The Big Idea

REVIEW SUMMARY
Business. Richard's Foodporium, Sarasota
Industry. Grocery, vitamins, retail
Key. Company is on a growth spurt, both organically and through acquisitions.

Richard's Foodporium executives tend to gulp with jitters when they hear the following fateful words from their boss, John Rorer: “I'm going on a trip.”

While the top managers for the Sarasota-based natural foods and specialty goods chain like Rorer plenty, their nerves aren't because they will miss him. Instead, they know an avalanche of business dreams — some doable, others, not so much — is in their future because Rorer will have time to kill.

“They don't like to see me go away,” says Rorer. “If I do, I'm at an airport and I'll come up with a lot of ideas.”

Rorer, 57, admits some of his ideas aren't always easy to execute. Nonetheless, the stream of dreams has certainly done a lot for Richard's Foodporium, which has 13 corporate and three franchise-run stores in Florida, from Port Charlotte to Dunedin and Oldsmar. A franchised location recently opened in Flagler County, on Florida's Palm Coast.

Founded in 1979 by Richard Downey, a Sarasota businessman with an admitted eccentric side, the chain is on a growth spurt, both in sales and locations. The entire company run by Rorer, which includes a distribution center and a few affiliated businesses, totals about $17 million in annual sales. Revenues have grown by about 18% company-wide since 2008, says Rorer, although average sales per store vary widely, from high growth to flat.

The good news there, adds Rorer, is the economic downturn deluge has subsided since the spring for Richard's, with same-store sales up at least 5% since April.

Locations-based growth at Richard's, meanwhile, comes from franchising and buying out competitors, the latter of which has been part of Rorer's growth strategy for most of the last decade. For example, Rorer bought three Good Earth Natural Foods stores in Manatee County in April. The purchase price wasn't disclosed.

The move was both offensive and defensive. On defense, Rorer closed a Good Earth in east Manatee County a few miles from a Richard's Foodporium location to avoid duplication.

On offense, Rorer will convert two other Good Earth stores into Richard's Foodporiums. That project includes new decor for each store, and expanded bulk food offerings and equipment, from shelves to point-of-sale machines. The project, says Rorer, will cost at least $300,000 and should be done by the end of the summer.

Growth is also forthcoming in warehouse and office space. The company long ago outgrew its 5,000 square feet of warehouse-office flex space south of downtown Sarasota. Rorer and some other executives have even been forced to work from home the past few years to conserve space.

Rorer has worked with a few local real estate brokers to find the just-right space. In addition to space with at least 10,000 square feet, Rorer has specific other needs, from ample parking to neighborhood quality.

Says Rorer: “What I need is fairly defined.”

Organic growth
While Rorer's internal moves have defined and led to most of the company's growth, it certainly helps that the natural food industry hasn't been completely crushed by the recession.

Indeed, organic food and beverage sales increased 7.7% in 2010, from $24.8 billion in 2009 to $26.7 billion, according to the Organic Trade Association. Even better for Rorer, the association reports that the natural food stores segment of the industry has a 39% market share. That moves it closer to the 54% controlled by mass-market retailers like Publix, Whole Foods and Sam's Club.

Rorer and others familiar with Richard's Foodporium, however, say, the company's edge comes not from industry growth, but its business model. That's where Rorer mixes the nostalgia of an old-time neighborhood store with a shopper's club mentality on bulk food selection and price points. Most stores range in size from 1,800 square feet to 3,000 square feet.

Greg Leonard, an executive with Jacksonville-based natural foods distribution firm Tree of Life, says Rorer's philosophy has shifted with the times, but has always leaned toward value — long before the recession forced the issue. Leonard has worked with Rorer for 30 years.

“In one sense the stores have a convenience-store feel,” says Leonard. “But bulk food is also important to the stores.”

The Rorer way relies heavily on the right employees, even more so than a traditional grocery business. That's because top customer service is essential, given many natural and specialty foods customers — and potential customers — can be overwhelmed by all the options.

Little surprise, finding employees who “get it” is one of Rorer's biggest challenges. Says Rorer: “There aren't that many people who are trained to understand vitamins and health food.”

Competition is another challenge. In Sarasota alone, Rorer clicks off the double-digit list of rivals, from GNC vitamin stores to Whole Foods to two locations of The Granary, now run under the Earth Origins Markets brand.

But to an idea guy like Rorer, competition is merely potential to win more market share. That's why he renamed the company headquarters “opportunity central” a few years ago and staffed it with his executive team, which he coined the “creators of opportunity.”

“This is one of the most competitive markets in the country,” says Rorer. “And yet an average (Richard's) store still does $1 million a year.”

Blue ocean
Richard Downey might not have dreamed the chain would ever be that big back in 1979. His focus was instead to build an eclectic list of hard-to-find natural food items.

When Downey first launched Richard's, then called Richard's Whole Foods, Rorer was on the east coast of Florida. A Virginia native, Rorer was a massage therapist in Melbourne when he received a call from a friend in St. Petersburg. The friend's nonprofit health food co-op was floundering, and he sought help from Rorer.

Rorer thought it would be temporary. “At first I was like there is no way I'm going to do that,” says Rorer. “But after six months or so, I realized how much I liked the natural foods industry.”

Rorer learned the business by doing and reading how-to business books. Rorer doesn't have a college degree, nor did he graduate high school.

In fact, Rorer left high school in the 10th grade, came back for a year and left again. He earned a GED in his early 20s. He then went on to various entrepreneurial careers. He was a real estate broker, ran a silk-screen printing firm and painted houses.

“School and I never really meshed,” Rorer says. “I was always an average student and getting into trouble.”

Rorer did help guide his friend's co-op out of trouble in the early 1980s. And he stayed in natural foods.

First, Rorer and two business partners opened a store, Rollin' Oats, in St. Petersburg. The partners bought the six-store Richard's chain from Downey's widow in 1997.

The chain was significantly outdated, recalls Rorer. Stores didn't have phones or credit card machines. Refrigerators were used sparingly.

The new Richard's owners took a blue ocean approach to an overhaul of the chain. They gutted some stores. They tinkered with others. It was a costly investment, but the payoff came quick.

Revenues company-wide doubled by 1999, for instance, from $3 million to $6 million. By 2004 there were 12 stores and $9 million a year in sales.

Rorer took another risk in 2005, when he bought out his business partners. It was congenial, he says, but the trio disagreed on long-term strategy.

Rorer thought the best way to fight mass-market competitors was to build small and be nimble, to find specific spots and products it could win on. His partners, though, wanted to invest $750,000 to $1 million into one store. They wanted to attack big with big. “I had a vision they didn't share,” says Rorer.

Lay low
Rorer has spent the half-decade since he bought out his partners making the entire chain bigger, not just one store. He hired new managers and executives and he updated the marketing materials. He changed the name to Richard's Foodporium in 2009.

The next big growth area for Richard's could lie in franchising.

The first three franchise locations opened in 2010, including the one in Flagler County, the company's first move outside the Gulf Coast. Startup costs to open a franchise range from $285,000 to $400,000, with most of it going to furniture, equipment, rent, initial inventory and early advertising. The franchise fee is $35,000.

Richard's has a competitive advantage in franchising because few natural foods companies are doing it. Interest from perspective franchisees is high, says Diana Capirano, franchise development and operations director. Capirano works through a continuous stream of would-be franchisees that call everywhere from Sarasota to Norway.

Still, Rorer and Capirano aren't in a rush to blanket the state with stores. “A lot of new franchisors have grandiose plans to grow quickly,” says Capirano. But the plan at Richard's is to go slow, so executives are sure they have the right franchisee in the right market.

In that regard, the company actually took a franchising timeout in 2011. Capirano hopes to open at least four franchised locations in 2012, with target markets including Orlando and the Fort Lauderdale-Boca Raton area.

“It's not to lay low,” says Capirano, “but to take a break as the economy works its way back.”

Rorer meanwhile, intends to keep his focus on the big ideas side of the business.

“I'd like to step back and let other people do things here,” says Rorer, “but I'm not the type to retire.”

Rorer's Reads

John Rorer, who runs Sarasota-based Richard's Foodporium, didn't graduate high school, didn't attend college and didn't get a GED until he was in his early 20s.

But he has long been an avid reader, especially of business books. He has leaned on a variety of books to make business decisions or think about an issue. Some of his favorites:

• “Atlas Shrugged,” by Ayn Rand: Rorer's all-time favorite. He says it has not only helped him in business, but in life and in understanding economics and politics.

• “Good to Great” and “Built to Last,” by Jim Collins: On many executives' list of favorites, the books are required reading for entrepreneurs and business owners. Both tell stories of how companies created long-term successful workplace cultures.

• “Blue Ocean Strategy,” by W. Chan Kim and Renee Mauborgne: Book is an ode to big thinkers and big dreamers surrounded by idea people.

• “The Tipping Point,” by Malcolm Gladwell: Uses science to examine why and how people connect with a message or a follow a product.

• Al Ries and Jack Trout: The duo has written several prominent books on marketing, including “Marketing Warfare” and “The 22 Immutable Laws of Marketing.”