Q&A: Does Costco Franchise in the UK?

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costco franchise

Are you interested in joining the warehouse chain that offers its members exclusive discounts on bulk-buy items? In this article, we ask whether there are any Costco franchise opportunities to get involved in.

Many people have heard of Costco – but what actually is it? Well, it’s a supermarket chain that uses its buying power to offer exclusive discounts to customers who have bought a membership subscription. Each store sells a vast selection of products, including food, electricals, clothes and books – and many have their own petrol station, tyre garage, opticians and photo processing kiosk.

Costco’s warehouse club is characterised by bulk-buy products, free food samples and low prices. By selling items in large quantities or multi-packs, the cost per unit is normally much less than at other food retailers, so customers can bag a discount.

By purchasing essentials at Costco, customers can save more than enough money to cover their membership fee. This is why many people consider becoming Costco members a good investment.

History of Costco

Costco can trace its roots back to the mid-1970s, when it was set up in the US. It was the first ever company to make $3 billion in sales in under six years. The company has always prioritised great value products and has developed its membership model over the years.

Today, customers can buy an executive membership for a higher cost than the standard fee, allowing shoppers to earn a two-percent reward on the majority of purchases. This encourages customers to spend more and return to Costco for other items and services, such as insurance.

Costco is also famous for offering an abundance of free samples to its customers. As well as pleasing customers, the free samples have been proven to increase the sales of its products too. Another key aspect of Costco’s marketing plan is showing its members that spending money can actually save them more – however often they visit the discount retail store.

Does Costco franchise?

Sadly, there are no opportunities to start your own Costco franchise. Costco operates its own network of retail warehouses and does not licence its business model to investors.

How to get involved with Costco

If you’d like to invest in Costco, you can buy stock in the company. It has created its own purchase plan and investment calculator to help potential investors make sense of the process.

If this isn’t for you, your other option is to join Costco as an employee. Take a look at the company’s careers page to find out more about the company, its staff benefits and how to apply.

The bulk-buy warehouse sector

It’s hard to single out statistics for the bulk-buy warehouse sector on its own, but we can look at the retail industry in general to get a sense of just how lucrative owning a store can be. Of course, as consumers turn to the internet to browse and buy their favourite items, many retail companies are struggling to maintain their spot on the high street.

However, discount stores continue to do well in today’s retail landscape – you only need to look at Aldi and Lidl, for example, to appreciate that consumers love a bargain. Take Aldi; it now operates more than 10,000 stores in 20 countries and enjoys sales of over £10 billion. This puts Costco and other discount stores at a significant advantage in the industry.

The retail sector as a whole has 2.9 million UK employees and annual sales of over £380 billion, as of 2018. Costco itself is worth more than £13 billion as the world’s sixth most valuable retail brand. Across its network of over 760 warehouses in 10 countries, more than 94 million people have signed up to its membership scheme to access its products. 527 of Costco’s locations are situated in the US and, on average, 120,000 members spend £134 million annually in each store.

Similar franchise opportunities

There are only a handful of businesses that operate discount warehouses with membership schemes, so it’s difficult to find close alternatives to a Costco franchise. But there are a few franchises that use similar models. Let’s take a look at two of them.

Switch Electrical

This franchise runs a chain of bespoke warehouses to house its wholesale electrical products across the UK. It distributes everything from lighting, heating and ventilation to lamps and cables. If you want to join Switch Electrical, you can attend one of its Concept Days and meet the franchise team to discuss the opportunity in more detail.

  • Becoming a Switch Electrical franchisee: You don’t need any experience in the retail industry to succeed as a Switch Electrical franchisee. Once you’re on board, you’ll benefit from the company’s huge buying power and supplier discounts, as well as a protected territory. To find out more, click here.
  • How much you need to invest: To join the franchise, you’ll need to invest at least £25,000, excluding the cost of fitting out your site and buying stock. The franchise also asks that franchisees have at least £25,000 in liquid capital.
  • What you get for your investment: Franchisees get access to a training scheme and ongoing support from the franchise team, as well as a continuous supply of sales leads to keep you turning an impressive profit. According to Switch Electrical, you can make a profit of £50,000 in Year 1, rising by £50,000 a year to reach £150,000 in Year 3.

The Source Bulk Foods

This franchise is a part of the zero-waste revolution sweeping the retail market. It offers shoppers a range of 450 foods, from organic wholefoods to healthy snacks and sustainable household products – and everything is sold without plastic packaging. Because this store allows customers to pick up as much of each product as they like, consumers can save money by buying in bulk.

  • Becoming a Source Bulk Foods franchisee: By joining this retail franchise, you can benefit from the growing consumer interest in living sustainably. You’ll need to have a passion for healthy living and an ethical approach to business. To find out more, click here.
  • How much you need to invest: A Source Bulk Foods store requires an investment of between £150,000 and £190,000.
  • What you get for your investment: The franchise makes sure all its franchisees get the right training in all areas of the business, from store operations to local marketing. It also offers five-year contracts, which can be renewed for another five years if both parties agree.

Start your own retail franchise

Although it’s not possible to open a Costco franchise at the moment, there are plenty of other retail businesses looking for enthusiastic investors. Focusing your search on discount retail franchises or membership-based businesses could prove to be a lucrative move, thanks to the growing popularity of stores offering cheaper alternatives to popular products.

We don’t currently have any discount stores on our books, but you can browse our full range of retail franchises here.

>> Read more articles on the Retail sector

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