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Business Observer Thursday, Mar. 25, 2010 12 years ago

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Even the fastest-growing franchises can stall in an economic downturn. But a WineStyles franchise owner is taking advantage of the recession by improving operations.
by: Jean Gruss Contributing Writer

By now, Gilles Pichette should have had six WineStyles stores open from Manatee County to Marco Island.

But because of the sour economy, there are just two wine stores in Pichette's franchise territory. Celebrated as one of the nation's top franchises by Entrepreneur magazine just a few years ago, WineStyles retailers have felt the downturn in consumer spending like many others.

The lessons Pichette has learned are illustrative of the challenges all entrepreneurs face, namely that sometimes forces beyond one's control will alter even the best business ideas. How entrepreneurs respond to these unexpected challenges determine whether the business survives.

Pichette, a retired corporate executive, opened his first WineStyles store in 2006 in Cape Coral, a $250,000 investment. At the time, Cape Coral was one of the fastest-growing cities in the country and business was booming. Then, in July 2007, Pichette acquired the rights to develop the region from Manatee to Marco Island for $85,000.

“Things in 07 were OK,” Pichette says. “It was promising.”

But shortly thereafter, one WineStyles store in Fort Myers that had closed in February 2007 never reopened as planned. And the owners of the North Naples store shut down one night and walked away in April 2008.

Meanwhile, Cape Coral became one of the cities with the highest levels of foreclosures in the country, crushing the construction industry. Investors who once were eager to open a WineStyles store and pay royalties to Pichette abandoned their plans. One was a vice president of a building company that went bust.

Some just don't have the finances for a new store. Besides the $250,000 to open a store, it takes another $100,000 in working capital. “I've rejected a half dozen people,” says Pichette, whose only other franchised store is in Lakewood Ranch, near Sarasota.

A group of experienced franchise builders created WineStyles in 2002. Although Pichette wishes now that he had opened his store in Fort Myers or Bonita Springs, he and his wife Jennifer have worked hard to keep their Cape Coral store profitable.

Part of the challenge is that the state of Florida has been divided into five franchise areas and half the stores have closed. Two area developers don't have any stores at all.

To grow his company, Pichette is making changes inside his stores and to attract new investors for future stores that will benefit from the eventual economic rebound.

Pichette is looking for ways to diversify revenues away from wine, which represents 97% of sales. The margins on accessories such as corkscrews and picnic baskets are better, but the volumes aren't high.

He's exploring how to sell other tasty treats such as artisan cheese, which can be paired with wine but needs to be refrigerated. Other ideas include specialty coffees and chocolates, which fit the company's pitch: “taste, learn and enjoy.”

What's more, new products would allow Pichette expand his wine club to fans of these other products. There are 110 members of the Cape Coral WineStyles wine club who are entitled to special tastings, discounts on bottles and invitations to wine dinners.

Meanwhile, Pichette is seeking investors to open new stores. With retail-space rents at historic lows and good, second-hand equipment available at reasonable prices, he says this is the ideal time to open a new store. “Be ready before the market turns around,” he says.

Potential sources of new investors include French and Germans who are seeking visas to come live in the U.S. Europeans who buy and own a U.S. business can easily obtain a resident visa. “They do have the money,” says the Montreal-born Pichette, who lived in France for five years when he was an executive with Pittsburgh-based manufacturer PPG Industries.

Pichette is also considering setting up a separate company that will raise money from wealthy investors to open new stores. These investors won't have to manage the businesses; Pichette or a manager he hires will do that for them.

Another way to expand is to partner with restaurants. Pichette says one restaurateur in Virginia has a WineStyles store connected to his restaurant. Restaurant patrons waiting for a table can sip wine in the store before dinner and even buy a bottle to consume with their meal, paying a corkage fee for the privilege. That store has the second-highest sales out of the 105 WineStyles stores, Pichette says.

Pichette, who looks a decade younger than his 64 years, says the enterprise has taken longer to develop than he anticipated. But he appears to relish the entrepreneurial activity after 27 years climbing the corporate ladder as an expatriate executive.

Pichette echoes a common sentiment in business today: “Everything got pushed back a couple years,” he says. That includes his own retirement, which he has pushed back to age 75.
— Jean Gruss

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