Retailers

How Grocery Outlet Picks Its Teams

CEO Eric Lindberg discusses a 300 to 1 shot
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With ambitions to grow its footprint at a 10% annual clip, Grocery Outlet is generating a lot of relative job opportunities—but even more job interest.

The chain in fact is hearing from between 2,000 and 3,000 interested owner-operator candidates every month, Grocery Outlet CEO Eric Lindberg said this week, describing how the company “funnels" that field to as few as 10 or 12 every month who are invited to enter what Grocery Outlet calls its Aspiring Operator in Training program. These IOTs, as they are called, participate in a nine-month training program during which they work alongside current owners. Only then will they get a chance to buy into the program and that too can be a competitive process, with multiple potential owners presenting business plans for review.

“What we’re looking for is skillset and mindset,” said Lindberg, in a conversation with UBS stock analyst Michael Lasser during the UBS Global Consumer and Retail Conference this week, according to a Sentieo transcript. “Skillset is on paper—what have you done in your life. Mindset is a more important thing. So we’re looking for the best we can find a mindset: ‘I’m entrepreneurial. I’m a risk taker. I believe in getting up and setting my own direction every day.’ ”

With 36 to 38 new stores on the horizon this year, becoming a Grocery Outlet owner is something of a 300-to-1 shot. But the discerning process is important for both Grocery Outlet and its operators, since its unique model calls for the company and its independent owners to split profits on store sales down the middle. Owners are responsible for selecting assortments, maintenance on buildings, local hiring and local marketing. The company acquires the store sites, and the merchandise, which is sold on consignment.

According to Lindberg, the opportunity has tapped into a desire among supermarket industry veterans anxious for the opportunity to prove they can make it on their own and be their own boss. Around 65% of candidates are coming from chain grocery operators such as Trader Joe’s, Costco and Whole Foods; the rest are a mix of Grocery Outlet employees looking to run their own stores and those from adjacent industries like restaurant and multioutlet nonfood retail.

Grocery Outlet has also traditionally made operators of family groups, particularly husband and wife teams, in part because it quite literally emphasizes a “mom and pop” feel that customers respond to and the company believes helps to establish the store’s trust in the community. For operators, that arrangement can also aid efficiency, which can be important especially given their initial investment.

“They have to really want to work for themselves. They have to believe in this idea of giving back to their community. That’s not something we say to publish on the website. That’s really in their heart. If you look at their motivation, it’s probably that first, working together with family, being involved in a community, [and] making money might be second or third in the list,” Lindberg said.

“It’s not all about the dollar, it’s about this whole thing of being independent, being able to take the tools that we give them and go out and apply it to their trade,” he continued. “Most of the people that we’re getting have been in the industry for 20 or 30 years, and they’ve just found Grocery Outlet. They get to apply everything they’ve learned to our model. And what we’re seeing is, they can be great at data, they can be great at merchandising, but they have to be good with people [and] have to be really comfortable leading and doing without us looking over their shoulders and telling them what to do every moment.”

East Coast Expansion

One of the chain’s newest operators, Heine Roikjer, is a Denmark-born 27-year veteran of Ikea who was awarded Grocery Outlet’s Carmichael, Calif., store late last year. It opened earlier this month.

As previously reported, Grocery Outlet is making a move to expand on the East Coast this year, with a plan to open between three and five stores in the greater Philadelphia area. This move will open a new front of expansion for the Emeryville, Calif.-based brand and add to a chain originally known as Amelia’s that the company quietly acquired a decade ago.

Speaking this week, Lindberg explained that the Amelia’s deal primarily allowed the company to support and build opportunistic buying relationships east of the Mississippi. New store expansion there will take lessons from the company’s more recent success cracking into the Southern California market in terms of brand introduction. But he said he was confident that the extreme discount format could succeed there—given the right people.

“We’ve had sites that haven’t worked—we’ll close a store or two every more around just sort of cleaning up, either a location we don't like or something about the town, but [the format] really works everywhere,” he said. “It works in incomes of $150,000 plus. It works in incomes of $20,000 minus. It works in [small] towns La Pine, Ore., to downtown San Francisco, we’ve got 150,000 people in a half-mile radius. And they work because I think the value we deliver and the local community that’s delivered by the operator. … So if there is a place that doesn't work, we haven’t found it.”

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