Stelios Haji-Ioannou’s Easyinternetcafe is turning away from the idea of having its own sites towards leasing under-utilised space from other retailers.
The original concept, which started in 1998, saw the roll-out of 22 stores in eight countries within two years. By September 2001 the company had £53m of net debt and was getting through cash at the rate of £4m a month.
Now the company has pulled back, cut the number of staff in its stores from 300 to zero, installing vending machines, to allow customers to buy internet time, reduced the number of head office staff from up to 150 to about 40, and “insourced” the running of the chain’s IT system, rather than use Hewlett Packard.
It has shut one store, in Antwerp, sold two more, in Brussels and Rome, to franchisees and sub-let space to specialist fast food and coffee retailers, such as Caffe Nero, Subway, and Dunkin’ Donuts.
Haji-Ioannou is now basing expansion on smaller units, which would occupy a few hundred square feet of under-utilised space housing between 20 and 65 PCs in stores and restaurants operated by other companies, in return for a rental payment.
Taking space in someone else’s store sharply reduces overheads, from a break-even of £3 to £4 of revenue per PC per day to around £1.60 per PC per day, as at the branch of Easyinternetcafe installed in part of the McDonald’s restaurant in Swiss Cottage, North London.
Haji-Ioannou believes that thousands of similar “points of presence”, or “pops”, could be opened over the next few years.
Including all overheads, and depreciation, he estimates that break-even will occur at £3 per PC per day. Haji-Ioannou said: “I compare it to a payphone business. If you get people to put in £3 a day, it does not matter whether it’s three people at £1 each, or nine people at 33p each, you will have a business.”
