Better coffee, service and food…
Foodco Group Pty Ltd, based in Sydney and founded 1989, is one of Australia’s most successful franchise operations; concentrating on providing mall and High Street locations for their franchisees.
Stronger than ever
Foodco recently emerged from the global financial crisis with a positive balance sheet and good outlook for the future for their 3 market leading brands; Muffin Break, Jamaica Blue and Dreamy Donuts. Each brand offers its own style of menu selection, service, and character. With over 360 franchise business retail outlets, Foodco and its brands achieved high growth in their businesses over the past few years, while others were still struggling with the effects of the global downturn.
Serge Infanti, the Managing Director of Foodco, says that one of the reasons that Foodco has maintained this growth is that the company has always based its offerings on the much more sophisticated European models of food preparation and coffee style. This has cemented their brands with their customers and shoppers alike as a place to go for great food, and high quality coffee.
“We have been here since 1989, and the real key to Foodco is that we have never really been a company that has accelerated too fast and that we have always maintained a very conservative view of the market and the future. This is because, at the end of the day, we are a franchise operator, and we have to be able to offer the maximum return on investment with minimal risk for our franchisees. So we have never been overly aggressive in the market even when the good times in retail were here. We were very careful about what leases we would take, always understanding that these leases would often be for 10 years or more,” he says. This means that Foodco operates with the concerns of the franchisees and their customers as the top priority and have always planned for the future with both of these groups in mind. “This conservativeness has helped us through the recent economic challenges and our brands have continued to remain strong,” he says.
Infanti says that they compete with many other coffee shops, both franchise chains and independent operators, but Foodco strives to differentiate its individual brands through unique points of difference; “What we offer is a more complete experience encompassing great food, coffee, service and ambience. These points of difference hold us up quite strongly and in good stay against our competitors,” he says.
Their offerings have grown to include hundreds of franchise locations in Australia and around the world. “We have a very strong portfolio 176 shops in Australia, 39 in the United Kingdom and 36 in New Zealand, and that’s just Muffin Break. Across the franchise network we currently have more than 360 locations worldwide,” says Infanti.
“With the Jamaica Blue concept starting in Australia, we have now opened in China, becomeing one of the top 3 or 4 chains there, with 13 stores located in Shanghai, Beijing, Suzhou, Wuhan and Nantong.We are also looking at territories like Singapore, Indonesia and India; the brand is growing quite strongly.” He says that their success in other markets has been due to their understanding that “you can’t just take an Australian concept, roll it up and drop it into a new market, you have to be aware of all the differences that market offers, and be flexible enough to meet the local demands. Today, Jamaica Blue has 88 locations worldwide including Australia, New Zealand, China and Dubai”
A changing market
Infanti says that “It’s another exciting year for the retail business; with all the up and downs there has been over the last few years, it is at least always interesting.” He sees that the market may be unpredictable and thinks that it is “as if Australia is holding its breath, we have heard so much doom and gloom, but as a retail economy we are still performing well compared to the overseas markets.” Infanti believes that they are looking at another conservative year of retail spending, but even with that he sees some positive developments in the industry.
“Through-traffic in shopping malls is the big problem for us, we do claim to be a recession proof industry, but when through traffic for the big retail shops are down so are the numbers for the entire food and food grazing industry,” he says. Even with lower numbers for malls and retailers, Foodco Group stores have continued to flourish with Muffin Break and Jamaica Blue posting significant growth in sales and most importantly customer count. Foodco also continues to grow the Dreamy Donuts business, a relatively new concept, and look forward to many more opportunities with the decline of Krispy Kreme.
“When you compare our numbers to the retail food niche, and the retail numbers that come out of the ABS, we are performing very well.” says Infanti.
He expressed his concern for Australian business overall; “What I am not so sure of is Australian retail as a whole. I think there may be some major problems with change to be honest.” Infanti talked about one of the real changes in the industry being the advent of the online shop; “Online buying is becoming much more relevant then it was expected to be even five years ago, as customers are searching for greater value for money” he says. “There is a saying that I have heard recently: ‘I can see it here at Westfield, but we are still going to buy it online.’ This poses a problem for shopping malls and as the decline of traffic and numbers is also going to translate in the decline in demand for retail space in shopping malls.”
Foodco already has plans in motion though, looking at ways of moving their kiosks and in-mall food-court operations into standalone storefronts and investing in overseas development. Infanti sees that Foodco can be every bit as successful in these formats, as they have been in the past, with their mall based Australian shopping centres.
Finding the silver lining
However, there is always some good news as a result of the above declining demand, and one of the positives that is occurring for retailers is that the property owners are beginning to offer much more reasonable rents for the stores. “The demand for space in the malls has also come back to an acceptable level and landlords have become much more realistic about what they charge for rental space.” Lower demand on rental charges means that Foodco’s franchisees can expect better returns on their investments in the future.
In the last few years occupancy costs have peaked, now they are down to a much more reasonable level where small retail business options are becoming attractive. “The rental cost equation is adjusting itself and is certainly making for better returns on investment,” he says. “It is a tough game and I think that you can see that, when you look at Starbucks’ story in Australia, just how tough it can be.” He is of course referring to Starbucks having to divest itself of many of its Australian holdings to a point far back from its position upon its entry into the market.
Success is in the ingredients
“What we do best is being a franchise owner, operator and retailer. We see each franchisee as an important investor,” says Infanti. He often drops by the shops, checks out how there are operating and makes sure that the owners all know him. “This is not a clandestine operation”, he says. “I would be a terrible undercover boss,” he jokes, “but I think that it is a real strength that they all know me. We operate in a very flat organisation; there are no barriers between me, our management team and our franchisees.” Indeed, Foodco Group has three of the most recognizable and trusted brands operating under their umbrella. One of the best things Infanti likes to hear is that many customers do not even know that all the brands are Foodco franchises’, he says that this is because each one of them has such a strong brand name on its own, and has made a real connection to its customers.