Jeff Phillips is ready for the next evolution of the specialty running channel.
Phillips, the president and CEO of Carrboro, N.C.-based Fleet Feet Sports and a college track star and specialty run veteran, said increased competition is going to lead to big changes — and consolidation.
“We’ve reached a point where consolidation is absolutely happening. There are a lot of forces converging on the success of running and a lot of change in the channel,” he said. “Change is good. Anytime there’s change, it forces out any tendency toward complacency.”
To that end, Fleet Feet announced this week that it has partnered with John Rogers to convert his two Maine Running Co. stores in the Portland, Maine, area into Fleet Feet locations.
The Maine Running Co. deal represents a new avenue of growth for Fleet Feet, which has traditionally either opened new markets with franchisees or acquired stores from owners looking to exit the business. Fleet Feet also made a similar deal for Off and Running locations in Greensboro and High Point, N.C., in July.
The company will next open its third company-run store in late October in nearby Durham; it’s a move Phillips said will give the company experience as a multi-store operator. And Phillips said the firm will continue to look for new opportunities.
“We have something no one else can offer; we’re the only option for someone to align their business with a national brand,” he said. “So we’ve become really active in creating dialogue with independents, and making sure the industry knows we are an option [upon retirement].”
Here, Phillips discusses the future of the channel and what Fleet Feet can bring to independents.
1. You’ve spoken in the past about the advantages your franchise model offers to new store owners. What’s the appeal to veterans?
JP: The financial management aspect is [actually] one of the most appealing aspects for conversions. We provide our “CFO in a Box” service, in which we can do the accounting with online access anywhere and we can really manage all aspects of the store’s financials, [such as] invoicing, balance sheets and closing the books every month. And that’s a huge value-add for most folks. I have yet to meet a running store owner that got into this business to be a bookkeeper. And store owners have access to our resources for what it would cost on an annual basis to hire a good assistant manager. And you can’t hire an assistant manager who can provide you with real estate, financial management, marketing and customer development expertise. And if there was, you couldn’t afford to hire them.
2. What have you learned over the years making store transitions such as the Maine Running Co. deal?
JP: We’ve learned some things over past five years through acquisitions. We bought a couple of stores that had been in business for 30 years and had huge equity in the name of the store within the community. And for the first one, the day after we bought it, we put the Fleet Feet store logo up, but we didn’t have much [name recognition] there so customers would show up and say, “Oh, my running store’s gone.” What we’ve figured out is when you take a store that has done a good job and is entrenched in the community, transition has to happen over a longer period of time. John will transition in less than [the three years given in the contract], but we wanted to make sure that we had a timeline that make sense [and lets us] make sure the local community understands the store’s still locally owned and operated.
3. How do you predict the forces at work in the independent channel right now?
JP: None of it should come as big surprise. I do believe [the channel] is going to look completely different four to five years from now. It’s happening fast. There will be three or four major players that are going to have significant presence. There’s always going to be a small group of outstanding independents that will continue to thrive. But the number I hear bounced around for our channel, as a whole, is 1,000 to 1,200 locations [that exist right now]. And the last data I saw said the average sales volume [for each store per year] was still between $750,000 and $800,000, which means there are a lot of stores doing $500,000 or $600,000. And here’s the reality: If you’re doing less than $1 million in sales volume, you’re not going to be viable going forward.