The company, founded by friends Ed Brown and Griff Holland in 2009, secured £1.25m from a mixture of bank and angel investor funding last October.
Brown said it has so far used the money to finance a new site in Bristol, with an opening in Birmingham to come in the third quarter this year. The plan is then to open a further eight stores, one a quarter in 2016 and 2017, in cities such as Manchester and Leeds to take its total estate to 15.
“Birmingham is the country’s second city and the highest concentration of young professionals outside of London. That’s our target market popping in for their breakfast, lunch or just a coffee and a cake,” Brown said.
London, crammed full of hungry commuters, workers and tourists, will have to wait.
“Provincial cities are very vibrant and cosmopolitan as well as being easier operating environments. You don’t have the extra staffing and rental costs of London which are two to three times higher than here in Bristol,” he explained. “If you are from London and begin your business there then you are very familiar with the cost base, demand and revenue potential. It’s more of a leap of faith if you are coming from a provincial city. If you get a poor site in London then it could really harm the rest of the company. But London is on our radar and something we will look at when these other site openings are out of the way.”
Indeed, Brown said the company would be looking for its second round of funding around the end of 2017 and 2018.
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It would look to expand its numbers in the provincial cities as well as extend into new areas – London as mentioned as well as Liverpool and Edinburgh.
Brown has recommended to other businesses, its approach of private investment and bank debt. “Having a bank facility as well makes the dilution of the angel investment more fruitful. We use the private cash first and the bank debt second,” he explained.
But going forward from 2017 he is seeking a different model. “With angels you are looking at an investment of between £50,000 and £500,000. With private equity we would likely get a lot more,” he said. “Also with one funding party the decisions come a lot quicker than with two.”
Expansion brings the challenge of maintaining control over the management of the business. To that end Brown said the main managerial positions in its new stores will ideally be taken by existing Bristol staff members.
“We have 60 staff at present and my co-founder Griff has told me that he feels he’s been recruiting constantly since the start of the year,” Brown said. “Finding the right people is hard. We’ll look to do that at entry level roles and with the other positions we will look at moving existing staff. That’s a big de-risk and will help us send our culture into a new geography.”
It’s a culture of social conscience, a fun working environment and supporting staff. Regarding ethics it uses free range meat in every recipe, powers its stores with 100 per cent renewable energy, recycling all waste with nothing sent for landfill and tie-ups with a number of good causes such as microfinance charity Deki, which helps fund entrepreneurs in developing countries including Malawi and Ghana.
“I don’t think these things make customers choose us over rivals but it is a nice surprise when they discover what we do,” Brown said. “We have a Deki poster on our walls but we are not here to preach to people or give them the third degree when all they want is Hotbox or a Flat White. They know about it, think our policies are cool but if they get a crap cup of coffee they won’t come back. Internally it makes our team proud.”
Brown wants Friska to be the best employer in the food industry. That means creating a fun working environment and finding staff who want to give good service and make their customers’ day.
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It also involves looking after their staff with benefits such as private health insurance and cycle to work schemes.
“We’re always experimenting with the things we offer staff. If you get the people right then you’ll get the financials right and not the other way round,” he stated. “Benefits such as private health care are important but the culture comes from recruitment, training and our processes. You can’t buy that and in fact the private care has had a surprisingly low uptake. It’s all about creating a good mix and it’s a constant process.”
Wages inevitably play a part in staff happiness. What does Brown make of the recent general election focus on the minimum and living wage?
“We have never paid the minimum wage and never will. For minimum pay you get minimum commitment. We pay significantly above the minimum wage,” he explained. “Regarding the living wage we would love to do it but considering where we are at the moment and our growth plans we just can’t afford to. It would lead to an eight per cent increase in labour costs as staff on higher salaries would also expect an increase. Wages are the second largest cost to our business each month. We don’t have the room to bring in the living wage without jeopardising the financial sustainability of the business.”
As seen by that 23 per cent like for like sales leap in its existing sites and a forecast of a £2.5m annual turnover, up from £1.5m last year, that core business is strong.
“The economy is helping. People are coming in more often and there are a few new office buildings being built around us here in Bristol so that will mean more people looking for a great lunch or coffee!” Brown laughed. “We launched right at the start of the recession so it is the only operating environment we’ve ever known. But we feel confident and heading in the right direction.”