Why stop at one shop?

18 February, 2011

Despite the economic gloom, you operate a successful off- licence. Sales are up, your customers are weary of supermarket wine and you’re making a decent profit. There’s a boarded-up Threshers nearby that has set your imagination racing. Is now the right time to double the size of your retail empire??It’s a question that has crossed the minds of hundreds, if not thousands, of off-licence owners over the past year or two. Not all of them have been spurred on by vacant First Quench sites; for some it’s simply a question of capitalising on the current mini-boom in independent drinks retailing while the going is good and property relatively affordable.?Among those opening second shops in 2010 were Cooden Cellars in East Sussex, Harrisons Fine Wines in Perthshire, the Sampler and Vinoteca in London and the Strand Wine Company in Kent.?But raising capital for such investment is not an easy task, says property agent Christie & Co. The company has sold about 300 former First Quench stores, many to buyers who have transformed them into specialist wine shops or broadened the offer to include delicatessens.?Finance was often a sticking point, although the company says banks were slightly more willing to lend to fund business growth and acquisitions in 2010 as prices and trading conditions stabilised.?“For the independent retailers, it has been difficult,” says director of retail Tony Evans. “They’re having to provide more security and demonstrate value in their business plans, which are being interrogated to ensure they are viable. There is money out there, but it is more of a long haul. If a bank has had a good experience with somebody and the history is there, as long as they’re not being too ambitious, funding is available.”

The government’s Enterprise Finance Guarantee scheme has come to the aid of some buyers. “Buyers with robust business plans, who sought individual units and small packages, had a good chance of securing the funding they required,” adds Christie & Co chairman David Rugg.?However, the Bat & Bottle in Oakham, Rutland, managed to open a second store in the town last year – Ben’s Wine Shop – without lending. “We did it on a very different business model to how most would do it,” explains co-owner Emma Robson.

“We have found a tiny, off-the-high-street premises and don’t employ any extra staff to run it. We’re in a market town so we open when the market is on: 10am to 2pm on Wednesdays and Saturdays, and all day on Fridays.?“We’ve taken on a rent which is about the same amount as we used to spend on advertising, on the basis that it would probably bring in as much new custom, and so far it has. There are three of us who work in the company and we do everything ourselves. It’s stretching ourselves a bit thinner because we’re committed to being in two places at once. It involves some extra hours but we didn’t have to buy any extra stock.”?In time, the business hopes to open a third shop, but “would look at franchising it off rather than running it ourselves,” Robson says. She anticipates it will be 18 months before the second shop realises its potential. “In the long term we wouldn’t be happy with the return we’re getting now,” she says.?Thomas Peatling, a wine shop in Bury St Edmunds, Suffolk, has operated a second store in Spalding, some 70 miles away, for a number of years. “It’s been organic growth,” says director Nicholas Corke. “I can’t tell you whether we’ve doubled or trebled the

profits, but from where we’ve started it’s moved in the right direction.

“It opened up a new area which was

certainly quite useful. Here in our main premises in Bury we get a lot of private customers as a specialist wine merchant, whereas the Spalding shop is slightly more trade-oriented. There we tend to do a little bit more with pubs and restaurants. It’s a small town and not really such a retail environment.”?The business owns the freehold at Spalding, and Corke says he would be keen to go that route again if more growth opportunities presented themselves. Some of the First Quench sites he has investigated have been ruled out because of unrealistic terms from landlords.?“The thing you’ve got to be cautious about – and I say this having been involved in a chain of shops – is controlling the overheads and getting the right lease,” he says.

“A lot of those First Quench sites are on fairly onerous leases, or rents, at least. The site is important but the costs are fairly crucial. The ones I’ve had a look at were too expensive. If you get clobbered with those terms it is very hard to make it work.”

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