Minding their stores together

Minding their stores together

Crain’s Small Business • November 8-12, 2010 | by AMY ANN STOESSEL

John Mazhar, RediGo, Perry, Ohio

John Mazhar, the owner of a new RediGo store in Perry, said there was no question as to the benefits of signing on with RediGo, the concept of which was formed and branded in 2007 by a group of store owners in Lake County.

A group of Lake County shop owners who founded their own brand, RediGo, touts benefits of operating through partnership.

There can be strength in numbers. Just ask a group of store owners in Lake County who banded together in 2007 to form their own brand.

And now the group behind RediGo Food Marts is looking to get stronger with the addition of two stores this fall and potentially more on the horizon.

Three years ago, the owners of six formerly franchised convenience-style stores formed their current partnership in search of a better way to do business.

“The amount of experience that brought this group together is tremendous,” said Angela Broski, one of the original store owners who now is president of RediGo. Woody Jedlicka, another of the original store owners, described the collaboration as a group of independent business owners who knew each other very well that now shares a name and buying power.

All eight of RediGo’s stores are in Lake County, with the two newest in Perry and Painesville. Collectively, the stores do about $15 million in inside sales a year, not including gas or lottery sales; and they employ about 70 to 75 people. In addition to sharing an advertising program, the store owners say that as a group they can bargain for better rates on products that the stores sell.

Working together also can mean more leverage in other negotiations, such as with banks and credit card companies and for workers compensation and health insurance. Additionally, the store owners meet once or twice month to share information and collaborate. “We all kind of knew each other before, but we’re twice as close now,” said founding member Lynn Mitchell, who has owned his store in Painesville for more than 25 years.

‘As flexible as they come’

Instead of operating in a more traditional franchise format, the founders opted instead to issue licenses to the brand — a business setup that generally means more autonomy for the individual stores.The cost savings for the store owners, they say, also has been substantial in comparison to when they were part of a larger franchise.

Yearly costs to be part of RediGo can range from $3,400 to $3,600, depending on the payment plan, compared with an amount that previously could reach into the tens of thousands of dollars in fees depending on store sales. There is no additional startup fee for a licensee.John Mazhar, the owner of the new Perry store, said there was no question as to the benefits of signing on with RediGo. Coincidentally, he was drawn to the store brand when he moved to the area because in Texas he operated a store under the same name, but with no connection.

For the annual cost of participation, Mr. Mazhar said he could barely buy an advertisement. “Plus, I got a lot of help from the group,” he said. Jack Kurant, an attorney with Wachter Kurant LLC in Pepper Pike, said while there is no specific test in determining the difference between a franchise and licensing arrangement, it all comes down to one word: control.

However, Mr. Kurant said it can be a fine line; the more requirements that are put in place for owners, the closer the arrangement moves toward being a franchise, which then opens it up to more outside regulation.As for RediGo, Ms. Broski said there are a handful of general requirements it looks for from its licensees: Stores must use the RediGo name; comply with certain standards, such as a minimum sales amounts; maintain clean, orderly businesses; and promote advertised items.

As for the future, the members of the original group are open to more licensees, but they are inclined to stay local at this point.  “Right now, we want to hold our cards close to our chest,” Mr. Jedlicka said.The next step may be to add smaller shops to the brand in a RediGo Express format. But nothing is set in stone, which by its very nature is the beauty of the partnership, according to the owners.“We’re about as flexible as they come,” Mr. Jedlicka said.

Making a name

One of the biggest hurdles for the group in the beginning was pretty basic: deciding on a name. “We’re a convenient stop. All of us had that in mind,” said Ms. Broski, who sold her store to a licensee in 2008 to lead the brand and work with vendors. “It was truly the first big obstacle we had.”

Laura Sheridan, president of Viva La Brand, a Cleveland-based marketing strategy and ad agency search firm, said in marketing, a business should first consider what it is about — what problem is being solved. “The strongest brands … own a place in a consumer’s mind,” said the 25-year marketing veteran, whose clients include Post-Up Stand, Resilience Capital Partners and ToolingU. A name should be selected that reflects the organization’s mission, is memorable, easy to read and short, she said. It’s also beneficial to make sure that the corresponding Internet domain is available.

As for RediGo, after months of the owners considering various names, the brand and look evolved from the concept of a stoplight. (A consulting group actually suggested the name Red Go, to which the owners added the “i.”) Once the name was developed, Ms. Broski said it was essential to send the message to customers that the look and name may have changed, but the stores were still the same. The stores sent out between 3,000 and 5,000 mailers — twice — with the store owners’ photos, emphasizing “we’re still here.” “A lot of our customers thought we were bought by a national chain,” Ms. Broski said.

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