A new low-cost tobacco retail concept has proven a cash-flowing franchise in Airdrie and Olds, Alberta, and is set to expand across Western Canada, according to Ed Alfke, chairman of Cheap Smokes & Tobacco. Alfke, founder of Rent-A-Wreck, said Cheap Smokes could be a similar franchise sleeper.
"I am amazed at the sales volume. I have never seen a franchise achieve $1.2 million in its first year of sales in a town, like Olds, with a population of just 9,000," Alfke said, adding that the Olds outlet was hitting sales of $140,000 per month after just 10 months in operation.
The Cheap Smokes franchise, owned by Lisa and Jeff Lawrence, is a simple concept: undercutting competition on prices to draw in customers and then upselling with smoking accessories and higher-priced cigars.
In Alberta, a pack of 25 major brand-name cigarettes costs an average of $11.32, with a carton of 10 usually selling for more than $100. Cheap Smokes sells a carton for $88.50.
"Our pricing structure makes us just a bit lower than Superstore and much more competitive then 98 per cent of the other locations [where] you can purchase smokes. However, the biggest difference is we are specifically servicing our smoking customers and have built a happy place just for them," Jeff Lawrence said.
This may be a key advantage; in most of Canada smokers have become a social pariah, though Health Canada estimates that 21 per cent of the adult population still lights up.
Alfke said a Cheap Smokes & Tobacco franchise would cost about $25,000 and "is an ideal investment for a small-town market."
from Western Investor May 2012