Is it time to expand or refurbish?

“Farmers are the masters of creating a building from nothing,” says food consultant Edward Berry of The Flying Fork, explaining why farm shops have become so ubiquitous over the last decade.

Not only are they a great way for farm-based businesses to sell direct to consumers, but they’ve also become a vehicle for farms to diversify in a way that might appeal more broadly to the rest of the family, paving the way for succession.

“Interestingly,” Edward says, “because farmers generally own farms, or have lifetime or protected tenancies, they don’t look at the return on investment in quite the same way as other businesses. They’re all about longevity, the next generation, and adding to their estate – and they usually have the space and capacity to grow easily.”

We are, says Edward, in the third generation of farm shops. ‘Generation one’ was a grandparent selling a bit of surplus, ‘generation two’ would have added a shop, tills and shelves, maybe a butchery. “And now we’re at generation three. We are all-singing, all-dancing, with a café. We’ve probably got activities on site. Maybe a maize maze, pumpkins, a play area, a farm trail. What this is doing is turning what started small, into really quite a substantial business, and often the motivation for this is supplying sustainable jobs for the family.

“You’ll have members who have gone off and done other things, but who might be enticed back when they see the potential that could be achieved. That makes a farm shop business almost limitless in its possibilities.”

Before they get carried away with extending and expanding, though, Edward says it’s very important to remember the shop’s raison d’etre. “Sometimes people expand to the detriment of the actual shop – you can’t allow that to get lost. It’s the reason you’re there in the first place.”

Stefano Cuomo of Macknade says whatever your financial or family situation, if you’re considering expanding this year or next “you need to go into it with eyes wide open, and understanding the difference of the products you’ll be offering, how you will generate income and get cash in quickly, and where the working capital will come from to support any extension.”

Study your competitors, your position in the market, and where you can slot into any niche opportunities or gaps. Even, Stefano suggests, go to look at other businesses for inspiration. 

A common expansion for farm shops is the addition of a restaurant or café and “if you’ve already got a good site, then adding an F&B (food and beverage) offering could make a lot of sense,” says Stefano, “but you have to really think about the employment market nearby and be on top of the availability of team members. Butchers and chefs, particularly, are in short supply. Do your research first, because a strong team player on the counter, or in the kitchen, can make or break a business.”

Most farmers never set out to be retailers, Stefano says, but if they’ve tackled that “mindset shift”, it’s much easier to then step into hospitality, because both arenas are service based.

“Make sure, if you’re adding a café, that it’s going to be a size you can manage, and that it will be profitable,” adds Edward. “Small cafes are difficult. It’s hard to get the most out of staffing levels against the percentage of turnover. You’ll want to try to make a smaller number of staff efficient in a larger space – ideally in a system whereby customers order and pay at the counter.”

Another challenge is the potential of diluting the farm shop itself – something that can also happen in delis and food halls that begin to offer dining options. “Often there will be times where people say to me ‘our café is full, people are here, but the shop doesn’t take so much money’,” says Edward. “I would say customers are then not there to shop, they are there to eat. They might have nipped out for a quick coffee, or for lunch – therefore they are in lunch mode, and not necessarily thinking about shopping, unless they have an impulse.”

Incentivising customers to take their spend from the table to the shop floor takes planning and persistence. “Your menu needs to tell them ‘look, we make our chutney, we make our jams, we bake our bread, we sell the coffee you’re drinking in the shop’. It’s important to make that connection between both parts of the business.”

Stefano agrees. “We’ve got a busy coffee shop.It’s fantastic, but it can be a low cash spend. F&B is good to increase dwell time, but you’ll need people to buy main meals.” At the moment, as customers continue to be more considered with where they spend their money, coffee and cake are becoming the default choice for many. “It’s a low barrier to entry,” explains Stefano, who says these sub-£10 spends can block tables, and anyone thinking of adding a café or restaurant to their business should take this into consideration.

He suggests having defined times for lower ‘cake and coffee spends’ or even, if the budget allows, having an area specifically dedicated to light bites and hot and cold drinks. The offering, though, has to be good, as “10 years ago people didn’t know much about coffee, but now there are coffee geeks. You have to ensure what you’re selling is decent.” It is the “responsibility” of independents to take on the supermarkets and high street chains in this sector, he adds.

“The products we have are far superior, and it’s a good idea from an economic and local perspective. People running SMEs are often made to feel embarrassed, like it’s not their place to expand, even when locals tell them they are so special. The more we have a supportive network in place in the sector, talking about the opportunities in refurbishment and expansion, in the next 10 to 15 years we can take more from the chains.”

On the subject of refurbishment, Stefano implores businesses to plan for the bigger picture, and to not leave works until the last minute. “Waiting until an area starts to look worn or grubby misses a trick and could turn off customers. It looks like a sunk cost because you’re not getting an immediate ROI, but if you don’t get a hold of refurbishments early, it could cause issues down the line.”

Stefano advises others to “recognise what is essential, what’s nice to have, and what you need to get ahead on, whether that’s upgrading equipment, or painting, or changing tiles. It all needs to be planned in advance, the cash flow thought through, and ways in which you are going to track success.”

His own advice has been put into action recently, as Macknade changed its wine shop, moving shelves, adding new light and music, and making some cosmetic alterations.

Already the business is seeing an uptick in sales here. “Our product is much more presentable and easily accessible to customers. We’ve also looked at selling wine by the glass in the space, adding tables and chairs. As business owners, we come in through the back door and just get on with our work. But we need to see each part of our business from a customer’s point of view, and what they might want or need.”

Edward Berry’s top tips for expansion

Keep your eyes open if you’re opening a cafe. Hopefully you’ve already got footfall and a reason to do the expansion. But remember these things come with risk. You have increased interaction with customers, for example. If you’ve already got a farm shop, you’ve probably already broached that one, which is a big jump for a farmer. Suddenly coming face-to-face with customers is quite a leap.

Marketing is very important. Suddenly you’ve got to think about social media and communications and advertising, and preparing for Tripadvisor. Keep this in mind.

Think of yourself as the customer, visiting a place you’ve never been to before. What do you want from the space? What don’t you want? How easy is it to determine where to park, where to queue, how to get a table, how to pay?

Managing the rota is incredibly important – especially if you are going to be selling food. You need to have the ability to manage busy periods and quiet periods without customers or the business feeling shortchanged. Make sure, once you’re set up, you take good stock of your labour bill.

Consider your menus in a café expansion carefully. Be realistic. The difficult bit is when people come in with a small budget and want to share soup or a cup of coffee. You need to be mindful of your service style. If you’re offering table service, bringing menus, drinks, food and bills, that’s a lot of work for a minimal spend. In this case, most will be happy to order at the till and collect, though this will make it harder to upsell, as you would be able to at the table.

‘Cafes are king at the moment’

Stuart Gooderham and his family set up Goodies Food Hall 21 years ago, in response to sales from pig farming bottoming out. From its beginnings, going from selling potatoes roadside, to having a butchery in a trailer, it was just a year before it turned into a real farm shop operation, with a café.

“We had to be different,” Stuart says of the expansion. “We wanted to produce as much as we could within the shop. We do pies, sausage rolls, Scotch eggs, quiches – and we’ve got one of the largest selections in the country on the butchery side, including ready meals, that’s how we’ve diversified.”

More recently a large modern restaurant opened, replacing the café, and although it’s been beautifully done, and thrives at weekends (especially Sunday lunch), Stuart cannot deny they’ve lost some loyalty from customers who’d come to rely on their café offering. “People just want to come in for coffee and a bit of cake,” he says. “And we now only do that at certain times. We get hammered by customers!” The effect has been so noticeable, they’re seriously considering adding a separate coffee shop to cater to demand, which he says is disheartening in some ways, as after VAT has been taken off a £5 spend, it puts very little back in the till.

However, the development did give him the boost he needed to invigorate the main shop, alongside his son, who has joined the business “because I’d let that get a bit behind.”

And having a fully functioning restaurant is proving a great way to manage stock. Whereas a spare bit of lamb leg in the butchery might end up becoming a few packs of mince or burgers, a premium can be commanded if the same cut is used, as leg steaks for example, in the restaurant, at £18 a portion. “And that works for us on margins and profitability.”

Stuart’s main advice is to seriously consider whether you can staff your expansion. In his rural location, he’s found it tough to recruit – spending hundreds of pounds a month to find suitable, reliable candidates.

Covid showed the demand in our community for a decent farm shop

The Goat Shed started life quite literally as that – a shed put up outside a north Norfolk cheese farm, selling cheese direct to the public. During Covid, says owner Sam Steggles, customers asked if they could get other essentials, from bags of flour to toilet roll. “We’d go out and source all these products…and have them at The Goat Shed the next day.”

The endeavour was so successful that the shed was moved into the back of a cheesemaking barn, and it’s been expanding ever since, all thanks to customer demand.

The business is “flourishing” says Sam, with plans for a butchery and bakery in the pipeline. “We’ve even tripled the size of our kitchen operation so we can get food out to our customers quicker, and give our chefs extra space to prepare more food. We can also bake more cakes that are available to buy in our shop.”

His advice for others thinking of expanding is to ‘go for it’, especially if local people are crying out for the very thing you are planning for. “My biggest piece of advice is to talk to other people about what they’ve done well and where they’ve gone wrong.”