Bakers Delight joint CEO David Christie talks with Inside Franchise Business Executive about harnessing the technology shift in the 40 year-old franchise chain.
Three years ago the target for growth in Australia was 800 stores. Where are you at now and how are you addressing growth over the next 12 months?
In Australia the business directly employs more than 400 people, with a further 8000 to 9000 bakers and sales staff employed under the brand.
In terms of targeted store numbers we’re less specific now. It’s great to throw numbers around but in Australia it is less about total store numbers and more about profit at store level and store growth.
The three year plan through to 2020 had aggressive store targets. How are we going to get there? A lot of sales growth, also bottom line profits. What has helped has been a reduction this year in wheat prices after a huge increase, and that’s helped profits. Over the last six months there’s been an increase in sales for core products and we will see growth over 2021.
It’s less about the footprint on the ground and more about how to get more customers efficiently.
Technology plays a role in that, and store format too. We are testing a couple of concepts at the moment – one around making the customer experience more efficient and convenient, so they can buy what they need contactless. Self-serve kiosks are at proof of concept stage, if that works, we will use it as a way to get into more locations without building a full service store.
We’ve done pop-ups at Easter but this would be a more formalised process. It also allows us to get into those big shopping centres that Coles and Woolworths anchor.
What will be the lasting impact of Covid on the bakery chain?
The impact on the economy will be there regardless. People have adjusted their behaviour. It’s a bit of a rollercoaster.
I think we’ll see eating at home continue. It’s been an enforced change and will stay in a large degree driven by more working from home and concern about public transport.
Even once initial concerns recede, huge number of businesses have found a better way to work, employees don’t have to be at the office 8.30 to 5pm. So why ask an employee to fight traffic two hours a day?
We’ve got a very good outlook for neighbourhoods and strip shopping and we’re just working out where big centres will sit. Most big shopping centres are franchising and some locations won’t have the traffic.
We’ve only had one location permanently closed and that’s because the lease came to an end. That’s the contradiction. Some businesses performed better, some are decimated, we’re seeing it in micro scale.
Providing support is a big priority for us. About 8-10 per cent of franchisees are on some form of support, a combination of Jobkeeper, Bakers Delight royalty support, and rental assistance.
What’s coming up in technology?
Delivery is playing a part in our business although a lot less so than it is in QSRs, how people interact with grocery delivery is a few steps behind. We’ve partnered with Uber Eats, and about 25 per cent of the network works with them. It is a small part of our business, and we’re still finding out how customers react.
With Covid the New Zealand network was forced to shut almost completely, only operating delivery. It meant franchisees kept in touch with customers but it didn’t make up for the shortfall.
We’ve learned a lot. Online grocery overall was expected to be about 2-3 per cent of sector revenue and it has grown to 10 per cent and is likely to hold across the category. We need to have a play in that space.
But 90 per cent is still bought in store and lots of retailers take their eyes off the in-store experience.
It’s about solving the convenience problem – particularly for parents, giving them an option to grab their bread without having to wait.
All Bakers Delight sites bake. Very few businesses are doing that, it’s been a strength for us. Supermarket supply chains were overwhelmed in the early days of panic buying, lead times are quite long. We managed very well, and our bakers can produce hourly, daily changes.
We are also building our own e-commerce platform integrated with loyalty. The current loyalty program is incredibly effective, but doesn’t give us huge benefits.
How would you sum up the competitive landscape right now with Amazon and supermarkets?
The online element has accelerated hugely. A few per cent in either direction is a massive change. The question is where do we go from here? Will it accelerate or level out?
People tend to overestimate short term and underestimate long term impact. A lot of businesses doing this now, some are going all in, leaving a lot out on the table. The trend is pretty clear. A lot of people who have no interest in buying groceries online have been forced to.
Big supermarkets have resources, and shown strategic intent to invest heavily in click and collect. A short term goal for us is to provide in-store better experience. We need to find a way to get customers product.
How is the brand adjusting to the rent and wages concerns?
Stores have to grow, have to find growth, the topline has to outstrip CPI or rent increases or they will struggle.
With more than 600 locations globally we generally have pretty good relationships with landlords. But in Australia, with a handful of big landlords, it’s not a partnership in the same way it is with our suppliers. It never really has felt that and I don’t see it changing in the short term. They have got shareholders who need a return. It’s going to be messy for a lot of businesses.
It’s important to prioritise franchisee needs and get the best outcome store by store.
What’s important to get shopping centre traffic is products and services and experiences that can’t be easily bought online. Fresh food has a part to play in that. A positive for us is the customers are going back to basics and there is a huge demand for core bread products.
What’s it like running a family business?
We’re incredibly passionate about the business. That passion is evident in the second generation and we’ve navigated business succession.
A big motivator is the relationship we have with our franchisees, employees, suppliers and community.
The brand’s connection with the founders is crucial to the business. Without that connection I believe it would be just another business – not a family business. There might be an argument to say it might be bigger; it wouldn’t be the same.
There’s been a lot of hard work and passion for such a long time in the business, it feels like I’m part of it, I’ve played a part in its growth and development.
It felt right from day one, my first day in the bakery and I saw how easy it is to sell product.
