Here's what is working for some innovators
At the IFA convention, we sought out innovators who were doing business as unusual. If there's one lesson to be learned from the economy right now, it's that you can't keep doing what you've always done and get the same results. It's like that old joke: A man says to his doctor, "My arm hurts when I do this." And the doctor replies, "Then stop doing it."
Perhaps now is the time to stop making your arm hurt and try something new. Embrace change. Remember the former president of Porsche's quote: "When there is no change, the mediocre catch up."
Tariq Farid, Edible Arrangements
It's easy to see why Tariq Farid was honored as IFA's Entrepreneur of the Year. He's someone who never stops improving on what's already working.
When he was 17, his father borrowed and financed $6,000 with credit cards to buy a flower shop for Farid to run after high school. Fortunately he did well in school and could relieve his mom at the shop by noon. His mother didn't speak English, but she took copious notes on the orders coming in and whether the salesgirls were smiling at customers.
There was no shortage of flower shops in his town, but Farid distinguished himself by buying roses from the growers and selling them for $9.99 a dozen, cutting his profit to $4. He made up for the loss by encouraging customers to "supersize," their orders by adding on higher margin items, such as bows or Teddy bears, he says. Lower prices delivered higher volumes, which allowed him to lock in prices with the growers.
Flowers were nice, but Farid's passion at the time was computers. He designed a computer system for his shop that he turned around and sold to other flower shops in the area. This was not a small endeavor. By 1997, his computer business had sales of $2.5 million a year. His strategy was the same as with flowers, "sell them on value, deliver lots of service," he said. Part of that service included advice on how to improve sales at their flower shops. "We had so much business we had to put people on a wait list," he said.
Tariq Farid stresses outstanding customer service, married to technology that informs clerks about a customers' history immediately.
He sold the computer company, kept the original flower shop and began to tackle a new project. He had seen bouquets made from fresh fruit and did a feasibility study on the prospect. "My mom liked them; that was my feasibility study," Farid said, grinning.
He designed the technology to support the business and built four stores that would serve as test markets. The first was the prototype, the second was as if a franchisee was building it, the third was located in an upscale area; and the fourth was in "an area no one wanted to build in," he said.
"I learned how to handle customers in all areas," he said. For instance, coupons worked in the blue-collar neighborhoods, but not the upscale ones. Upscale areas, on the other hand, demanded the shop be open on Saturdays.
Customer service is key. When a call comes into the shop, the employee immediately pulls up that customer's file. For a repeat customer, they suggest a different item. So no one's getting the Simply Dipped Daisies time after time, when there's artfully arranged strawberries and grapes and bananas to create buzz.
So how does a luxury business survive in hard times?
Two ways: Design a symbiotic concept and start a finance arm (which shouldn't hurt, right?).
"I felt if I was so confident about this I should back it," he explained. "The best thing you can put your money into is yourself. Worst case scenario, I'll have to take over the stores and run them."
In order to qualify for a loan, franchisees have to agree to an extensive training program, including finance management.
To solve the problem of leftover fruit from the edible arrangements, Tariq Farid developed an add-on concept, Frutation.
What to do with the leftover fruit was another problem that created opportunity. Since the stores have to buy premium fruit for the arrangements, they are careful to have very little waste. But there's still pieces left over after the fruit is trimmed to look like flowers. Farid developed a complementary concept, Frutation, which turns the scraps of fresh fruit into smoothies and fruit salads. The concept is a natural because the locations are already in premium locations with foot traffic. Franchisees pay an additional $10,000 for the franchise fee.
Farid said that if a franchisor isn't reinventing himself right now, he or she is in trouble. "When you swim in your own little pond, you think you're the best swimmer," he said. Not only is the pond getting bigger, but there are lots more swimmers entering the race. Perhaps it's time to take swimming lessons...
Here are some tips from Farid:
Transform yourself before there's a need.
Walk into your concept like a customer, not an owner.
Technology may save you money, but there's always a cost involved. Step back and view your processes from a distance. If you enhance an inefficient process, all the technology in the world won't help.
Don't just compare last year's number with this year's - look to see if you could have done more.
Know your destination and how to arrive there. And, if you're the CEO, you have to arrive there before everyone else does.