So you want to… open a farm shop?

In many ways, there could not be a better time to get into farm retailing.

People have never been so interested in quality local food and how it is produced, in freshness and in traceability.

Customers are seeking out specialist producers and, for some, there is a desire to reduce food miles.

Farm shops are opening at a faster rate than ever and farmers’ markets are proving a great way for producers to test the retail water without a large capital commitment, says Gareth Jones of FARMA, the National Farmers’ Retail and Markets Association.

While farm shops come in all shapes and sizes, the most sustainable at the moment are those offering what is known as a full basket shop – all the ingredients for a good wholesome meal, thereby making the journey for customers worthwhile, he says.

But not all farm shops must offer this.

“The range you offer and the other activities you want to bolt on should reflect your location; it’s all related to how long you are able to keep customers on site.

If you are highly urban, then you can offer just food.

If customers have to travel then you have to persuade them that their journey will be worthwhile.”

Location is critical.

FARMA will advise at an early stage on whether your proposed site has any disadvantages which can be overcome before money is spent on planning applications or anything else.

“When you look at a location, look at the way the buildings sit, the way in which farm retailing might work.

You have a great attribute in the landscape, open space, trees, greenery, which you don’t get in other shop locations, so keep it and use it.

It endorses the authenticity of the produce.”

Roads, access, local population, traffic flow and competition all influence the suitability of the site and the prospect of getting planning permission, which is always easier when converting an existing building, says Mr Jones.

Do I need planning permission for a farm shop?

That depends.

If you are selling overwhelmingly your own fresh produce – at least 90% – then you do not need planning permission to sell in a suitable existing building.

But it is always best to write to your local authority outlining what you propose and get a ruling from them, advises Mr Jones.

Even when planning permission is granted, it often comes with strings attached.

Farm shops which intend to sell anything that has been processed, including meat and poultry (which are not regarded as fresh produce) will need planning permission.

FARMA will support applications where 40% of goods are own produce plus local foods, 40% regional and 20% from elsewhere, as from experience this will lead to a more viable business.

Who should I notify?

Food is the most regulated area of retailing.

You must register as a food retailing business – start with your local council’s Environmental Health team.

You may also need a need a butchery licence from them, and if cutting meat talk to the Meat Hygiene Service.

Your building control department should advise you about fire safety requirements in your buildings, but only the fire department can issue a fire certificate, which you need before you open.

What about food safety?

Anyone serving or processing food in its raw form needs basic food hygiene training and a certificate.

Supervisors need a higher level of training and an intermediate certificate.

From 2006, everyone processing food will need an HACCP (Hazard Analysis and Critical Control Points), a preventive approach to food safety based on due diligence (ie, showing you have tried to follow the rules) and good record keeping.

What else is important?

People.

Your customers and your staff; if you don’t love dealing with both, forget it.

“The average number of employees of a farm shop is nine, often part time.

As well as giving customers an experience they want to repeat, you need to be able to encourage, motivate and carry your team along with you.

And they must understand why you are doing it.”

How much will it cost to build a new farm shop?

You can start with a hut for a few hundred pounds.

With tight control, a simply-designed, purpose-built new farm shop of around 1000sq ft with electrics, staff loo, car park, signage, basic equipment, scales/tills etc can be built for £50,000, says Mr Jones.

Some people, on the other hand, spend £250,000.

How can I forecast my sales?

FARMA has several models for farm shop performance, all based on the location of the farm.

As retailers, two key factors are considered.

The first looks at average spend a visit, based on the planned range of produce.

The second forecasts the number of customers a week.

How profitable are farm shops?

Food retailing is a low margin business and farm shop profits are very variable.

A low-borrowings, efficient, grant-aided operation might make 10% net profit ie £30,000 profit on sales of £300,000.

Should the shop be a separate business from the farm?

Not necessarily, but a rapidly-growing shop may warrant its own separate accounts after the first year or so.

Take advice, though, as there are tax and VAT implications.

Do I have to take credit cards?

Most farm shops say this is now essential.

Relatively few customers rely on cash and cheque and, in any case, handling and banking cash is expensive and can be risky.

Where can I go for advice?

FARMA (www.farmshopping.com or www.farma.org.uk or ring 08454-588420) gives advice and can recommend planning and other consultants.

DEFRA offers two days’ of a consultant’s time free to help assess your business and plan for changes, including budgets.

Grants from DEFRA, your Regional Development Agency or EU structural funds may be available.

Do I need specialist insurance?

At the least, you need to inform your insurer what you intend.

Farm insurance usually only covers the business of farming, so you may need extra cover.

Check product liability, public liability and employer’s liability cover.

Why do farm shops fail?

• Most commonly, by taking on too much without the necessary planning, research, skills or capital.
• Those used to taking the lead in the farm’s business may not be equipped for this challenge.
• Don’t be tempted to wander too far from fresh, local produce – that is what people want.
• Don’t buy in too many everyday branded products.
• If you are going into butchery, make sure you have someone who understands the high quality meat market.

Farm shop facts

• Estimated 4000 farm shops in UK
• Combined annual turnover estimated at £1.5bn 
• Average FARMA member annual turnover £270,000 (2002 figure) – ranges from £100,000 to £5m-plus
• Certification, accreditation and advice from FARMA

Case study Sharnfold farm

Sharnfold farm Shop began, as many do, as a natural development of the PYO venture which Dennis and Carol Hilsdon began in 1983 at their farm near Eastbourne, E Sussex.

The PYO was intended as a small adjunct to a mainly cereal business on the 52ha (130-acre) farm.

But the downward trend in cereal prices and the success of the PYO and shop businesses has meant rapid expansion.

The shop is in its fourth incarnation thanks to that expansion and the 1987 hurricane, which demolished shop number two.

The Hilsdons now plan a tea room and a larger shop.

But do not even contemplate a farm shop unless you are ready and willing to have strangers on your farm seven days a week, they say.

You have to be a people person to be involved with customers.

It is a very different skill to running a farm.

Recruiting and managing staff is one of the biggest challenges.

Carol, who runs the shop, would rather take on an employee with few skills but the right attitude, than someone who is not personable, welcoming and helpful.

“You have to treat each customer as if they are going to spend £10,000, even if they have only come in for a 37p cabbage,” says Mr Hilsdon.

Carol deals with more than 30 suppliers every week for regular deliveries and many more on an occasional basis.

An increasing proportion of shop sales are on credit and debit cards and offering this facility is a must, say the Hilsdons.

Handling cash is another challenge.

“Banks charge as much as £6 per £100 to handle cash and you must always have enough change,” says Mr Hilsdon.

Temperature controls, storage and labelling requirements, staff training, hygiene, shop layout, stock control, all have to be right before a penny goes into the till.

Security and alarm systems, air flow in the shop and good lighting, all need to be planned too.

Sharnfold – Retailing tips

• Visit many other similiar ventures – you can’t do too much research of this type
• Tell neighbours and parish council what you are intending, don’t let them find out through a planning notice
• Talk to planners well before application
• Speak to district councillors, especially the one on the planning committee. Try to get support pre-application.
• Use a consultant/planning adviser already familiar with the approach of your local council and iron out wrinkles before application
• Plan enough storage space 
• Staff uniforms help to identify shop employees and give professional image
• Good signage off the road is essential
• Don’t ask customers to step out of cars into a mucky yard
• Build a customer database, keep them informed, ask their opinion – makes them feel involved and helps promote loyalty

Case study – Boathouse Farm Organic shop

Your best customer is the one you already have, so keep them happy, says Martin Tebbutt.

 

With his wife Sally and a small, dedicated team, he runs Boathouse Farm Organic Shop near Lewes, East Sussex.

Here, 90% of sales are repeat business and trade increases every year, mostly by word of mouth.

A stint farming in the US convinced Mr Tebbutt that to be in commodity markets was always going to be a struggle.

 

“We can’t compete; I decided then that we had to take all the margin by adding value more than once.”

Mr Tebbutt and his brother Crispin took on an organic farm 18 years ago and ran a small basic retail operation there.

 

Then, five years ago, a bungalow with a nursery came up for sale on the A26 and the expansion began, with Crispin concentrating on managing the 323ha (800-acre) farm and Martin planning and running the retail side, opening the current shop four years ago.

“It was against planning policy to have any new retail development in a rural environment.

 

The planners wanted to have the shop in Lewes or Ringmer, but I would have been in competition with other small businesses there,” says Mr Tebbutt.

“What you think makes sense doesn’t necessarily make sense to the planners.

 

But it was passed and we now have expansion plans again for a more environmentally friendly shop with savings in refrigeration and heating costs.”

 

As well as growing herbs, salads and vegetables for the shop, Mrs Tebbutt has converted the double garage into a catering kitchen, saving between £10,000 and £15,000 by buying second-hand equipment at auction; time consuming, but well worth it, she says.

 

Outside catering, including the Glastonbury Festival last year, is also her domain.

The couple say that anyone considering retailing needs to take account of the move from living a very private life on farm to a very public one at a shop.

 

Their three children are growing up and living on a site where anyone can legitimately pull into the drive and wander around. 

Boathouse – Retailing tips

• Spend time with customers
• If considering butchery or any processing, talk to local EHO first
• Only advertise is you can gauge response – eg, cut-out discount coupons
• Don’t underestimate how long it takes to become established – allow three years from opening
• If doing construction/setting up work yourself, weather/seasonal demands of farm will mean shop work schedule will slip 
• Don’t spread yourself too thinly – regulation and skills needed for retailing mean you can’t excel at everything; get a partner, spouse, offspring or someone else to take on specific areas
• If working with partner or spouse, you need a strong relationship to start with, because it will definitely come under strain
• Labelling requirements will become more demanding and problematic – understand and comply
• Budgets need to include items like cost of waste disposal. Boathouse pays £23.50 a week for its wheelie bin of meat waste