Case Study - Robin Arkle
Why Coffee?
Prior to signing up with Costa Coffee in July 2004, I was working for Perfect Pizza in a franchise recruitment capacity.
At one of the many Franchise exhibitions I attended I met Matthew Holgate who was launching the Costa Coffee Franchise model. Upon investigation it seemed like a very robust and sound business model. Costa appeared to be a company that would encourage and support franchisees to develop the brand in their local environment.
My colleague at Perfect Pizza (Andy Hirst) and myself then signed up for an initial cluster of 5 stores in Hampshire. We opened our first store in Fleet in November 2004 and 4 very busy years later we now have 12 stores turning over in excess of £4m and employing over 150 people.
Our stores: Alton, Bognor Regis, Eastleigh, Fareham, Farnborough, Fleet, Gosport, Petersfield, Romsey, Southampton High Street, Southampton Marlands, Woodley.
How did you secure funding?
In our respective roles at Perfect Pizza we already had good business contacts with RBS and HBOS. We secured funding with Bank of Scotland (HBOS). They have been very supportive right from the start. We had to each offer security (our homes) for the first couple of stores and we also took advantage of the Government Guarantee Loan scheme (GGL) for 2 stores funding.
After we had opened our 4th store our loans have been on an unsecured basis. Until the recent credit crunch and well documented banking issues HBOS have been incredibly supportive of us. Right now, all future funding and loans from the bank have temporarily been frozen. We are currently investigating switching our banking arrangements to HSBC.
Did you prepare a business plan and register your business?
Yes, we prepared a very thorough business plan which thoroughly investigated each of the initial 5 towns that we signed up to. The business plan was as much for our benefit to put our minds at ease with the concept as it was for the banks to demonstrate our credentials as serious business partners.
We registered the business as a Limited Company in 2004.
Did you use a solicitor in setting up?
Yes we did. Right from the outset we have used a local solicitor who is familiar with the area. We chose a solicitor who specialises in property law. He took care of outsourcing specific advice with regards reviewing our franchise documentation.
Each store that we has required quite intensive legal work. The solicitor has had to review our lease with the landlord and partnership arrangements with Costa where the lease is shared or guaranteed by Costa.
Did you use an Estate Agent in selecting / renting / buying your property?
Yes, we have retained the services of a Hampshire based independent Commercial Property agent. He specialises in finding retail sites, negotiating leases, rent reviews and lease renewals.
Do you have a reward scheme for regulars?
Yes, we offer every customer a loyalty card. Each time the customer purchases a drink they get the card stamped, when the card has 10 stamps the customer can claim a free drink.
What is your most popular item on the menu?
Cappucino's are the most popular drink. Ham and Cheese Panini's are the most popular food item.
Biggest mistake you can admit to and how you rectified it?
Hiring people without doing the proper checks and taking references. It is the easiest thing in the world to be fooled by 'good' candidates at interview stage. It is easy then to ignore the need for references and proper checks.Rectifying and losing these people once employed is difficult, time consuming and expensive.
Where do you source your food / coffee / tea?
We purchase all our food and drink items from 2 Costa nominated suppliers. Most food items and milk are delivered daily direct to the stores whereas the longer shelf life items and dry good are delivered once per week direct to store.
How would you describe relations with your staff and suppliers?
We try and look after our key staff. With over 150 staff it is hard to keep everyone happy all of the time. We employ a mixture of full time and part time staff. We recognise that many of our part time people are not with us for a career but to earn money whilst at college or university, whereas many of our full time staff are wanting to develop a long term career with us.
We operate a monthly bonus scheme for Store Managers and Assistant Store Managers. This rewards sales growth, labour and food costs, cash control and standards instore as measured by a Mystery Shopper programme and Costa's internal auditors.
A good store manager should be able to earn around 40% of their annual salary in bonus. We also have an annual staff party in the summer with a BBQ and disco. There are also additional ad hoc incentives and rewards for managers and staff such as contributions to their own Christmas Parties for good Mystery Shopper results.
Relations with suppliers are good. We have had some suppliers kindly donate small prizes for use as staff incentives. We have had camera's and Ipod's donated. We meet up on an annual basis with oru key suppliers to review servicing arrangements and our business relationship.
Any particular story / legend that brings a smile or tear to your face?
We had a very sweet engagement story in our Eastleigh store. A young couple met each other one day in our store. A while later after they had been on several dates together (seemingly mostly at the same table in our store) the man came to see us to help him arrange his proposal to the girl.
He wanted us to reserve the table that they usually sat at. He brought in the ring and asked us to bury it under a pile of marshmallows. When the girl arrived for the date they both sat at the usual table, the pre-ordered drinks were delivered to the table with the pile of marshmallows and the ring.
The man went on bended knee and asked the question. Of course she said yes. The man later came back to us and asked if he could buy the table and 2 chairs that they usually sat at for their new flat.
Awards won?
As part of the Costa Franchise community we have won several awards including Costa Franchisee of the Year in 2006.
What's the best piece of advice you'd give to potential coffee shop entrepreneurs?
Take time to employ the right people and don't be afraid to delegate and let go. It's not possible to be there 24/7 and the only way to be successful is to develop a good and trusted team.
And what's the worst piece of advice you've been given?
Too much to mention! Mostly I have managed to filter out the good and bad advice.
How much do you advise spending on signage / sandwich boards / etc?
Can you tell us what you have to advertise the shop?We are fortunate being part of a national franchise that much of our marketing materials get produced for us and delivered direct to store. All we have to do then is to make sure it is up in the right places at the right times. We do have A Boards which stand outside the store.
We also do our own local marketing which might be tactical to combat the effect of a competitor coming to town and this can take the form of leaflets distributed near the store or vouchers printed on the reverse of ferry or bus tickets.
Do you accept cash and / or credit cards? How do you go about buying machines and not getting ripped off by customers? Is it difficult getting merchant status? Have you had any incidents of forgery?
Yes, we accept cash, debit and credit cards. We set up the merchant facility through Bank of Scotland without any problem. They provide the terminals and the money is transferred directly into our bank within 3 days of going through the terminal.
We do get cases of forged notes. We have also had professional tricksters who come in asking for change for £20 notes, they wait until the younger members of the team are on till, then they confuse them often getting away with £30 or more.
Can you describe the opening / launch?
The day before each store opens we host a 'Friends and Family' evening. This is designed to get the staff used to making and serving the drinks as well as saying thank you to friends, family, local suppliers for helping us get the store open.
We have also done an offer in the local paper to create awareness and to encourage customers to visit the store.
What do you think of advertising / PR?
Advertising and PR are vital tools to promote the business. Unfortunately we do not possess the necessary skills to make the most of the opportunities available to us. Costa are in the process of developing a local marketing toolkit which we can buy into various pre-agreed templates which allow us to develop local marketing initiatives that have been tried and tested.
I am also in the process of trying to locate a local independent PR professional who can help us gain local press coverage.
Do you hire out the coffee shop for small functions / parties?
Yes, our store in Southampton High Street has a meeting room upstairs which we hire out to local businesses by the hour, half day and full day. This is proving very popular with local solicitors and banks. Of course in addition to the room hire we have a captive audience for food and drink for the duration of the day.
Would you do it all again?
Absolutley. Having been involved in franchising for over 20 years, the Costa business model is one of the best.
There is never a dull moment. With 12 stores and 150 staff and thousands of customers every day representing all sections of society, it is a fun filled and constantly challenging environment in which to work.
