all reliant on where the best quote is from and the banks and the symbol groups can give advice on this. I’d say it’s best to have all stores under the same umbrella.
How do you create a business plan?
SBOur business plan is based on targets set according to how well we think the store should be performing and how we can arrive there. Then we monitor the numbers to make sure sales, wastage and margins are working toward those targets. Nisa help with this, setting up the plan, doing a store survey and even telling you what range will work well for the customers a store attracts. Any major symbol group will have these facilities and if a retailer isn’t too sure it’s always better to ask.
KJI will see a site that’s being developed near new housing areas and go to Budgens and discuss the potential. From that point on their business development team will assist me in creating a business plan for the new store.
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