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Why has 175-year-old retail titan Co-op started franchising its stores?

Written by Zen Terrelonge, Jon Parker Lee on Thursday, 06 June 2019. Posted in Interviews

With 2,500 of its own stores already up and running, food retail giant Co-op has embarked on a franchising journey under the watchful eye of Martin Rogers, the firm’s head of new channels

Why has 175-year-old retail titan Co-op started franchising its stores?

For the past 14 years, Martin Rogers has been a stalwart employee of northern business titan Co-op. But did he expect to be there for so long? The answer is a simple one. “No, absolutely not,” Rogers laughs. “I don’t suppose anyone does [expect to stay with an employer for so long] but I suppose it’s like a footballer who plays for his hometown club – it would have to be a mega transfer to make me move because it’s something I genuinely feel passionate about and I literally wake up every morning trying to think about how to make the Co-op stronger.” And as the firm’s head of new channels, Rogers is able to do just that by spearheading the organisation’s new push into franchising.

Before finding his calling with the food retail group, Rogers begun his career as an investment banker, having studied economics at the University of Birmingham and joined a graduate recruitment scheme with Swiss multinational bank UBS in 1999. “It was very meritocratic,” he says of the market, claiming his comprehensive school education wasn’t an inhibitor in the eyes of his employer. Indeed, as long as you were bright and could do the job well, you were only judged on your capability rather than your background. “I was able to join a global graduate scheme with a bunch of other graduates from across the world – Switzerland, Singapore, France, Germany and the UK,” recalls Rogers. “And being a guy from a comprehensive in South Manchester, it was quite liberating and flattering and I learnt a huge amount.”

Working out of Frankfurt, Rogers became the head of trade support, a role which saw him overseeing stock for the likes of Volkswagen and Bosch. “It was helping people access the value in those stocks whilst concentrating on what would help make their portfolio stronger or contribute to their value for a pension fund,” he explains. Not entirely unlike his role at the Co-op today, Rogers adds his banking post was “very enjoyable and fast-paced” while there’s a link between the two in terms of the commerciality aspect.

Before returning to the UK though, having found himself in a financially stable position where he was able to pay off his student loan, Rogers wanted to give back. “I decided to do something more aligned to my ethical conscience,” he says. This saw him head to China in 2004 where he started voluntary work teaching English and HIV education. “That was [supporting] people excluded from the mainstream, [who’d experienced] lots of intravenous drug use and human trafficking, sex workers etcetera,” Rogers says. While it may not seem it on the surface, his banking background proved useful for his stint in Asia. “The pressure of preparing an English language course for 60 native Chinese speakers seven or eight times a day, six days a week was intense and I think I was prepared for that pressure by working on the stock market in a high-paced commercial environment."

With 18 months’ experience as a volunteer under his belt, Rogers realised he wanted his next career move to have a foundation in giving back and doing good, describing the time in China as “hugely enriching”. “That really confirmed to me that I wanted to do something meaningful which then became a pivotal turning point because I wanted to combine that passion for doing something with an ethical conscience with working in the commercial world,” he says. “I felt very passionately about doing something that was making a positive difference and a necessary contribution. So that’s when I seriously started thinking about the Co-op.”

Upon his return to England and with Co-op in his sights, Rogers joined the Manchester-headquartered firm’s graduate scheme in 2005 at the age of 29 as a mature graduate, which he refers to as a “horrible phrase.” “I’m still not very mature,” he laughs.

But what was it about the firm he felt would cater to his desire for ethical employment? “I’m based in the north west, my family are from Manchester, so it was easy to relocate back home after living abroad for five or six years,” Rogers details.  “And I was really passionate about what I saw the Co-op was trying to do, which was to create a place where an ethical retailer could really make a difference to people’s lives.” He points to the fair trade supply chain partnerships with developing markets, its care of colleagues and customers as well as its cultivated farming processes in the UK and animal welfare standards. “The Co-op in the past probably didn't always do things right but I think it always tried to do the right thing,” opines Rogers. “And I believe in recent years we’ve done more things right – and still try to do the right thing.”

Of course, going from investment banking to food retail may not seem like the conventional move but Rogers found a lot of synergy between his first job and the Co-op. Working in operations as a banker, the goal was to satisfy and overachieve on expectations. “My roles within the Co-op and where I rose to seniority was around operations,” he details. “So [reacting] very quickly, to run help desks, to have a feel on what’s going on in that market and the ability to have an external antenna to try and separate the signal from the noise [were all skills I had].” From a retail perspective, that meant appreciating the needs of customers, staff, shopkeepers and store managers as well as the overall business. “I think what’s really important is that skillset of being able to deal with multiple, sometimes competing, priorities in a fast-paced environment where your actions can have a very significant effect on the bottom line,” says Rogers. “That actually was highly transferable. Running shops is easy but running great shops is really difficult. And I think the same is true in finance – running a bank is easy but running a great bank is difficult.”

Although Co-op had been operating for 160 years at the time of Rogers’ arrival, he felt there was still opportunity in the business for his own career progression but also in terms of what he could deliver to the northern operation. “I saw the opportunity in a brand that has a huge amount of latent affection with the UK population and a special place in people’s hearts and really needed to improve how it operated as a business,” he says. “For me, the Co-op was a sleeping giant and I thought I could help contribute to help waking it up.”

Seemingly he’s made quite the contribution over 14 years of service. From heading up operations for sales, services and communications to leading service delivery for food, Rogers today occupies the post of head of new channels, which he’s held for the past three years. “My role is all about extending the Co-op difference to new places, customers and members,” he details. During this time in the position, he’s witnessed convenience store operator McColl’s snap up 300 Co-op branches and subsequently stock Co-op’s own brand goods, a wholesale agreement forged with Costcutter and also the acquisition of Nisa Retail. “It’s been a hugely rewarding experience to learn about the independent retailer market, independent shopkeepers and people who’ve survived the onslaught of the big four,” says Rogers, referring to Tesco, Sainsbury’s, Asda and Morrisons. Pointing to the strong and vibrant offerings small stores provide the communities, his goal is to build on what the Co-op is doing through wholesale and franchising.

But with 2,500 stores already, why is there a need for the retail behemoth to enter the franchise space? “It’s really been a journey to allow other people, trusted partners of pedigree, to use the Co-op brand to generate mutual value in places where the Co-op couldn't be itself,” reasons Rogers. “We’re the fastest growing [grocery] retailer in the UK apart from Aldi and Lidl and lots of that has come from the thousands of incremental improvements we’ve made across our shops. My role is about commercialising all of those improvements and then allowing [franchisees] to share in that.”

While the Co-op officially started taking on franchises in February 2019, the concept has been in the pipeline for a long time. “We’ve been talking about franchising for several years,” Rogers reveals. “We’re deliberately cautious because the Co-op brand is a beautiful, fragile, precious thing. And we want to make sure we’re working with people who share our values and principles.” He notes the goal has been to ensure the franchise proposition works for the business itself but also franchisees and that’s taken time to perfect. “The Co-op’s been around 175 years, so we’re in no rush but we also want to seize the opportunity,” Rogers continues. “So a lot of the work we’ve been doing in the background very conscientiously is getting the permission and understanding that there’s no contradiction between [franchisees and] the Co-op operating model, values and principles.”

In order to achieve that and ensure Co-op doesn’t fall into disrepair before celebrating its 180th birthday because of one bad egg, Rogers has been working with independent retailers of high quality. “We’ve had to do a lot of work on segmenting systems to make them legally compliant around independents,” he explains. “And we’ve also had to do lots of work around ourselves, in trying to understand how we package up 175 years of history into something meaningful [for] people who haven’t grown up with us or haven’t run Co-ops before.” A lot of lessons have been taken from the Nisa acquisition, through which staff have been given broad exposure of wholesale and how independent retailers operate.

While a move like this has the ability to create intrigue from outsiders, Rogers isn’t oblivious to the fact it could cause concern within the walls of Co-op and has been keen to dispel any worries they may have. “I’m making sure colleagues in the Co-op are reassured that this is additive, that this doesn’t replace our company-owned store opening programme or ambitions in our own estate,” he says. “This is about us deciding together where to put Co-ops down that generate value for communities, partners, customers and members.” Drilling into the potential of the franchise market for the Co-op, he notes the “well-worn route” it provides retailers to expand their brand. “It’s a faster, cheaper way to get into more places more quickly,” he says. The benefit for a Co-op is that while prospective partners may not want to give up their shop, they could aspire to revitalise their existing presence by “operating under the professional expertise of a Co-op franchise.”

With franchising, Co-op is also able to tackle a problem that’s been in the way of growth, which is the difficulty of locating viable properties. “[It’s] getting harder and harder to find competitive value at the sites we want to operate in because our various successes are acting as a market signal for people to move into the convenience space,” admits Rogers. “That’s not to say we don’t still find and open [new stores] because we have still got enough in the pipeline. But franchising gives us another route to market, an agility and operating model which allows us to partner in a way the company-owned model wouldn’t.”

For example, with four franchise stores open currently, universities look set to become a key stomping ground for Co-op franchises. Leeds University is the home of one such site, prompting Rogers to declare “franchise is the only way that we would have been able to access that location.” “Leeds didn’t want to sell and they would have gone with another franchise operator, someone like SPAR,” he says. “And we felt, why should students and colleagues in that location have to put up with a suboptimal offer when they can have a fairly-traded, ethically-sourced, healthy, reasonably-priced value for money Co-op operating model? We felt we had to develop franchises [to support] people who were asking us and [it] also gives us another option to expand at pace.”

Co-op has sourced three franchise stores through its Costcutter partnership so far, while a preexisting arrangement with the National Union of Students allowed the Leeds launch. “We’ve also signed Kent University, which is opening two stores in July and August and there’s a number of other universities coming through our pipeline,” says Rogers. “We’re just taking time to ensure we can select the right partners who generate the right amounts of value which we can share.”

With Co-op franchises now officially available for the taking, the Costcutter pilot that got the ball rolling has had its first anniversary this year. “The two other Costcutters are six and nine months [old] and Leeds University opened the end of February,” says Rogers. There’s been a marked effect on the locations too – or “exceptional” in Rogers’ words where Costcutter is concerned. “The sales increase is over 80% and the transaction count has increased by a similar ratio,” he says. “In Leeds University, sales have increased by more than 100% and we’re seeing close to 80% of transactions go through self-service tills.”

There’s a great deal of support provided to franchisees who join the Co-op network, according to Rogers, with the franchisor out to “create a partnership that really marries the best of independent retail with the strength of the Co-op proposition.” That means all technology and branding is taken care of by Co-op, which accounts for around 25% of the total refit cost – depending on the store. “We contribute all of the EPOS, so all of the tills, all of the technology, the handheld terminals, the headsets, the Co-op tablets which all of our stores use and then we also contribute the nature of the Co-op brand and internal and external identity,” Rogers says. “Those are the things that Co-op generally takes ownership of because obviously it makes sense and it’s also a neat way for us to contribute.” Additionally, all training and guiding principles are also taken care of to get everything ready for launch, inclusive of marketing the opening as well as offering a physical presence on site to include post-live support.

Co-op is by no means the only player in the convenience supermarket space where franchising is concerned, so how exactly does it intend to stand out? “There’s lots of good operators out there,” admits Rogers, nodding to the "flexibility" of SPAR, for example. “But also we’re unique in the way we’re the only grocer franchising the master brand. So actually if you want to franchise with Tesco, well, Tesco don’t franchise Tesco – they franchise through One Stop. Or if you want to franchise through Morrisons, well you can’t be an independent retailer and franchise through the Morrisons Daily format.” To that end, Rogers wants to stress the Co-op is really putting its money where its mouth is. “We’ve taken the plunge to do something no-one else is doing,” he continues.

Looking outside of that space, however, there’s also room for Co-op to do battle with other retail franchisors, although it won’t necessarily be easy. “If I were to say the top ten shopping centres in the UK – Bluewater, Lakeside, Trafford Centre, Metrocentre Gateshead, Bullring in Birmingham – we’re not in any of those locations,” Rogers highlights. “Whereas some of our franchise competitors are – Costa, Starbucks, Greggs, Nero – from a food-to-go proposition. So I think franchising allows us to get into those places and I think our challenge will be to satisfy demand to get into those places while not detracting from the core Co-op proposition.”

With his eyes on the future, while growth of the network is on the agenda, it isn’t the be all and end all, according to Rogers – not to the detriment of the overall Co-op business at least. “Within the next couple of years we’re definitely aiming to have a couple of hundred [franchises],” he says. “And it’s more about the quality of the location rather than an arbitrary number of stores.” Those locations will include universities as previously mentioned but also be near transport links, hospitals and neighbourhoods that aren’t being catered to currently. “[Our franchise growth is] less about numbers and more about quality but certainly we have an enormous ambition in this area and that’s based on the positive results the pilots have got,” Rogers concludes. 

About the Author

Zen Terrelonge

Zen Terrelonge

As editor, Terrelonge can be found on the hunt for all things startup and scaleup – that's when he's not busy talking babies via DADult Life. Whether it's health or hospitality, food or philanthropy, tech or travel, he'll be seeking out the most interesting entrepreneurial developments to run in the magazine and online.

Jon Parker Lee

Jon Parker Lee

Jon Parker Lee is a member of British Press Photographers Association (BPPA), a member of the National Union of Journalists (NUJ and a member of Editorial Photographers UK (EPUK. In other words, he’s an exceptional shutterbug who help the Elite team bring the magazine up to another level. 

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