The franchise business model has expanded into the beverage alcohol retail sector, and based on the success of Wine & Spirits Retail Marketing, it may be the wave of the future. The North Providence, Rhode Island–based company’s roots date back to 1974, when John Haronian, founder of the Douglas drug store and Vision World chains, opened his first beverage alcohol store, Douglas Liquors. Unable to expand Douglas Liquors into a multi-store chain due to the state’s licensing restrictions, Haronian launched Wine & Spirits Retail Marketing (WSRM) in 2004 as a consulting firm. In the years since, the company has launched two more beverage retail concepts and has expanded into Massachusetts as a franchising company.
“We have a unique business model,” explains senior vice president Joe Costello, a former winery sales executive who joined WSRM eight years ago. The company allows for a network of independently owned stores to access shared resources, which include marketing, operations, financial, legal and real-estate support. The franchiser makes recommendations to store management on product selection based on national and local trends and data. The model also provides continuity between the company’s independent retail partners and ensures that their stores are professionally operated. In addition, WSRM provides forecasting for its franchisees and is responsible for all hiring and training. “I’ve worked in every state in the country, and this model caught my attention because it’s so unique,” Costello says.
Wine & Spirits Retail Marketing has a network of 20 independently owned stores, including 10 in Rhode Island and 10 in Massachusetts. “We don’t own a single license,” Costello notes. “We’re strictly a marketing company.” The Douglas Wine & Spirits concept accounts for 12 of the stores—six in Rhode Island and six in Massachusetts—although not all of them operate under the Douglas banner. There are four Wines & More stores, including three in Massachusetts, and four People’s Liquor Warehouse locations, with three in Rhode Island. According to Costello, none of the company’s franchise partners currently owns more than one license.
Costello declines to report total sales revenue, saying only that average annual per-store sales are “far in excess of $3 million. The store owners see the value in franchising and consultant dollars.” He adds that beverage sales are evenly split between wine, spirits and beer.
At between 17,000 to 26,000 square feet, the Wines & More stores are the largest of the group. Costello describes the outlets as destination stores, with mostly affluent, white-collar customers. Vice president of marketing Frank Mariano, who joined Douglas Wine & Spirits in 2002, says Wines & More units typically stock about 6,000 wine, spirits and beer SKUs, with wine comprising about 35 percent of the selection. “We try and make sure there’s something for everyone in our Wines & More stores,” he says. The venues also feature education rooms and tasting areas, including an automated “Tastestation” bar at the Wareham, Massachusetts location.
People’s Liquor Warehouse stores are targeted at more price-conscious, blue-collar consumers and are typically located in areas with big box stores. They range in size from 12,000 to 15,000 square feet, with an average selection of about 5,000 SKUs. The Douglas Wine & Spirits units are regional and neighborhood stores, ranging in size from 7,000 to 10,000 square feet, and they generally carry between 3,500 and 4,000 SKUs.
Big Wine Selection
Wine sales at the franchised stores are up, with the price point of $8.99 to $14.99 a 750-ml. doing particularly well. “That price range is where customers feel they’re getting the biggest bang for their buck,” Mariano says, noting that sparkling wines and rosés have also been strong. The stores stock between 1,800 and 3,500 SKUs, generally priced from $7.99 a 750-ml. of Dark Horse Cabernet Sauvignon to $3,000 for the 1998 Château Pétrus. Top-sellers include Josh Cellars Cabernet Sauvignon ($11.99) and Bread & Butter Chardonnay ($10.98). “When it comes to wine, our stores are known for their selection, customer service and knowledgeable staff,” Mariano says.
The spirits category has experienced the biggest growth, driven primarily by whiskies, including Bourbon, Scotch and Irish offerings. The stores each carry between 1,800 and 2,500 spirits SKUs, priced from $7.99 a 750-ml. of Burnett’s vodka to $1,700 for Louis XIII de Rémy Martin Cognac. Top-selling spirits include Tito’s vodka ($27 to $30 a 1.75-liter), Maker’s Mark ($52.99 a 1.75-liter) and Jack Daniel’s ($24.99 a 750-ml.). Mariano notes that locally produced craft spirits from distilleries like Massachusetts’s Bully Boy and Rhode Island’s Sons of Liberty—priced between $29.99 and $44.99 a 750-ml.—are becoming a big piece of the business.
Overall beer sales at WSRM stores have been flat, Mariano says, although “craft beers have done very well.” The stores generally offer between 1,500 and 2,800 beer SKUs, priced from $6.49 a six-pack of Natural Light up to $15.99 a four-pack of Consolation Prize Imperial IPA from Lord Hobo Brewing Co. in Woburn, Massachusetts. Other local top-sellers include those from Rhode Island’s Narragansett, Foolproof and Grey Sail brewing companies. Most stores feature between 12 to 15 cooler doors, while some units have close to 30 doors.
The stores also feature a wide array of gifts and accessories, including gourmet food selections and gift baskets. “We sell thousands of gift baskets during the holiday season,” Costello says. “It’s a big part of our business.”
Just as WSRM puts enormous thought into its product selection, the company takes a strict approach to in-store merchandising. “We don’t use any national p-o-s materials,” Costello explains. “We produce every bit of signage, whether it’s on an end cap, in the windows or on the shelving.” He says that with the absence of “big pieces of cardboard,” management is able to “move the customers around based on the direction we want them to go,” in order to showcase unique items and special offers. In-store merchandising also includes displays of seasonal and monthly features, such as end caps promoting the “drink of the month.”
In-store tastings are held regularly at the stores. “Every one of our stores does a minimum of a couple of tastings a week,” says Costello. Locations with education rooms also host seminars for consumers covering any number of topics, including Spanish wines, sparkling wines and craft beers. Larger tastings are also offered, such as a “Grand Wine Tasting” that featured about 120 wines and a “Beers of the World Tasting,” which paired imported brews with regional foods. The tastings are all complimentary.
WSRM relies on traditional and emerging media to promote its stores. Print advertising takes place throughout the year and reaches about one million homes in Rhode Island and Massachusetts, while radio spots run during specific times. The company also employs a full-time social media director to manage Facebook, Twitter and Snapchat, with a focus on the stores’ assortment of limited-release craft brews.
Costello and Mariano count the stores’ 500 employees as the company’s most important tool in educating its customers. “We spend a lot of time and resources on sending our staff to seminars and classes,” Costello explains, adding that they also visit wineries, distilleries and breweries. The company’s wine staff meets once or twice a month for educational sessions and tastings. “Education is one of our biggest assets in an industry that has a lot of turnover,” Costello says. “Fortunately, we don’t.”
The company also puts a high value on supporting local organizations, ranging from food banks to coat drives to adopt-a-pet events. Douglas Wine & Spirits is a sponsor of the “Zoobilee! Feast with the Beasts” fundraiser for Providence’s Roger Williams Park Zoo. Costello says the stores also offers discounts to firefighters, police officers, and current and retired members of the military as part of its “Honoring Our Heroes” program.
Costello sees numerous areas of future growth for Wine & Spirits Retail Marketing. Third-party delivery for stores in resort areas like Newport or Cape Cod is a possibility, although for now the company isn’t recommending online sales for its franchisees. While WSRM has received inquiries from as far afield as Aruba, expansion for now will likely be concentrated in the Northeast. Costello cites opportunities in Connecticut and New Jersey and notes that existing franchisees are also interested in additional stores. “We’re looking to expand,” he says, “but controlled growth is the best way to manage our clients’ best interests.”