With a background in lean management, Serj Shergill is keen to help chippies diversify and increase profitability. He’s even formed a co-operative with local shops to buy better
Serj Shergill has bought and sold numerous fish and chip shops over the last 10-15 years. His aim is to go in, increase the profits and move on to the next one. The most recent takeaway to benefit from his expertise was a derelict pub in the West Midlands that was revamped and opened four years.
Two years into the project, it was struggling to achieve its full potential so Serj was brought in as a last throw of the dice to apply his business know-how. With his changes, turnover increased four-fold.
The biggest impact on the business was Serj’s insistence on adding delivery via platforms such as Just Eat, enabling the shop to vastly extend its catchment area. He comments: “A lot of shopkeepers tend to concentrate on their direct catchment area, which is usually between half a mile and a mile radius. The problem here is that you are restricted because in most areas people only eat fish and chips once a week. It’s not like a convenience store where people are popping in day in, day out multiple times a week. You’re dismissing all those customers further out, that’s a big open market that you can capitalise on with deliveries.”
Online orders quickly racked up for the takeaway and now 60% of sales are delivered and 40% over the counter. “Some people say it’s quite a poor reflection on how a business should be going,” says Serj. “But my mindset is that because future sales are all becoming digital, there will come a time where the majority of our sales will become digital.”
Serj doesn’t concern himself with the costs aggregators charge and believes if more operators thought like him and priced their product correctly, it wouldn’t cause such a sticking point.
“Some operators see the customer paying two to three pounds more and it hurts them to see that money go to somebody else rather than into their own till. My mindset has always been that you’re associated with a big major brand here, that’s a royalty you are going to have to pay for, nobody’s going to give it to you for free.
“As long as you price your product right, you’re not losing anything, in fact, you’re gaining customers. Who cares what Just Eat is earning because you’re still earning as well. And you have to remember that a lot of the customers it brings, you wouldn’t be getting normally.”
Alternatives
Serj is a huge fan of diversifying and always looks for ways his shops can appeal to more customers. Recently this has involved adding basa fillets as an alternative to cod for cash-strapped customers that still want to enjoy fish and chips. While a box of cod costs Serj around £310, a box of basa comes in at just £60. Priced on the menu around 25% less than cod, Serj is making an 80% profit on each fillet sold.
Working with basa is different to cod, admits Serj. It’s nowhere near as flaky and it retains a lot more moisture, making it “quite a mushy fish” he says. To counteract this, once defrosted it’s left to dry on towels for up five hours. And as well as battered, he offers basa in a southern fried coating to help make up for any slight loss of taste. And it’s working – the shop sells around 12 slabs of basa a week.
“I’m a strong believer that if you don’t offer alternatives you’re dismissing a certain percentage of the market. I know some shops will frown upon it, but it’s how you advertise your products and how you manage customers’ expectations. We tell our customers that basa is never going to be as good as cod – we always recommend customers buy cod – but if their budget doesn’t go that far and they want to eat fish and chips, one way around it is to have this. That way we’re not excluding anyone.”
Another product he believes is a great seller for fish and chip shops is burgers, but not just any burgers, premium ones.
“It’s something I know traditional fish and chip shops don’t like going into, but it’s where the market is heading. You only have to go online to see people are prepared to pay £10 for a burger meal.”
With Serj estimating the profit margin on one of his burger meals to be 70% or more, he says shops need to think about it from a prep point of view too.
“With fish, you have to spend time cutting it, with burgers you put it on the grill and it’s done within two, three minutes and there’s very little wastage.
“Yes it depends on the catchment area but we’re finding fish is very much a middle class/an older generation product, whereas the younger generation is leaning towards kebabs, burgers and other types of food.”
Snobbery
For Serj, diversifying is something shops have to face up to, adding: “You’ve got to take the snobbery out of fish and chips. Yes, fish is a far more premium product, I’m not disputing that, but the bottom line is we’re in business to make money and to get as much of the local market as we can.
“Why would you want to dismiss certain elements of your market and not offer a product for everyone? Your overheads are there, you’ve got your customesr, you’ve got the staff. You’ve got everything there. You’re not going to enjoy the economies of scale if you don’t.”
Economies of scale are something Serj knows a lot about, having set up a co-operative with several fish and chip operators around him. Whilst there were four shops in the beginning, Serj now buys for ten chippies and he’s secured some impressive discounts from suppliers for bulk purchasing.
“When I added up the turnover from the 10 shops, we were talking in the millions and I thought, hang on, if these guys are spending that much money, surely they’ve got to reap some benefits. If they were a corporate business with a turnover of £2 million, they would get a far better deal than somebody that does £5,000 a week. The other thing that surprised me was that we were pretty much all using the same suppliers but paying different prices.”
While suppliers were sceptical at first and many offered a trial period, Serj is now buying fish, potatoes and kebabs all in bulk from different suppliers and saving himself and those in the co-operative up to 25% on each line. And with the 10 shops all investing in a shared walk-in freezer and storage, the delivery savings are quickly racking up too with everything dropped to one central location.
“I’d love to see more shops doing this because the savings can be huge,” adds Serj: “I wasn’t being greedy. I didn’t want too much off, but there’s enough room in what I’ve negotiated for the suppliers to play with and there’s enough room for us shops to benefit from too.
“I do think that’s where shops should be focusing their efforts – diversifying, increasing profitability and buying better – especially with the way prices are increasing at the moment.”
