Symbol groups must provide a more consistent offer, but is franchising the best way? Helen Gregory reports Visit a McDonald's in Bolton or Beijing and you can be confident that your burger will not only look and taste the same but you'll be served with the same corporate smile. McDonald's stranglehold over its outlets means that the product (whatever you may think of it) is always the same and customer safisfaction is absolutely guaranteed. Other fast food chains however, have less rigid control over their stores and this devolved power manifests itself in some less than perfect outlets. Apply the analogy to the convenience store sector and it poses the question: should symbol groups take a harder line with their members in order to achieve more consistent standards? The idea is not just a theoretical one however, as some symbol groups have recently approached the British Franchise Association asking how they can improve their offer and make it more uniform. Many in the industry acknowledge how hard it will be for unaffiliated independents to survive in the future and retailers are increasingly joining symbol groups or becoming fascia retailers to assure their position. But is the next step in the retail evolution for symbol groups to adopt the same discipline, uniformity and level of standard that a franchise can offer in order to keep the customer satisfied? As many suppliers will testify, it can be hard to check whether every store in a symbol group is properly promoting a particular product. They admit this sometimes prevents them giving independents good deals, and they instead favour the multiples which can guarantee where, when and how promotions work in every single outlet, as well as providing them with immediate sales figures. It seems many independent stores are more likely to get pulled up when standards drop drastically, rather than being brought into line in a bid to create excellence. And although the groups insist otherwise, in setting up special groups of chosen retailers such as Costcutter's five star programme and Spar's multiple retail group ­ who get better deals in return for proving their standards are higher ­ the symbol groups are tacitly implying that their other stores are somehow less worthy. One supplier echoes the experience of many when he says his company usually only expects compliance on promotions from 50% of symbol group stores, compared with more than 90% of multiple retailers' stores. He puts this down to lack of control and expertise in category management as well as a dearth of qualified buyers. "They need to get their training sorted out. In America, companies really concentrate on their convenience chains, but in the UK it seems that people who can't get a job anywhere else end up working in c-stores." He adds: "It would improve my job 100% to have more consistency in c-store groups. At the moment we feel that we don't have proper control over our products and it makes it difficult to justify the investment." Costcutter's managing director Colin Graves concedes that suppliers are sometimes right when they think multiple retailers follow guidelines on promotions more strictly than symbol groups, but insists that criticisms could be addressed if they gave the symbol groups a better deal. "Independent retailers ask why should I support promotions if I don't get a good deal'?" he reasons. Graves believes the group has high standards and ensures that its members' stores are run properly but it does have a five star programme which it uses to encourage higher standards in the group. This includes 450 retailers who get better deals and promotions for being loyal and disciplined. "We've got a waiting list to join but we won't let people in until they meet the required standards," Graves says. "They have to prove to us that they can execute promotional activities properly." He adds: "We've got to be more professional, but the sector is very buoyant." And that need to demonstrate professionalism is spurring thoughts of the franchise model which, as the British Franchise Association says, allows customers to understand that retailers offer the best possible value for money and service. The association's business services director Simon Wise reckons the model is enjoying "phenomenal growth" and that 90% of all franchises report profitability in the first year, rising to 96% in the first five years of operation. He says franchises are attractive because customers know what to expect in terms of service and standards. "The professionalism and uniformity can add value to the product and on the flip side, if there's a rotten apple in the chain it can taint a customer's opinion; they might think all the outlets are of a lesser standard. "We have been approached by some of the symbol groups which say they're nearly there but want to apply some features which will raise their game. They are aware that they currently have some shortfalls ­ they know that some people are letting the side down and not performing to the same level as the others." Spar's UK managing director Morton Middleditch admits that the group is moving towards franchising as a business model because it is perceived as bringing benefits, but says: "If we can encompass the ideas without becoming a franchise, we've achieved our aims. "Franchises are prescriptive. Spar hasn't got to the stage that every store should be the same, although we will influence stores as far as we can and give them the right weapons." At the moment, Spar stores don't have to support all initiatives ­ just the ones they sign up to. Middleditch believes most store owners prefer to be their own boss and have no incentive to turn their business into a franchise, thereby losing their independence. Currently, retailers get a say in how the organisation is run through the National Guild of Spar - the forum where issues such as the group's marketing programme are discussed. Half the business is made up of single stores and half of company-owned stores and retailers who own more than five shops. Middleditch says this is a "nice, happy balance". He adds: "Because retailers get a say through the guild, they may well get peer pressure, and if a certain store is bad, others may ask them to improve things." He points out that many of the store owners are entrepreneurs who push the group to introduce changes. "Some stores we would prefer to shape up or ship out ­ but bad standards will be one reason for a store being asked to leave the group." He concedes though, that the multiple retail group is the long-term future for Spar, enabling the group to take a more disciplined approach. Spar's MRG ­ which agrees trading arrangements with suppliers over products that will be stocked, measuring results so that suppliers can keep track of their investment ­ is deemed extremely important to the company because it engenders multiple disciplines. About 400 people are part of the MRG but Middleditch insists, however, that this does not mean that the other Spar stores are in any way inferior. "It just means the independent stores are not geared up or ready for the procedures involved, such as scanning. Some of them don't have to have a business that's at the absolute cutting edge." But whatever the companies say in their defence, some business consultants are not convinced. Michael Treacy, chief strategic officer of US venture group Gen3 Partners, says: "To most people quality means consistency and symbol groups can only provide this to a limited extent. They will eventually be overtaken by better models. Symbol groups are better than independent stores, but franchises give you so much more." He believes the franchise model will become more appealing and grow stronger over the years as supply chain efficiency becomes paramount and the pressure of Wal-Mart's "extraordinary thresholds of performance" take effect. "Wal-Mart, for example is so effective in controlling absolutely everything about the running of the store, that it unburdens the store manager to the point that all he has to focus on is the very local issues of consumers and employees. "They don't get measured on sell through or price. Complex centralised systems mean there's very little left that needs to be controlled on a local level ­ you can manage that by having good training programmes." Treacy admits that no franchise model can design or mould how customers are greeted or treated, and adds that if the central office isn't doing a good job in maintaining standards, shop staff will try to innovate themselves, with "chaotic" results. But he is insistent that symbol groups have nearly had their day. "Ultimately, the brand doesn't stand for the merchandise, but the service experience which is based on the processes. So how strong a brand can you have if the customer experience varies from store to store?" Jacqui Scull, an executive consultant at KPMG, is equally blunt in her summary of symbol groups. "They have an image problem. Some of the retailers think they are outdated, that they are tired, don't have the brand credibility, and are not modern or responsive enough to change." Scull believes the symbol groups have a job to do to protect their position as the multiple retailers move in on their traditional territory with formats such as Sainsbury Local. "The industry needs to smarten up its act ­ consumers won't tolerate sub standard stores unless it's an emergency. Budgens appears to have strong brand attributes ­ they've done a lot to position themselves in the fresh food market. When you've got an established brand it makes for a much easier model for people to buy into, from a retailer's perspective. A recognised name over the door can be very positive." Budgens is perhaps furthest down the franchise route of all the multiple chains, with its plan to operate groups of convenience stores trading under the Budgens Local fascia. Six stores are already up and running. The chain aims to fit up to 50 Budgens Local stores within the next two years and is in talks with groups to undergo the conversion. It will supply a full marketing and systems package to the store and "ensure that standards of quality are consistent with the rest of the Budgens store portfolio". Norman Kears, Budgens director of franchise operations, says it is franchising "to a degree". "It's part of the future for Budgens ­ a way forward. We're taking the independent retailer into another league. It gives them the opportunity to increase turnover substantially more than they would be able to in a symbol group." Kears says it is hard for symbol groups to control what goes on their shelves, but extremely easy for a multiple operator like Budgens. He says that a number of symbol group members have already approached him with an interest in joining. But Kears is quick to point out that the chain operates "controlled flexibility. We realise that there's some regional flexibility and can't always insist that people do certain things." Budgens does not plan to recruit large numbers to the format and is insisting on signing up only good quality independent retailers who are prepared to invest in their business and take on the concept and controls. Kears is not keen on a more rigid approach however, and believes most store owners want to remain independent. "We don't want to take on the ownership of their margin." It seems that the more complex head offices get ­ wielding more power and using clever ordering/buying systems ­ the less sharp and entrepreneural store managers will have to be. People managers and good with customers, perhaps, but less adept at using their initiative in working out how to shift a shelf-load of slow-moving promotional products. In these localness-obsessed days, attention to detail and satisfaction is paramount in order to keep local customers ­ no matter how this is achieved. A slight loss of independence could be a small price to pay for more cohesion and respect from suppliers. Symbol groups should ask themselves: if the customer is always right, can it be wrong to believe that franchises are the way forward? {{COVER FEATURE }}