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Entrepreneurs 101, day eight – give customers what they want

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The standout characteristic of successful entrepreneurs is an ability to see what the market or potential customers want and to think outside the conventional square to come up with a product or service that meets that need. This tendency is becoming a trend in the food industry where switched-on business builders are catering for a changing customer base demanding better quality, organic, lower fat, gluten-free, salt-reduced food, even in the take-away, junk food space.

But this isn’t just a market-driven development with state governments starting to wield the whip demanding the truth in labelling, even for eat-out meals.

Dining establishments are looking down the barrel of regulations, which will mean they have to reveal the nutritional content of food on their menus. So-called junk-food chains will be targeted but some industry experts think this is the thin end of the wedge.

For example, the Victorian Brumby government will make food service businesses with more than 50 outlets in the state or 200 nationwide display the kilojoule content of each menu item by 2012.

The New South Wales government could follow suit but also insist that salt and fat content be shown on the menus.

Clearly these initiatives are related to the national obsession of talking about obesity in our children and the creeping, silent deadly assassin in our midst called diabetes. There’s also a potential fiscal dividend for governments if individuals become informed about how regular modern diets explain the rising incidence of heart attacks, obesity and type two diabetes. 

Ahead of the curve

That’s the state of play right now and provides a snapshot of what lies ahead but fast-thinking entrepreneurs have long ago jumped on the bandwagon, even before it started to roll into normal consumers’ lives.

The Koronczyk family saw the trend ahead when they started their Melbourne-based Lord of the Fries business. The founders were Amanda Walker-Koronczyk, Mark Koronczyk and Sam Koronczyk.

They started in a van in 2004 going to music and other festivals and they then opened their first shop a year later, recognising that there was a healthy opportunity.

“Because our food is vegetarian it lends itself to being a healthier option,” explains Amanda Walker-Koronczyk.

“We saw a large opening in the marketplace for fast food that uses fresh produce, has less fat and additives, makes a smaller eco-footprint and still satisfies the consumer’s need for what seems to be a typical hamburger and chip place.”

The van days and customer reaction convinced the trio that they were on a winner.

“The market response has been great and it has put us in the position that we now have five stores and are opening another by the end of the year with many opportunities to open more stores interstate and internationally.”

Katherine Sampson was way ahead of the curve starting her sandwich bar business, Healthy Habits, in 1992, buying it off a relative. At that time, the business was called Celebrity Health and a new name was needed.

“I trawled through the Yellow Pages of different states and made a list of 20 names and then handed out these names on a sheet of paper to about 100 friends and family and got a top three list and over and over again Healthy Habits came out as the number one name that consumers related to.”

Sampson concedes that she did not see the growing trend for healthy alternatives but over time, compared to junk food, sandwiches were seen as the healthier option.

In fact, the penny did not drop until 2004 when she started working as a franchising consultant to grow the business.

“I was looking to franchise my business then after realising that I was becoming the busiest food retailer in my food court after McDonald’s, Hungry Jacks and KFC,” she points out. “People were choosing the healthier alternative and that’s when I saw the opportunity – we then marketed ourselves as the healthier alternative.”

And it paid dividends with 34 Healthy Habits stores around the country. Sampson was rewarded for her entrepreneurial talent with bookseller – Dymocks – taking an 80 per cent stake in the business. That’s the kind of healthy payday most entrepreneurs pray for.

Ray Good is a relative newcomer, starting Hooked just over three years ago.

“It was a no-brainer to take something that people love – fish and chips – and provide them with a healthier option,” he says. “It’s worked too, last year we were awarded Melbourne’s ‘Healthiest Fish & Chips’ and Melbourne’s ‘Best Chips’ – no frozen chips – we use real potatoes from a local farmer and cut them by hand in-house.”

Good’s approach to hook in more likeminded customers isn’t just about the cooking and he admitted it did take time to win the healthy-caring customers over.

“The initial perception of fish and chips in general was very bad,” he concedes. “There are so many bad operators cutting corners. We had to re-educate people and lead the way by refusing to sell flake, which is shark, and follow a policy in which we only sell sustainable fish from well-managed sources.” 

Tick of approval

The changing demands of a new age consumer and the response from food retailers are showing up in the number of businesses seeking the tick of approval from the Heart Foundation.

The national director of healthy weight at the Foundation, Susan Anderson, says there are guidelines that restaurants, cafes and other food outlets must meet to be able to display the Foundation’s tick.

“There are three steps,” she explains. “One is the nutritional profile of their meals, the second is about their processes and quality standards – the meal must always meet the tick standards – and the third is about the promotion of that meal, which needs to be pre-approved by the Foundation.”

Anderson is wary that the tick on some meals in a junk food outlet should not be used in promotions to produce a ‘halo effect’ and that’s why the promotions of the tick are watched closely.

The lack of transparency on what we are consuming when we eat out compared to food bought in a supermarket, where labelling has improved in leaps and bounds, is a concern for the Foundation. This is especially worrying, Anderson argues, with many people eating out up to three times a week. In fact, the Foundation provides information for businesses in the food retailing industry, even if they can’t earn a tick, to improve the quality of the ingredients, the cooking methods, the recipes they are using and even advice on portion sizes.

“It’s pretty tricky, though,” Anderson added, “as all of the chefs have been trained on salt and butter.”

The interest from restaurants, cafes and takeaway food outlets in winning a tick from the Heart Foundation is growing but it is still early days.

“We are seeing a trend but it is a high bar to achieve and so only a small number of licensees have met the standards,” she points out. “But we have a lot in the pipeline.”

Anderson says consumers are increasingly looking for Heart Foundation guidance on food but she was worried about the impacts of successful TV shows such as MasterChef. Over 2009, there was a 9.3 per cent increase in the sales of butter and the celebrity chefs were being blamed.

“The trends of ingredients people are shifting back to is a concern,” she said. “Butter has 50 per cent saturated fat and these sorts of ingredients aren’t good if you are looking for better heart health.” 

Business with heart

One entrepreneur who leveraged off the Heart Foundation tick to build a fast-growing franchise business is Costa Anastasiadis of Crust Gourmet Pizza Bar.

“We started as a family business in Annandale, Sydney in 2001 and we will be hitting 80 stores by the end of the year,” he says proudly. “My partners and I are all Southern Europeans and our families have always been engrossed in food.”

He explains how an early goal was to make the provision of food staged and glamorous, as well as on show and that meant you had to have the best of ingredients on show.

“This meant that we evolved into a healthier option because all of the ingredients were on display,” Costa said. “Our aim was always to be a healthier alternative and we ultimately pitched this to franchisees.”

Right now, six of their products have achieved the Heart Foundation ticks and it has had an impact.

“Three years ago, we achieved this but we got into it because we had a gluten-free offering and this was the tip of the iceberg,” he recalls. “We saw that there was something really big here and so we approached the Heart Foundation.

“It was a 12-month process and it was massive for us being the first pizza business to get the tick of approval – it brought great PR and gave confidence to our franchisees.”

Michael Baker a global retail and property analyst and consultant points out consumer survey by Mintel, a US research organisation, found that 60 per cent of respondents thought posting food nutritional content on restaurant menus was a good idea but the overriding consideration for 60 per cent of respondents when going out for a meal was that the food "tastes great".

Only 23 per cent said eating healthily was their principal consideration but that’s one in five customers and could be the icing on the cake for many food retailers as these sorts of people are often prepared to pay for quality.

Costa Anastasiadis knows the innovation to seek Heart Foundation approval has helped his business and both founders of Hooked and Lord of the Fries admit to not thinking about doing the same but thanked me for giving them the idea.

In recent times, Domino’s Pizza gained a Heart Foundation tick for a pizza and it seems that anyone in the food business that can afford to ignore possibly one in five customers searching for healthy alternatives is bound to end up with an increasingly less healthy bottom line.

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