Starting a retail business (perhaps franchised)

excellent post. the little things add up to a lot in a business like this and having actual metrics to measure success of marketing etc and to tweak based on those results is so important.

 

Hi Witzel,

Sounds good, seems like you will have great control (though my experience is most of above mentioned in dictated by HO)

Regarding the rebates, I would get clarity around rebates and stock control. Great that you can control your stock, when you come across struggling SKUS check if you will have the ability to negotiate rebates to clear our SKU at a fire sale. If you can be proactive and sell off struggling SKUs and rebate the cost difference , will make a huge difference compared to writing off at stock take.

RE: Partnership, nothing is free in business . Imagine a business meeting between the 3 of you, how will you feel when it is a 2 v 1 discussion? Are you comfortable with that? With regards to skills, having a details person vs big picture is kind of irrelevant (all due respect). I would suggest more a structure of Store GM (perhaps yourself) and have the sales and store managers and marketing - report into partner 1 - focus on sales/marketing/store look and have a Inventory GM and have bond manager & freight manager report into Inventory GM (who would be more in the detail regarding run through, lead times, holding costs etc)

If you have clearly separate roles and reporting responsibility, that can work. If your roles lap over, it will not work (have seen this many time in retail)

Jeremy

 

With slow moving stock lines (SKUs), most suppliers are happy and willing to do stock cleanses - whereby they swap out slow moving lines for new/fast moving lines.
Ultimately, the supplier's dont want you to be sitting on dead stock - because it means you have less cash to spend with them on lines that turn quickly.

As i said - as a store owner you have 100% complete fully autonomous control of your stock range. The only exception are 5 suppliers which are "core range" - meaning you have to carry those ranges above a minimum set level. These are all fast moving ranges, and there are stock cleanse mechanisms in place so you dont end up owning dead stock.


Very good suggestion with the break up of roles within the business. I will take that on board!!

 

Best of Luck.

Keep us update with your progress.

Jeremy

 

Best of luck. It sounds like you have good knowledge of the business from working in head office.

 

Thanks everyone
Will definitely keep you all informed!

I'll be spending the Xmas break writing up business plans and doing swot analysis on the various different locations for this business.... fun stuff!

 

Succession planning is a massive step that often gets overlooked in a partnership type arrangement.

You want it to be ironclad, expect the best but prepare for the worst. It's been mentioned but have every type of exit covered and an agreement in place for how it will happen (divorce, death, retirement, bankruptcy and the like). Generally it's a good idea to have an insurance policy in place to pay out the leaving member in these scenarios to ensure that one partner isn't left hanging because of the other.

On top of that you want a clear separation of duties and a great partnership/shareholders agreement in place to enable decision making to be fluid. You both have skills to be used but that doesn't mean you will always agree the other is doing it right.

As for the business, you should be in a unique position to actually gain info from existing franchisees, I don't know if you have access to their financials but that would be a great place to start if you can, otherwise I'd have a chat with them, just mention you have a friend who is thinking of buying and was wanting some information. Some may give you nothing but some may tell you the truth, the corporate end of the agreement always has a different perspective on just how successful the stores are.

Sounds like you're doing as much due diligence as you can which is always the first step. I think it's certainly important you do a 2 and probably even a 5 year cash flow projection using worst case/expected/best case scenarios and see where you end up and just how viable your plan is. People always tend to be overly optimistic if they just do an "expected" projection so the worst case is really important and the best case presents the optimal scenario, if it isn't enough for you than the other 2 shouldn't matter because it's not worth doing! Cash flow really is king on a startup, you need to manage it tightly or things can spiral out of control rapidly. Sounds like your partner should bring strong support on this front.

Otherwise mate, good luck with the idea. As I said, sounds like you're doing the DD on it so you're doing everything possible to succeed but a little luck never hurts

 

Unlike some of the other posters I think you will go just fine teaming up with your beancounter mate. Complementary skill set and another set of eyes and hopefully brain working for your good. Just agree with him your compensation package to come off the profit prior to it getting split, likewise his compensation for doing his thing. He will be a perfect foil for you particularly if you want to grow to multiple sites in time. Make particular use of his skill in setting cashflow budgets for working capital and monitoring, as that's where a lot of start-ups slip up. Your summaries suggest you have got the goods to make a fair fist of this opportunity. Good luck!

 

IGA?

 

CHRIST NO!!!!!!
I couldnt think of more overly controlled and structurally broken franchise than anything from Getcash... i mean Metcash.
Oh wait.... a 7-Eleven, Pieface, or Dominoes.....

Yeah no thanks.


Sound advice Foxy and Wogitalia. Really appreciate the input!!

 

When setting up the partnership you should always consider the exit strategy - 'roulette clause' (either party can offer to sell the business to the other party but if the business partner declines, the other party pays the amount offered) ie if you can see value in the business at $1m you take the risk that they accept the offer and buy you out (so you have to be satisfied with the amount on the table) or you then have to stump up the cash to buy your partner's share for the offer amount.

 

I like that clause. Wasn't it Kerry Packer that used it to great effect?

 

I

I thought that baccarat was more his game

It was envoked in a jv over the Indooroopilly shopping centre about 15 years ago.