Ingredients for Success
The answer to the question, “How can c-store operators develop proprietary foodservice programs?” is, according to consultant Dan Bendall, founder and president of FoodStrategy Inc. in Rockville, Md., the same as what he would tell any would-be restaurateur. “You need the following ingredients to be successful, not just serve food.” They include:
How to Fail
With the economy still in flux and millions of Americans continuing to dine out less, convenience store operators with foodservice programs are under more pressure than ever before to get their solution right.
While many see shortcuts and economies in franchising or licensing existing foodservice brands, others have opted for proprietary programs and all that they offer—including brand differentiation, a greater opportunity for innovation and an end to branding fees.
Still, proprietary foodservice can prove to be a double-edged sword, especially for foodservice neophytes, as they lose the experience and support that established brands offer. Sorting the pluses from the minuses before committing can be crucial.
The primary advantage of a proprietary foodservice program, according to T. W. MacDermott, founder and president of the Clarion Group consultancy in Kingston, N.H., is that if the product is good and recognizable by locals, it becomes a unique asset that will draw traffic.
“Customers will come for the product and often buy something else,” MacDermott said. A further advantage is that the operator is making the product from purchased ingredients, rather than purchasing a finished product. That means that the margin will be substantially greater.
“If the product isn’t also sold elsewhere, the price point can be at whatever the local market will bear,” said MacDermott. “If it’s an improvement over or a noticeable variant of an existing, widely-available product, then a price that is slightly higher than the competition’s price is feasible.”
The disadvantage, of course, comes if the product isn’t embraced because it’s not well made, properly presented or fresh when the customer buys it. “Or,” said MacDermott, “maybe it simply isn’t the right product—no one’s interested in it.”
Know Your Customers
MacDermott urges retail clients to do their due diligence before rolling out a new product. “Test market every product by offering samples and getting customer reactions before investing a lot of time and money,” he said. “Then tweak the offering based on what the test-tasters say. Don’t create a product that will take additional facilities or special equipment, except a display case, to make.”
Many operators are guilty of letting the product go stale on the counter. “It’s better to discard $10 or $20 worth of unsold product than lose future sales because customers are turned off by a bad experience,” MacDermott added.
In a nutshell, proprietary programs require the same expertise as big brands. “Operators must figure out the requirements of the target demographic, the product that will meet the need, the source of procurement, the production/delivery process and the price point,” said Paul Bartlett, president of KitchenSolutions LLC in Baltimore. “These factors must all be in sync with available location, space and equipment.”
At that point, Bartlett continued, the cost per unit served must generate enough of a margin to justify the expense of time, labor and dollars. “Don’t go off half-cocked. Do financial due diligence. Conceive the brand objectives and test market before you bet the store. Develop procedural manuals for all activities. Train to the manual and use it thereafter as a resource for policy enforcement.”
Manage Your Business
Foodservice requires much different skill sets, so don’t expect employees to pick up best practices right away. In fact, not every c-store employee will be a good foodservice employee.
“Step away from managing the store and manage your business,” advised Rudy Miick, president of Miick & Associates in Boulder, Colo. “This will allow you the time to develop a winning concept with the right people behind it that is positioned to grow.”
Among the benefits, Miick said, is ownership and all that goes with it. “They’re your ideas, your products and you reap the rewards—if you can stay focused and make it work.” And the drawbacks? “It becomes easy to eat up your own cash flow or profitability, so beware of this. Do your homework and don’t kid yourself. You have to be critical and honest.”
What Miick termed a potential “major drawback” is not doing due diligence that is data based. “You’re more than likely—95%—going to fail if the numbers don’t work. Either rework the idea, product mix or walk away.”
To Miick, the question of whether proprietary programs cost more doesn’t make sense. “Costs are costs. If you track them, budget them, price them and the numbers work, you can win. If the numbers don’t work, you’ll lose,” he said. “I watch far too many operators run a pro forma, then kid themselves that they’ll do better than the projections. Most do not. Do your homework. Be specific, focus on behaviors and actions that are trackable so there are no surprises.”
The management challenge of introducing and carrying proprietary foodservice items is ensuring that you have a reliable supplier and stable pricing. Establishing and maintaining effective controls on variables like quality and waste is equally important. This can be facilitated by keeping accurate records of costs, unit sales, best and worst daypart sales and the like.
“The training challenge,” said MacDermott, “is ensuring employees know how to make, merchandise and present the product and understand and maintain quality control. The counter display has to be always clean, neat, well-lighted and inviting.”
Proprietary products decrease costs, MacDermott pointed out, not increase them, unless the product is labor-intensive to prepare. “It should be simple, not requiring a full kitchen, unless the operator already has a commissary and doesn’t need to add extra labor for the preparation,” he said.
The independent or small chain operator can try to identify a hand-held food product that’s popular in its operating region that isn’t already overwhelmed by the major chains, especially a variant on an established product like burgers or pizza, or something that isn’t offered by the chains, such as ethnic products. Convenience store operators would be wise to enlist a professional to help develop a brand name and logo. “This isn’t something that’s usually successful on a do-it-yourself basis. The pro can be a local graphics or ad shop, usually not all that expensive,” MacDermott said. CSD