From the most vibrant economic peaks through to the pits of recession, franchising as a business model has consistently stood the test of time.
But while this proven approach to managing a business or brand is common in sectors such as fast food and high street retail, it is not something that has traditionally been associated with the catering equipment market.
Dominic Ricciardi is attempting to alter that, however, by setting up a franchise package that could lead to dozens of Caterquip branches being opened up throughout the country.
Ricciardi is certainly not afraid to test a model that others in the business have shied away from. 16 years ago he was working in the catering industry and faced an urgent need to replace several major kitchen appliances at the same time.
Buying new equipment wasn’t an option due to the cost, so he set about trying to source what he needed second-hand instead. After getting hold of kit, he discovered it often needed repairing before it was fit for use, leading him to launch Caterquip, a business specialising in the resale of refurbished equipment.
While the company can also supply customers with new equipment these days, its main revenue stream continues to come from selling and installing second-hand reconditioned equipment. Caterquip offers everything from large rack conveyor dishwashers to built-in blast chillers, counting schools, hospitals, colleges and private sector buyers among its sprawling customer base.
“The biggest edge we’ve got is the fact that we can go to any establishment and offer to buy any redundant catering equipment they’ve got,” says Ricciardi. “If you imagine a big chain, it will have kit to get rid of, so we can either buy that off them or put that in credit so they can offset it against other kit they may want to buy. And whether that is reconditioned or new is up to them.”
Having worked to establish Caterquip as the foremost name in refurbished commercial kitchen equipment, Ricciadi believes that setting up franchise operations around the UK represents a more practical way of expanding the business than if it were to open wholly-owned sales offices. The intention with the franchise model is that it attains critical mass under one banner and with head office support, but operating on a local basis.
Ricciardi and his team have therefore carved up the country into 105 separate regional territories and is offering budding entrepreneurs the chance to buy an exclusive territory.
As a special launch offer, Caterquip is pricing the first three franchises it sells at £41,500. After that the cost is likely to go up.
“For that £41,500 the franchisee literally gets a turnkey solution and is ready to trade,” explains Ricciardi. “We’ll help them find and source an industrial unit where they can sell reconditioned and new catering equipment, as well as associated services such as detergent sales, new sundry sales, oil filtration and kitchen deep cleans. There is nobody that does what we are setting out to do. There are lots of people out there doing what we do — catering equipment — but it is quite fragmented. We’re trying to bring it all together and offer the end-user customer the whole package. We are going to teach the would-be franchisees what we have been doing for the last 16 years,” he says.
Caterquip estimates that a typical franchisee could generate a turnover of between £150,000 and £225,000 in the first year, rising to between £400,000 and £650,000 by year three. The contracts it is offering run for 10 years and franchisees pay Caterquip 8% of their annual turnover each year by way of a fee.
The Peterborough-based company has spent £75,000 developing the franchise programme so far and plans to invest a further £180,000 in the next two years to increase its central warehouse capacity and improve its website and SEO capabilities to the benefit of franchisees.
Of course, the million dollar question is what would happen to Caterquip in its current guise if the franchise network grew to a level where its existing business was compromised.
It is a dilemma that Ricciardi has given plenty of thought to. “We’ve got what we are calling our tipping point and that is probably when we take on between 20 and 25 franchisees,” he explains. “At that point we are probably going to stop becoming sales people ourselves and become franchisors, providing the back-end support that is needed. We can’t be 100% sure of the situation, but basically the business itself — the head office — would just become redundant really. That is a long way down the line though.”
Click on page 2 below to continue reading article. [[page-break]]
Whatever happens, Caterquip is bracing itself for some massive changes in the years ahead. Ricciardi reveals that to avoid any potential conflict with franchisees, the company is also potentially looking at whether it would make sense to convert the existing company into some form of buying organisation.
“We have got a massive warehouse the size of a hangar here so we may just keep that unit on because we buy a lot of B-grade kit off manufacturers,” comments Ricciardi. “If companies like Hobart, Electolux and lots of other dealers and suppliers have kit they can’t get rid of then we are a great source for them because we are a sort of ‘inbetween’. It’s not new, it’s not second hand, it is damaged — so it is perfect for what we do.”
Having effectively helped create the reconditioned catering equipment sector 16 years ago when he founded Caterquip, you certainly wouldn’t bet against Ricciardi shaking up the market once again with his franchise plans.
It is difficult to put a value on the potential earnings that can be made from running a franchise due to the many variables that can affect it. However, Caterquip believes that if franchisees exploit all possible streams of revenue and work hard to build their territory presence and reputation then the conservative revenue projections for a typical regional franchise are as follows:
Net profit: £30k-£45k
Net profit: £70k-£90k
Net profit: £80k-£130k
Address: Kates Cabin Stores, The Great North Road, Chesterton, Peterborough, PE7 3UD
Tel: 01733 777778