COMPANY PROFILE: Gelatissimo was launched in 2002 in Australia and is one of the largest gelato franchises in the world with stores in Australia, Singapore, Philippines, Kuwait, Saudi Arabia and China.
IRW: Gelatissimo has been going for 15 years now and has 60 stores both locally and internationally. How did it all begin?
FB: We launched in 2002 when we opened our first store on the corner of King Street and the MLC Centre. Over the first 24 months, we opened 20-odd stores, all company-operated, then we started franchising in 2004.
We made early mistakes, like most people do when they go out and get gung-ho, so we rationalised a bit and closed a few company stores in the early days. We probably didn’t understand the business model well enough in terms of where we needed to be – we made some poor site selections, we paid too much rent for certain areas, which is the biggest mistake you can make it retail, and then by 2005, or 2006 we started rally franchising seriously. And then we’ve grown around three to four stores a year over the course of the last 9 years or so and that’s really what we’re looking for. We’re not looking for crazy growth, we’re not looking for controlled growth.
We’re fundamentally looking for franchisees to be profitable. We’ve got an interesting model, where we don’t charge a percentage-based royalty. Most of our income comes from product supply, so therefore, we sit on the same side as the franchisees – if we make money, they make money. It puts us in a nice place from that perspective.
Back in 2002, there were a lot of independent operators in the space – your mum and pa businesses and a lot of old Italian families who had been around for 20-30 years, but there was no-one really who had an integrated approach. There was Wendy’s, Baskin Robbins and Mr Whippy too, but there was no real good quality retail product other than your occasional mum and pa ones and they weren’t scaleable.
One of our early MDs was over in Europe and thought there was an opportunity for a gelato business here. He came to Australia and the owners – it’s a privately owned business by two brothers – saw an opportunity in the Australian market and decided to invest in opening some stores. That was the beginning, so we contracted a manufacturer, Brava Gelato, which was our sole supplier for a couple of years. In 2004, we bought them out and Gelatissimo became one integrated company.
IRW: How many stores has Gelatissimo got at the moment?
FB: At the moment, we’ve got 41 stores in Australia and we’re about to open two more in Wetherill Park and Chermside. Wetherill Park is in western Sydney and Chermside is in north east Brisbane and they’ll both open in June.
We’re primarily up the eastern seaboard. Sydney is our biggest market, we’ve got 19 in NSW, 18 in Sydney (Wetherill Park will make 19). We’ve got a couple stores in Melbourne, we’ve got four in Adelaide, a store in Wagga and then we’ve got stores right up the Queensland coast.
IRW: Would you look at going across to Western Australia?
FB: We’ve got a store in Fremantle that started in March 2016. That’s going okay. The WA market is a bit tougher than it was a few years ago with the mining drop, so there’s not as much money floating round.
Gelato is a disposable commodity unfortunately, so people will still go out, but not as often. The WA market is tough, but it’s certainly something that we see as an area of opportunity. There is a lot less rain than on the eastern seaboard, so it’s certainly got some advantages to it.
IRW: What plans do you have internationally?
FB: Singapore’s our original international space. We’ve been there for 10 years. We operate three stores there and we’ve got eight in the Philippines, two in Saudi Arabia, four in Kuwait and two in Chongqing in China. We’re thinking of expanding the China footprint and we’re looking at the US at the moment.
From our perspective, the international footprint is where we see the growth coming for the business. If you think in practical terms, Australia is a country with 25 million people. Just by default, you need to have more opportunity internationally, if you can get the model right.
So far, international territories are quite successful for us. A lot of it is about partnering with the same people. We’ve not always got that right. We’ve gotten better at that selection process and understanding who we need to partner with and what expertise we need from them. They need retail experience and the right connections in the space that they play in. If you get that right and as long as you base the relationship on being mutually rewarding long-term, there’s definitely opportunity out there.
IRW: Not many Australian retailers that have expanded out into the Middle East, really.
FB: Saudi Arabia’s got a fairly established US presence, though – Starbucks, Baskin Robbins, your big guys. It’s interesting. Saudi is geographically a big country with a big population with massive disposable income. From our perspective, it’s a good environment for us. We’ve only got a small footprint, though. We’ve got two stores, but Baskin-Robbins has 300. It’s a big market.
IRW: What lessons have you learnt around international expansion?
FB: Be very selective about who you partner with, protect your IP and take your time. Don’t be too gung-ho and try to conquer the world in five minutes. One of the things we find is while fundamentally the product is the same wherever we sell it, the way consumers purchase it is different.
Therefore, we have to cater our marketing and packaging to that market and the actual user experience. For example, in Saudi, it’s quite a traditional country in a lot of ways. We don’t employ females behind the counter, because 95 per cent of your consumers are male, so from a cultural perspective, it makes it more customer-friendly. The stores have what they call ‘family’ and ‘non-family’ areas. So if you come in with your family, you sit in a designated area and if you come in with a group of male friends, you sit in a separate area of the cafe. Those are just some of the cultural variances. It’s also very hot and a lot of people take product home, so we have to consider how it transports – we need things with lids and insulated packaging, for example. When we play in that space, we have to tailor it differently to how we do it in Australia.
The product’s fundamentally the same, but it’s about the service experience and what we ask our staff to say to people.
In my early days involved in the business – and I’ve worked across all levels of the business – when I was running retail and operations, I used to do a lot of in-store training. One of the things we’d do was roleplay in a store opening.
I found Singapore to be one of the most difficult markets to train in because Singaporeans can be quite shy until they know you. In Australia, when you greet a customer with a ‘hello’ or ‘how are you?’ most people will respond positively and you create an interation. When you do that in Singapore, you see people look away or walk away because they’re intimidated. The consumer’s not accustomed to the non-selling question. They’d be much more comfortable with you saying, ‘would you like to buy a cone of gelato?’ rather than ‘hello’ or ‘how are you?’
IRW: What plans do you have in store for Gelatissimo this year?
FB: We’re looking at conservative growth, so we’re opening four to five stores this year, including Bundaberg in October. We’re looking at three to four sites in northeast Queensland and the west coast, possibly one or two more in Western Australia and certainly far north Queensland. We’re in some big regional towns like Rockhampton, Mackay, Townsville – there are other opportunities there we’d like to explore, too.
We’re looking at multi-site franchising. Only a few franchisors have multi-sites and there are opportunities for those who do it particularly well to take on an extra site and really get the momentum and economies of a scale that come with owning more than one store.
IRW: Does Gelatissimo do mostly standalone stores or are they in shopping centres too?
FB: We mostly do standalone stores. We run two models. We call it a kiosk, but it doesn’t have to physically be a kiosk. It’s a smaller footprint store, which is focused primarily on gelato and it tends to be 25-30 sqm.
Then we do a cafe offering, and that tends to be 40 sqm and up. It’ll have coffee, various other desserts like muffins, friands – it’s more of a dessert bar than a gelato bar. They have a slightly wider product offering, where coffee plays a part in that mix and obviously seating is a requirement, where people expect to buy a coffee then sit down and consume it.
Our biggest store is in Mackay with 150-160 sqm, our smallest is in South Lane in Melbourne which is about 18 sqm. We have a fairly broad footprint and fundamentally, it depends on what’s available. In regional areas where rents are substantially more affordable we’ll often a bigger footprint store. As long as it’s in the right location, the rent can still be attractive and so you’ll take a bigger footprint, even if you don’t need it, just to be able to get the location you’re after. In Sydney, you couldn’t afford to do that.
Wetherill Park is our first venture west, really. We had a store in Parramatta for a few years in Westfield in the very early days. We were in a kiosk down in the food court – that would have been one of the ones I’d have rated as a mistake for us. Kiosks in shopping centres typically don’t work well for us.
Because of the nature of how desserts sell, people don’t consume desserts in the morning. Our sales tend to be very much skewed towards the post-lunch and post-dinner periods and unfortunately, shopping centres trade til 5 or 6pm, so we were incurring a lot of costs in timeframes where weren’t generating a lot of revenue.
For us, the drivers need to be around entertainment, so things like dining, cinemas and tourist precincts where people can stroll, buy gelato then walk along the beach or park wherever they might be. That tends to be where we do particularly well.
Even when we’re in the suburbs, we tend to look for sites that have the area drivers present, where there might be a congregation of 10-12 restaurants that draw the local community down and an engaged local franchisee that gets to know their customer.
IRW: The Newtown store in Sydney has just partnered with local cafe Brewtown to celebrate its 5th birthday and created a new gelato flavour, infused with Brewtown’s famous cinnamon brewnuts! How did that collaboration come about?
FB: We look at collaborations periodically if they’re with a well-aligned brand. We sit in a middle-ground – we’re no longer truly boutique because we’re a bit big for that, but we’re not a big corporate in any way. We’re a fun brand and we’re looking for people to be engaging.
So when we find an opportunity with someone like Brewtown, we’ll take the opportunity. We’ve looked at partnerships with bigger brands, they haven’t eventuated, but particularly at a local store level, they can be quite successful. If someone’s got a good local following, if we’ve got a good franchisee with good local community support, then that partnership is attractive.
We’re essentially looking at aligning their product offering to our brand and trying to do flavours that are representative of what they do. It’s only a fairly new thing for us. We haven’t done a lot of collaborations of this nature. Most of the things we’ve done tend to be a national level. We’ve now got someone in our marketing team whose focus is on driving the local store engagement.
IRW: You guys are always creating new flavours and products for customers. There was the Trolls gelato, the gelato easter bun, the Love Me Mallow flavour for Valentine’s Day, the Mother’s Day high tea…
FB: I think when you go back 20 years, you’d go into a supermarket, and you’d pretty much get chocolate, vanilla or strawberry. Now, you can buy 50-60 different flavours, but it’s a trend that’s in the whole treat space in supermarkets, like chips and chocolate, not just frozen desserts.
The customer no longer expects to walk into a store that sells only chocolate and vanilla. Product development is the most fun thing of any business. We’ll do a new product, I’ll take it home or to a friend’s house and they’ll say, ‘you’ve got the best job in the world! You get to eat different flavours of gelato every day!’ I guess that’s the glamorous part of what we do, because we do get to try some cool things.
But the reality is whilst we enjoy it and we’re conscious of doing it in the interests of being proactive, it’s also a necessary as a retailer that you have to evolve. If you don’t, eventually, the market will surpass you, something new will come along and you’ll get left behind.
Customers don’t want chocolate and vanilla anymore. Their expectations are changing.
IRW: It seems like the frozen dessert and gelato space is particularly competitive now. Is that something you’ve noticed?
FB: I’ve been in this business for almost 15 years and back then, we had a store in Erina Fair on the Central Coast in Sydney and at the time, it was still a developing area. It’s more cosmopolitan now, a lot of people have moved out of Sydney and commute down from the Central Coast regularly. Fifteen years ago, people would look at our gelato displays and couldn’t even understand what it was. The space we played in was so limited in choice that people just didn’t even realise when something new came into the market.
Now, particularly in the Sydney and Melbourne markets, you read a new article on Taste or Time Out or Urban List and there is some new trendy place happening every week. Some of those offerings are great and I go to them myself because they’re exciting and new.
But from our perspective, it’s about staying true to who we are as a brand and being conscious of the fact that fundamentally, we sell gelato. That’s what we do. We sell other items, but gelato is what we do well, it’s the core of our business, it’s ultimately what drives customers to us and we sell millions of them every year.
While it’s tempting to sometimes say, ‘we’re not going to have donut with a scoop of gelato, we’re just going to sell donuts’, we’re not Krispy Kreme. While it’s tempting to say, ‘why don’t we just do cannoli with custard?’ Well, we’re not Papa’s Patisserie, either.
While the space is competitive, ultimately, people remember what you’re good at. And the minute that you divert from your core fundamental values, you really run the risk of being good at nothing.
So from our perspective, we stay true to who we are and focus 80-90 per cent of our time on driving what generates 80-90 per ent of our revenue.
There are some incredible independents out there that have a great imagination with no boundaries as to what they can do as a mum and dad operator. But it’s not something that’s ever scaleable.
Ultimately, systems are what drive growth and some of those small businesses don’t have the ability to be scalable, but they do present great consumer choice and it keeps us on our toes. It makes the space we play in more interesting.
IRW: Are there any retail trends that you’ve got your eye on right now?
FB: They’re interesting for us. We toy with different things – could you have a self-serve gelato bar? Could you dispense gelato in different forms in different vessels out of vending machines? Ultimately, they’re things that might come one day, but the reality is, people can buy good ice cream and gelato from a supermarket. They don’t, because they’re looking for more than a product.
People come to us to buy great product that’s been made fresh in-store, that’s got no artificial colours and flavours. It is ultimately one of our main competitive advantages and maybe 50-70 per cent of why people are coming into store.
The rest of it is, can I spend time with family and friends away from home in an environment that’s conducive to consuming the product? Can I have this as an experience, as a moment?
That’s not an easy experience to create when you’re just buying the product, you’re wearing your PJs and slippers and sitting on the couch. That’s not the same as going out with your partner or friends and sitting in one of our stores.
Whilst we look at retail trends, particularly in the online space and the innovative way things can be served, fundamentally, we try to be conscious of staying true to who we are, because ultimately, the customer experience is a big part of the product purchase.