Knowing your skill sets when it comes to foodservice is vital in accurately determining which foodservice model will breed the most profitability for your chain.
By Erin Rigik, Associate Editor.
Co-branding, leasing space to a quick-service restaurant (QSR) and creating a proprietary program all have benefits to c-stores, but knowing the model that is best for your brand takes a savvy retailer ready to take a hard look at its chain’s capabilities.
Jiffy Trip, a 28-store chain based in Enid, Okla., recently took just such a critical look at its operation. The chain not only offers proprietary programs at about half its stores, as well as a Hot Stuff Pizza program, it also is moving ahead with plans to open and operate three Subway franchisees.
“We purchased the franchises and will be operating them with our own employees, said Jiffy Trip President Kyle Williams. “We will, however, set up these franchises as a profit center, so we can track profitability. We’ll actually charge ourselves rent internally and charge ourselves overhead to cover insurance, supplies and utilities.”
Williams noted the benefits Jiffy Trip sees in Subway are two-fold. First and foremost is profitability, and secondly is the control that comes from running one’s own franchise.
“There are companies who lease space to these companies, but then you can’t control the business, and you are competing against someone else. We like having control of the operations, and this way the better we do the more money we make,” Williams said. “Tony Robbins has a great quote—he said ‘success leaves clues.’ Subway is the fastest growing franchise out there. That’s what we’re hitching our wagon to, and we’re looking at how we can move that forward while also providing a healthy offering for our customers.”
Know Your Skill Sets
John Matthews, founder of Gray Cat Enterprises, noted that a chain’s success or failure with a co-branding model is likely to come down to skill set. “I’ve seen chains do really well because they have someone who understands foodservice. You have to understand safety, sanitation and how to deliver a quality product in a consistent manner—it’s a different animal. If you have that skill set, you can take advantage of a co-brand franchise program, but if you lack that skill set you, will shoot yourself in the foot,” he said.
For those who readily admit that foodservice expertise is not their strong suit, an effective proven strategy is to lease out the space to a QSR. This allows your site to bring in an expert who knows how to run a foodservice program—from training employees to managing a menu and marketing. The storeowner receives a flat fee for the balance of the lease.
If you’re certain your team has the knowledge and experience to operate a food brand, the first step is to evaluate the market place and determine where a new brand could fit. Is there a need for a sandwich program or a pizza program? Can a drive-through offer a competitive advantage?
Once you decide on the type of program, be honest about your staffing situation and commit employees to man the foodservice station. Dave Thomas, founder of the Wendy’s hamburger chain, famously said, “Our hamburgers are square because we don’t cut corners.” There are no shortcuts to executing a successful foodservice program.
“What can wind up happening is people show up for a slice of pizza, but no one is running the pizza counter and the product hasn’t been prepared. If customers get a cold slice of pizza or one not properly cooked and they had to wait 10 minutes for an employee to walk over because he or she was restocking cigarettes—that’s not being in the game and that customer is never coming back to your store,” Matthews warned.
Rules of the Game
A co-branded model also requires franchisees to follow a certain set of rules. You will need to pay a franchise fee, royalties, contribute to an advertising fund, follow their design specs and prepare their food from a preset list of preferred suppliers, as well as complete their training program. You’ll also be held accountable for executing with their brand, and you’ll need to play according to their rules.
“There is a reason some franchises are better than others and that’s because they hold their franchisees accountable to the rules that maintain the integrity of their brand,” said Matthews, who is also the former president of Jimmy John’s Gourmet Sandwiches. “If those are rules that you don’t want to play by, then go out and start your own brand or have someone else do it. The reason you’re buying a McDonald’s or a Subway is that there is the expectation that they have a winning solution already figured out and all you need to do is execute.”
But execute can be a loaded word. “If you fail to buy their products from their preferred vendors then they can jettison you. There is a lot at stake for them as well,” Matthews said. “A lot of franchisees want all the benefits without all the rules. Well, you can’t have it both ways.”
Doing your due diligence with an existing brand before entering into a contract will ensure there are no unwelcome surprises once the papers are signed.
“Some franchises tend to overprice and sell you high dollar food and they truly don’t care what you sell,” Williams said. “What I like about the Subway plan is that you are able to make a nice margin on your food and they make it themselves, so everyone is on the same playing field. Their job is to help us sell more product and when we sell more product we both make more money.”
By contrast, some concepts require operators to buy high dollar products and have no incentives to help you increase sales.
“Subway is a franchise brand you can make money on, and we like the volumes and the healthy offering,” Williams added.
The Proprietary Path
If you need a strong foodservice skill set to brave the co-branding path, you need even more knowledge and experience to launch your own proprietary program successfully.
The benefits are obvious. There is a reason chains like Sheetz, Wawa, Rutter’s Farm Stores, Quick Chek, Stripes and several others stand apart as top quartile chains. They have outstanding foodservice programs that are executed flawlessly every day.
“If you’re an operator who also spent 10 years at Taco Bell, I have no doubt you can do your own proprietary food and do it well because you have the experience,” Matthews said. “But if you have been in convenience and have never worked in a foodservice setting, you’re running a risk that you’ll be able to execute foodservice. That’s why you’re seeing a lot of c-store chains hiring foodservice people to manage their growing programs.”
Some chains think they can overcome a lack of foodservice expertise though a brilliant marketing program, but Matthews cautions against this often-disastrous approach. “Operations leads foodservice more than anything else,” he said. “There is no magic bullet.”
Jiffy Trip is fortunate to have a solid foodservice background. William’s father and founder of Jiffy Trip, K.V. Williams’, first business was a 13-store drive-in restaurant chain across Oklahoma and Arkansas called Mug n Jug that, in addition to hamburgers, offered it’s own homemade root beer. “I grew up in the hamburger business,” Williams said. “So we’ve always had this niche for hamburgers.”
Today, as part of its proprietary program, Jiffy Trip offers bean burritos, chicken wings, corndogs and hamburgers made from fresh ground beef.
“We don’t use frozen patties,” Williams said. “In rural and small or even medium markets like ours, that type of offering works well, but it’s not as effective in major markets where you’re competing against the likes of Burger King, Subway and McDonald’s.”
The proprietary program offers Jiffy Trip the benefits of solid margins and flexibility, so it can tweak its offering by location.
“Anyone who has been in the c-store business for a while realizes that from community to community the market is totally different. You can have stores just 7-8 miles apart with completely different clientele and who want different foodservice offerings,” Williams said. “The second side of that is it’s more difficult to manage because you can’t just look at one set of numbers and have 20 offerings.”
Even after successfully launching a proprietary program it’s important to continue monitoring what is needed to move it forward with the times.
“We know we have to add some more fire power in our management team to take our proprietary program to the next level,” Williams said. “We do very well, but we know we leave a lot on the table in developing our menu selections—that’s something we can strengthen.”
The restaurant business tends to have a high mortality rate to begin with, and adding it to a 24/7 c-store environment presents even steeper challenges. If c-stores are going to extend the resources, it’s important to do it right.
“It is all hands on deck,” advised Williams. “Foodservice is tough. You have to pay close attention and it takes a lot of refinement.”
The Pros and Cons of Foodservice
There are advantages and disadvantages for each point of entry into the foodservice business, according to Gray Cat Enterprises. Evaluate each one carefully to find which strategy works for you.
• You’re in the driver’s seat.
• It offers competitive differentiation because it’s your brand and the competition can’t use it.
• Product cost savings.
• More mystique. Your own brand can achieve a higher acceptance level when executed well.
• It’s more time-consuming.
• Organization challenges, such as ensuring that training, supply chain, operations and marketing are all in perfect sync.
• Overshadowed. The big foodservice brands command the attention of suppliers and consumers.
• Higher costs. Every idea, every product, every marketing piece is paid by you.
• Product recognition due to brand awareness.
• Customers already know and trust the brand.
• Consistency/quality is already established.
• Brand support is available. Most branded foodservice companies provide training and marketing.
• Branded companies are interested in their brand first, your store second.
• Cost of goods; marketing promotions, licensing or franchise fees all erode your profit margins.
• Lack of control.
• Branded concepts like market share and error on the side of overdevelopment.