It’s impossible not to be impressed by what Euro Garages has achieved in a relatively short amount of time. From negotiating a first-time franchise with an international brand like Starbucks to winning the backing of former Asda boss Andy Bond, there appears to be no limit to what Mohsin and Zuber Issa can accomplish if they set their minds to it.
While they are now one of the most respected independent retailers in the forecourt and convenience industry, Euro Garages has come from humble beginnings. Zuber, 39, made his first headway into forecourt retailing in 1997 with an Esso leasehold site in Halifax. Knowing nothing about forecourts his retail experience was as a newsagent he took the plunge after seeing an advert in Forecourt Trader.
"After I saw the advert I went to see the guy he wanted to sell the lease so he could move abroad but while I had retail experience I had no real capital," he recalls. "He took a liking to me and said I could pay in instalments. It was an exciting time. My Dad used to have a garage a long time ago, and I remember it looking like a good job he was always relaxed, sitting in his chair! When I left school, and started running two leasehold newsagents in Preston and Manchester, he had already sold it, but I knew I wanted to get a forecourt of my own."
Running the Esso leasehold site plus two newsagents Zuber raised enough capital to take on a second site in late 2000 a Mobil-branded forecourt in Bury, which BP was disposing of with a supply agreement for five years, following its merger with Mobil. The site had a 2,000sq ft shop and Zuber set his goal on maximising its potential.
Mohsin, 40, was operating a plastics manufacturing business with their other brother Zakir, but joined Zuber in Euro Garages in 2001. "Mohsin liked what I was doing and I needed help," recalls Zuber. "At that time we thought convenience was a big market so we started investing from day one. Then we came into a period of rapid growth with BP giving us some Quantum sites. The Halifax site came out of Esso and went to Texaco, who looked at what we were doing and all of a sudden started giving us a lot of sites. Within 18 months we were up to eight or nine sites."
Then Texaco began selling off its network, giving Zuber and Mohsin first refusal on the sites they were operating. After getting minimal funding from NatWest, BP started shedding some of its leased sites. Euro Garages was set to fly, but funding was proving tricky to secure. "When we said we wanted to borrow a lot of money we had always been with NatWest and they weren’t sure," says Zuber. "It was a challenge because they still saw us as kids. So we went to a different bank and told them our story and they came on board with open arms different parents altogether! We needed someone to believe in us and that’s what happened with Lloyds that was our big break. We’d also bought a few BP sites with NatWest, but by late 2004 we moved to Lloyds at which point we were owning about 11 sites."
The rapid growth not only benefited the Issa brothers but the staff got their chance to shine, too. "The guys working as cashiers on the sites all of a sudden became managers. They were good staff, my staff, that I had trained and the whole structure of the company is still to promote from within. I’ve still got staff from the first site in Halifax. It’s the best way forward they know how we work and it’s a team effort. They have seen us develop and have one eye on success they want to climb the ladder as well."
With cash behind them and a growing network of sites, adding around 10 sites a year, Euro Garages has a clear and concise goal redevelop existing sites and build five new ones every year. In the past three years it has built five greenfield sites and has another four or five in the pipeline. In August this year, the company announced a £110m funding agreement to step up its development plans.
"We are looking at individual sites but they’ve got to be the right ones. We start at the bottom with a piece of land and attribute all the other services. We consider how much it will cost to build, how much for renovation, how much to buy the house next door we look at it from the ground up. If the store has got potential we will go ahead and do it. There are a lot of things we haven’t even tapped into yet. We’ve applied for a licence to open a chemist at Beehive because there’s a hospital nearby and the supermarkets have been successful where they’ve put in a pharmacy. They’re a destination and it gives people another reason to come here."
Thinking outside the box with ambition is what Mohsin and Zuber do best, and now the pair are setting their sights on developing partnerships with other grocery brands. With forecourts in varying demographic areas, the brothers are keen to partner with a ’top-tier’ brand such as M&S or Waitrose. "We’d like to get in with M&S and have had some negotiations, but it’s early days. BP has got exclusivity with M&S on forecourts. We’ve missed the boat with Waitrose now that they have done an exclusive deal with Shell. Sainsbury’s would be a good one but they don’t currently franchise. M&S and Waitrose have already gone through the hurdles of franchising."
But establishing a franchise deal is not new territory for Euro Garages. It impressively won over coffee shop chain Starbucks to bring the international brand to its network. "We have gone through the process with Starbucks and had to convince them that we weren’t going to abuse their brand," explains Zuber. "We told them ’your brand is our brand; we want to enhance and promote it’. If we try to abuse the system or brand no one is going to get any benefits. They quickly understood that. They took a gamble with us, but it worked.
"We were in the right place at the right time," adds Zuber. "It was 2008 and the UK market just went into recession; Starbucks closed the door on any developments. We hit them at the right time and said we wanted to do roadside. They said they weren’t in the right frame of mind so we left it with them. We went back in 2009 and showed them the Costa/Esso model, saying it was a cost-effective way of putting a brand on the roadside. They ran it past the States, who said they didn’t like the smell of fuel coming through the smell of coffee, so we suggested drive-thru as an option. We left it with them to sink in and it was a success."
Euro Garages’ site in Deeside, Flintshire, was the first to add a drive-thru Starbucks and by the end of this year, the group will have 14 in operation. But while collaborating with respected brands is an essential facet of the Euro Garages strategy, operational excellence holds just as much weight. Staff training is fundamental, and after moving into sprawling new head quarters next to the award-winning Beehive Service Station, the company is conducting training in a dedicated suite.
"We want staff to imagine they’re the customer and think about what they would want. We tell our managers that it’s their business because we can’t be there. If we can get that across to them and get them involved, they see that they are part of a bigger team. We spend quite a lot on the bonus structure because staff have to be rewarded. If there’s no substance behind what you’re saying, no one is going to concentrate. You’ve got to put money behind it."
Euro Garages’ biggest, immediate challenge is to get a new fuel supply on board. Going out of supply in July next year, and with the same agreement across the majority of its sites, it has 325mlpa going out to the market. "We’re saying to BP, which supplies most of our sites, that if the supermarkets can buy cheaply, they should be able to get product even cheaper because oil companies have been in the business for a lot longer than the supermarkets.
"We need a brand; we believe in branding that’s been built up over the years and we respect that. We don’t want to create our own. If supermarkets can sell fuel at such a low price and make money out of it where are we going wrong? On occasions the supermarkets will lose money when the market is down, but oil companies don’t have refineries anymore so they should be buying at the same price as the supermarkets and passing that onto their dealers.
"The supermarkets are our biggest challenge they see transient locations as a growth sector for them. We will not compete on price we are going for margin and we have been 10ppl adrift on occasions. It does affect our volume but not so much in the shop. We are looking for profitability we won’t be competing on price but competing on quality and customer service."
Zuber admits that a lot of the deals they have made have been done by gut instinct, and despite their massive success, he is still as modest as his humble start in business. "I never envisaged we would be here, sitting in this head office in Blackburn, where we were born and bred. We have worked hard, we take opportunities and have an excellent team around us. You can have a lot of money to spend but if you do the wrong things, it can go disastrously wrong. We are still learning. Every day is a different day.
"There are a lot of opportunities out there and lot of challenges, too. You’ve got to weigh up the challenges with the opportunites and try to take them forward. We never thought that one day we would be working with Andy Bond, former CEO of Asda [who joined Euro Garages as executive chairman in January this year]. We want to work with the likes of Starbucks, M&S, and Morrisons so we need bigger people around us to support us and guide us through. If we say ’we are Euro Garages’ people will respond ’okay, we’ll get back to you’. But Andy can pick up the phone to anyone and have a conversation.
"The way we’re going, fuel margins will be non-existent so you need to have 75% of the business coming from sources other than fuel. People have to realise that early on and invest in their sites. The industry has its challenges but it has its rewards as well. For us it’s a team effort and people need to have passion in their hearts. We started from scratch we have done it and we would say to people ’you can do it too’."
Retailer: Euro Garages
Number of sites: 72
HQ: 30,000sq ft office over three floors in Blackburn, Lancashire
Fuel brands: BP, Shell
Employees: 44 at head office; 1,200 across the group
Awarding-winning site: Beehive Service Station in Blackburn. Facilities include drive-thru Starbucks, Subway, florist, Spar convenience store. Fuel volume 170,000 litres a week, LPG 2,500; shop sales £33,000 a week, florist £1,400, Subway £12,000, Starbucks £18,000.