Lollypotz

Spooked by the GFC, Louise Curtis launched Lollypotz in 2009 with the hope of bolstering her existing business.

The new company, which offers “chocolate bouquets” to gift-seeking customers, has 43 franchisees in Australia and three in New Zealand, with 90% run by mothers.

Curtis talks to StartupSmart about the impressive growth of her sugar-based concept.

This wasn’t your first start-up was it?

No, I started Hamperesque in 2002 before starting Lollypotz in 2009. When we went into the GFC I worried that I’d lose corporate clients that would cut back on things like hampers.

I realised I needed to get into the retail market more so I started Lollypotz. It was an offshoot to start with and now it’s much bigger than Hamperesque

How did you fund Lollypotz?

I won a $10,000 Telstra award which I used to start Lollypotz. I spent it on websites, business name and logo, the standard start-up costs. I’ve been lucky not to go into debt and not to need any further capital.

Why chocolate?

Chocolate has been around for a long time and there aren’t many people who don’t like it. I realised there was an untapped market when it comes to providing affordable chocolate gifts.

Usually you’re looking at $70 to $80 but our average sale is $33. You can’t get much at our competitors for $33. I put our growth down to price, service and product.

Because of our franchising we have people building the business in places like Perth, so deliveries can be done in those areas that afternoon. No business other than an Interflora can do that.

Did you use suppliers you previously worked with?

We used a few previous suppliers for packaging but I’ve had to forge new relationships too. I did a lot of research and did a lot of work on those relationships.

Ferrero Rocher didn’t want to know us until we ordered $250,000 of goods. Once we did that they suddenly wanted to know us.

We started by buying from wholesalers rather than direct but now we buy directly. Where we used to order 100 boxes we now order 100,000, which has helped our margins and given us the buying power that puts money in franchisees’ pockets.

What’s been the secret to growth?

I’d say the secret has been that I haven’t taken a cent out of the business. I have put everything back into products, infrastructure and marketing. We’ve spent wisely and are always talking about how we can improve in the business.

I also nagged suppliers to death and I’ve got staff who are second to none. I’m in Canberra and I have a general manager in Melbourne. Having a great team around you is very important.

We’ve invested heavily in franchisee magazines and we’ve piggybacked on the expos and awards that we’ve won. We’ve been very active in the franchise community to build our profile.

How did you manage your time when you launched the second business?

I had no concept of what I was in for when I launched Lollypotz. I was just exhausted because it consumed all of my time.

My operations manager took over Hamperesque and now I don’t really do anything for that business. For the first six months of Lollypotz, I worked like a dog. It was nothing but hard work.

How are the two businesses faring financially?

I’ve still taken no money out of Lollypotz but I’ve promised myself that in 12 months I will pay myself a wage on the third anniversary of starting the business.

I could take a wage out of the business now but I’d wonder what I could use the money for in the business. Hamperesque is the cash cow – it’s an established business that’s profitable and has $1.5 million turnover.

Lollypotz had a $2 million turnover within the first six months. We’ll have an $8 million turnover for year two. It was a bit tight to start with but we were profitable after 18 months and we’re certainly covering costs now.

How did you decide upon the business model?

I started the business in February 2009 and took on the first franchisee in July of that year. I wanted market share and it would’ve cost me millions to start up 40 stores myself.

Franchising gave me stores around the country and we’re now the market leader.

We have 43 franchisees and 10 of those have shopfronts – the rest work from home with online orders. People come into the store here in Canberra and it does very well – not everyone likes to shop online.

I’d say about 40% of people in the shop are over 60. They like to touch and feel the products.

We say to franchisees that they can work from home or have a shop but if they work from home they have to do casual leasing, which we do in shopping centres one week at a time, so six weeks a year, at Easter, Christmas and so on they will have temporary stands at shopping centres.

We pick the times based on when people are spending money. We can go into Westfield in Canberra and make $60,000 in six days and spend just $3,000 in rent. It’s a great way of driving sales.

How did you come up with this idea?

Things weren’t travelling well six months after the first franchisee came on board. I had franchisees who weren’t sales people and they weren’t finding corporate clients. They didn’t have entrepreneurial skills.

I thought “what can I do?” So I got five or so guinea pig franchisees and tested the market with casual leasing and it went bananas. At Westfield at Christmas we can make $100,000 on top of what we already do.

Did you have lots of problems with franchisees?

We’ve had some bad ones who have sold up or walked away. When I started franchising I took anyone with a cheque. But you need someone who is a real go-getter, really driven and motivated.

I took on people who thought it could be a hobby but it can’t be a hobby. I learnt a lot about the type of franchisee you need.

What’s been the hardest part of starting up?

The time aspect – I’ve got two young children and the business took me away from them for long periods.

It was also hard to prove it could be done. It was a great relief to come up with the casual leasing idea. We’re now seeing 100% month-on-month growth in internet sales. I always knew I could do it. I am generally quite a determined person.

What are your plans for the business?

We are going to expand to the UK and Singapore in the next 12 months so there are a lot of exciting plans. We are diversifying the product range too and introducing our own products, which should ensure the long-term survival of the business.