Franchise Spotlight: Grocery

‘Symbol group’ franchises like Spar, Londis and Premier are prospering as shoppers increasingly swap weekly big supermarket shops for more regular visits to small-format stores.

Every household in the country uses grocery stores of one shade or another, usually weekly and often several times a week.

Even if they buy most produce in a single weekly online shop or supermarket visit, shoppers generally need a few extras in between. In these situations, convenience stores, 31% of which are ‘symbol group’ franchises, are rather more, well, convenient.

Sector overview

  • UK food and grocery market set to grow 14.8% by 2023, with online, discount and convenience channels growing fastest
  • Most grocery franchises are ‘symbol groups’ – such as Spar, Costcutter and Premier – which expand through rebranding of existing independent convenience stores
  • Supermarkets and hypermarkets are losing market share globally, particularly in the UK, while symbol groups are growing steadily

At present most grocery franchises are ‘symbol groups’, which include Spar, Londis, Nisa, Costcutter, One Stop, McColl’s and Premier. Rather than recruiting franchisees to create new sites, symbol groups typically expand by persuading existing independent stores to adopt their branding and own-brand product ranges.

In a food retail market where supermarkets seem so dominant, the biggest symbol groups are heavyweights in their own right. Londis alone has 1,900 UK outlets, while Spar has 12,000 stores across 40 countries.

Recruitment by Symbol groups is “poised to further accelerate” despite the high street’s wider decline thanks to a small-format model with collective buying power. Tania Page, associate director at Harris Interactive, has noted that “consumers are moving away from a regular big weekly shop and towards ‘as and when’ needed shopping trips.”

Used by 89% of shoppers, convenience stores are the second-biggest, second-fastest growing grocery channel, according to grocery research firm IGD. Younger consumers and food-to-go are expected to drive 18% projected growth over the next five years.

IGD anticipates that discounters will account for 30% of total growth over that period.

Food retail has been comparatively insulated from the rise of ecommerce. Indeed, the fastest-growing supermarkets – Aldi and Lidl – are yet to offer online delivery. Symbol groups haven’t either, but they do generate revenue through click-and-collect services for non-food ecommerce.

Other revenue streams beyond produce include scratch cards, tobacco and e-cigarette products, electricity top-ups and petrol (Spar has over 800 forecourt operations).

Beyond symbol groups, we may well see grocery franchises emerge that focus on dietary niches like vegan or gluten-free food or ecommerce, which is the fastest-growing grocery channel.

Is a grocery franchise for me?

The benefits of bringing your independent grocery store under a symbol group umbrella include a recognised brand, collective buying and marketing power and bespoke point-of-sale systems. Spar claims that retailers enjoy sales rises of up to 12% after adopting its award-winning training.

But what are the financial costs of getting such a turnkey solution? Not necessarily significant. Londis, for instance, levies no joining, membership or other fees.

Franchise agreements usually restrict you from changing branding, prices or product lines, among other things. However, one Spar franchisee claims they enjoy “flexibility to add our own things to our store and allow us to use smaller, lesser known suppliers.”

The structure of grocery franchises

Your day-to-day role will change little if you rebrand as Nisa, Londis or another symbol group brand.  What will change are your product lines.

Symbol groups usually have hundreds of own-brand lines, often tiered into premium, mid-tier and bargain ranges. By simplifying their supply chain they can drive down prices and/or drive up your margins, with Londis promising a minimum of 25% profit on return.

Other perks might include:

  • High quality façade of a pedigree brand
  • Expert help in optimising store layout and product range to suit local demographics and store dimensions
  • Training programmes in operations, retail management and more
  • Access to new revenue opportunities
  • Marketing campaigns across multiple channels – including leaflets, TV and radio, social media, national PR
  • Regularly updated price promotions
  • Bespoke point-of-sale systems that provide data on customer buying patterns, and tools for replenishing stock and viewing invoices, promotions and product details
  • Free membership of Association of Convenience Stores

 



Joshua Antoniou

About the author

Joshua Antoniou is now Global Account Executive having started at Dynamis in the Customer Service department. He also writes for BusinessesForSale.com & FranchiseSale.com.