From the source: Giro Maurici, San Churro

Giro MauriciBIO: Giro Maurici
After working in the finance sector for years, Giro wanted to break away from his corporate career and find something he could be passionate about. After travelling through Europe, he discovered the rich history Spain has with chocolate and in particular, how that history has manifested in Madrid’s Chocolateria San Gines. This was something he could see himself bring to Australia and so he launched San Churro more than 10 years ago.

COMPANY PROFILE: San Churro
San Churro opened its doors to the world in 2006, in Fitzroy, Melbourne. From humble beginnings in a tiny 47sqm hole in the wall, San Churro has since grown to 53 stores. The well-loved chocolate franchise is known for its authentic Spanish hot chocolate and churros.

Inside Retail Weekly: How has the year been for San Churro?

Giro Maurici: In all honest truth, it’s been a slog and it’s been difficult – not so much from what’s happening in the store network, but internally, we’ve got to that point where we’ve moving into our teen years and now we’re facing the next ten years. 

No longer is it a game of survival. We’ve gone past that hump of furiously needing to grow to keep our heads above water. We’ve become a more commercial and rationally-focused organisation and we’ve been able to keep a lot of distractions at bay. I guess now, the next chapter is I’m back [as CEO] and trying to re-establish our heart and exactly why it was that we became San Churro in the first place and really look to capitalise that over the next five years. 

We have 53 stores at the moment. To be honest, we’re not an organisation driven by putting new stores on the map. In Sydney especially, during that time since we were born, there’s been an explosion of bubble tea joints and frozen yogurt joints. They were probably at times more aggressive than us in terms of bidding for sites and the rents they were willing to pay.

All along, we haven’t been playing that game – we’re playing the long-term, sustainable game. We’re a franchise and we need to make sure we’re treating our franchise partners  with respect – these are  people who come along and quite literally put their houses on the line for us.

IRW: That’s quite a different approach to a lot of franchise businesses in the QSR space, where sometimes success equals aggressive growth.

GM: It’s one thing to be seen as growing, buying flashy cars and taking the sites on Pitt Street and all the rest of it, but at the end of the day, you can become unstuck very fast.

We’re especially wary of Sydney as a market. Sydney retail rents over the last 10 years have been up with the highest per square metre rents in the word. That’s why we’ve been much more measured with our growth. We don’t have a Sydney CBD site for example. We’re much more drawn to the left-of-centre sites, like Glebe back in the early days, where the rents weren’t through the roof, but we could start establishing a brand that people could identify with.

I wouldn’t lose any sleep if we didn’t put on another site. That said, we’re always in the market, looking for the right opportunity, but now more than ever, if we don’t have the confluence of having the right site with the right supportive landlord who we can be very clear has  got a clear plan of execution not only on the specific site they are selling us but for their entire property, as well as a franchise partner we’re confident in (that’s not the challenge right now, because we have existing franchise partners who would love more opportunity and love to grow) – then if we can’t hand on our heart say this is the right risk to take, then we won’t recommend the investment in the first place.

IRW: How have you managing those high rents? I know some businesses are changing their models to adapt, like opening smaller format stores or going regional. Is that something you’d look at doing as well?

GM: On the regional front, that’s something we’re open to. Of the sites we’re looking at, a lot of the more viable ones tend to be in the regional areas – there are more realistic landlords, lower rents and lower levels of competition. It’s much easier to shine there through a crowded marketplace. That certainly might be somewhere that we can find some growth over the next year.

IRW: Shopping centres are undergoing a lot of change at the moment and changing their tenancy mix to include more food and beverage. But at the end of the day, there are only so many meals someone can eat, really. Do you see San Churro remaining in centres?

GM: When there are landlords in shopping centres that have a good track record of being able to deliver on the promise, we take that into account [before deciding to open a new location]. There’s no lack of landlords and developers out there who are really good at selling the sizzle, producing the 3Ds and the fly-throughs, selling the promise of night traffic and driving customer traffic.  We understand that many landlords have been looking to food and beverage, entertainment and experiential offerings to help re-invent themselves and stay relevant. And some of them have done it really successfully.

As you would with a job applicant, you look at the landlord’s track record and look at how successful they’ve been delivering on the promise. We’re not in the business of taking unnecessary risk with our franchisees’ livelihoods and if a landlord can’t back a deal with the right level of commitment and assurances, then we’re not going there. It’s really simple. We’re well past the point where we have to grow for growth’s sake.

It depends on what your growth perspective  and endgame is for your business but the honest truth is we’re not looking for an exit. We’re not looking for a private capital company to buy us out or an IPO, we’re playing the long-term game and I’m thinking of the next young family who walk through our doors looking for a franchise opportunity, and thinking, in five and ten years time, are we still going be able to head out to dinner and be friends? That’s the end game.

IRW: Have you considered taking San Churro overseas?

GM: We’ve been asked that since day dot and yes, we would love to one day, but I still don’t feel that we’re ready as a brand. I don’t think we’re there yet. I would much rather be looking at you in the eye and saying, ‘We’re solid here’. Maybe it’s the curse of being a founder because I often see what’s not quite right and I see the opportunities yet to be exploited here and once I can see the possibility of overseas emerging in the next few years, then sure, we’ll look at it.

But at this stage of the game, despite our local focus, we probably have more international enquiries than domestic and we’ve probably had that for the last five years. As Kim, who runs our franchise recruitment, can tell you, those enquiries just get an automatic response, we don’t even look at them. We file them and say, ‘Thanks for your inquiry, but we’re not getting distracted.’

IRW: What are the local opportunities that you’re looking to exploit at San Churro?

GM: One of the big drivers out there is our nighttime and dessert trade. People come in and share a celebration with friends and family.

That’s been our core, but what a lot of people don’t know (and we haven’t done the greatest job of communicating it) is we still get all our amazing chocolate from family-owned companies in Spain that have been around for hundreds of years.

The whole chocolate angle is still an opportunity for us to establish with a decent retail range and we’ve been doing a lot of work to evolve that over the last couple of years. And now with Christmas and Easter and celebrations, it’s an example of where as a brand, there are still a lot of blue sky [opportunities] and existing stores and franchisees that can ride that wave.

IRW: Dessert is really popular right now in the food and beverage sector. I’d say you’re getting a lot more competition from other players now.

GM: It’s definitely upping the bar and customers are expecting a whole lot more now from their sweet treat experience than they ever were.

The brunch place that used to be built around eggs, bacon and avocado is now doing pimped up stacks of waffles and pancakes morning through night. It’s not just the breakfast and brunch joints that are upping the game, restaurants are working a whole lot harder on their dessert menu and sweet offerings. No question, that’s part of the hidden competition that we’re facing at the moment.

Food’s never been more readily available either, with the explosion of UberEats and the home delivery channels. We’ve probably got half of our sites on UberEats and you’re seeing a market shift in the way people are ordering their takeaway, and that’s probably part of the reason why some of the established delivery operators like Domino’s are starting to struggle – consumers have a lot more choice now. When the weather’s crappy and you want to stay at home with mates and watch a movie or footy, it’s not just Domino’s, you can pop on UberEatS and have whatever you want.

It looks like that channel’s here to stay and we’re working hard to make sure we have a menu and offer that resonates with that customer and occasion as well.

IRW: A few franchise businesses have come under fire for underpaying their staff lately. What kind of work have you been doing at San Churro to ensure it’s a solid system for you and your franchisees?

GM: One thing you’ll be surprised to hear is that even the bigger franchisees – we consider ourselves babies, we only have 50 outlets – they often don’t have one system to monitor their timekeeping or payroll. A lot of them leave it to their franchise partners to muddle through these laws.

Literally over the last 12 years since we launched, the laws have changed every single year and what was perfectly normal and legal one year has become all of a sudden, whether it’s the ‘better off overall’ test or the ‘no worse off’ test. Seriously, how you could ever hope a franchise partner on their own to work it out without having an industrial relations lawyer? It’s impossible.

So over the last few years, we have all our franchise partners and our own stores working on the same platform – one database, one set of rates (the National Award Rates). We take it really seriously not to take any shortcuts, because it’s not only for the benefit of individual franchise partner, but it’s for the benefit for the whole group that we’re not just seen to be, but we are employers of choice.

So when parents are about to give their 15-year-olds permission to work at San Churro, they know we’re looking after them and paying them proper rates. It’s actually good business, regardless whether it’s law or not. Yes, the laws are changing and it looks like franchisors are going to be responsible for any transgressions in their franchisee group, regardless of whether they had direct control or not.

But at the end of the day, in the court of public opinion, if I walk into a Maccas or San Churro, I don’t care if it’s a franchise or not, I want to know the churros or burger I’m about to enjoy wasn’t built off the back of taking advantage of young kids.

We can proudly say that we’ve got the one system across the group and anywhere there might be a slip-up, we can identify it with our franchise partners. We’ve been proactive about that for a good few years.

IRW: Is it hard to keep the same core values you built the business on when you’re growing it?

GM: Yes, it’s been hard and I guess that’s why I’ve just jumped into the CEO role in the last six months. So even though I’ve been involved in the company from day dot, what we found over the last few years is we became very good executors, very commercial, very ‘hard’ if you like and now, the theme over the next few years is how we reestablish the heart of what we do.

We spend a lot of time talking to our franchise partners and our customers and our support office staff just to reinforce and re-establish what our values are and why we actually exist.

And at the end of the day, we exist for nothing much more than giving people an excuse to celebrate a small moment in their lives. We probably have the perfect medium and atmosphere to do it. I’m looking forward to us becoming an even more unique and memorable experience and through my lenses, I see a lot of opportunity to up the ante. That’s what fires me up.

 

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