By: John Matthews, founder of Gray Cat Enterprises.
In the convenience store marketplace, margins continue to tighten on core products such as candy, snacks and tobacco. Prudent operators are attempting to stem the tide by introducing foodservice items into their stores. Most facilities provide plenty of customer traffic and space within the store to enable modifications for introducing a foodservice operation. While the desire to incorporate foodservice is on the forefront, operators need to address every aspect of the implementation.
With the appropriate modifications to their operational systems and procedures, convenience store owners can slowly unveil a foodservice offering. Many items need to be addressed including a concerted effort in marketing outside the store to attract new customers, capitalizing on improved merchandising and signage, and developing better metrics and Key Performance Indicators (KPI’s). Only through a holistic approach, can the stores be poised for a giant leap forward to improved profitability.
Overall Business Planning: It is essential to understand the direction of both the c-store and foodservice operations. Separating the foodservice component from the rest of the P & L will enable a true assessment of the operation. For ease of computing, labor can be an estimated allocated number of hours. By doing this, one can see if the operation is performing adequately through the use of a break-even analysis and four wall analysis. In addition, any CAPEX improvements can be reviewed for ROI and each of these reports can be rolled up into a three-year Proforma.
Operational Excellence: Foodservice operations are viewed differently than typical retail from an accounting standpoint. The big three in foodservice are food, paper and labor. Tied to inventory management, this is truly the only way to manage foodservice. Systems and procedures are then built to support the overall management of operations. Foodservice operators leave nothing to chance and develop metrics and procedures in a disciplined fashion to regularly monitor the business. Prepare for opportunity.
Merchandising And In-Store Promotion: All of the Quick Service Restaurants (QSR’s) utilize some sort of value or combo meal. Take the time to develop—and market— combos to your customers to help them decide on items; improve speed of operation, and raise average ticket. That being said, out of stocks need to be non-existent and better merchandising should be put in place through product placement adjacencies. These complimentary items are developed in order to capture all of the opportunities. Addressing these potential shortfalls improves sales and margins and can be easily avoided through systems and procedures.
Local Store Marketing And Advertising Plans: While customer traffic in the convenience industry is stronger than the QSR market, the items above will address some of the additional opportunities to capture sales. External cultivation of customers – both onsite and offsite – is generally non-existent in the convenience industry. Window signage with product photography are a must, and outside local store marketing opportunities need to be put in place. Overall signage needs a whole new approach to guide and entice customers. Opportunities in catering and “To Go” marketing are plentiful and require a proactive plan addressing these opportunities. All marketing activities should be included in an annual advertising plan.
Key Performance Indicators: Knowing the key drivers is the only way to improve the bottom line of the business. Lumping the foodservice results in with the convenience product P & L makes it difficult to understand the nuances of foodservice. A series of KPI’s should be developed in order to fully grasp where the opportunities exist and provide the measurements on the steps toward improvements. Conducting a marketing/operational pilot is a key step in creating the benchmarks to target.
Vendor Management And Purchasing: Vendor management is important for both the convenience store and foodservice operations. Managing your vendors with regard to drop off times is critical (i.e. not having totes stacked in front of foodservice at 11:45 am). Inventory management at the store level with regard to FIFO (First In, First Out) is not only smart, it is food safe. Foodservice means you need to be aligned with the right vendors that can help you expand your operation in tandem with the customer needs – it cannot be a deterrent.
Launching a foodservice operation in your c-store is both an exciting initiative and a smart decision. Manage it correctly and you enjoy the benefits of high-margin products that address a growing customer need of improved foodservice items. On the flip side, running your foodservice operation like a typical c-store and you will be disappointed with your results.
John Matthews is the founder and president of Gray Cat Enterprises, Inc., a strategic planning and marketing services firm that specializes in helping businesses grow in the restaurant, convenience and general retail industries. With more than 20 years of senior-level experience in retail and a speaker at retail-group events throughout the U.S., Matthews has recently written two step-by-step manuals, Local Store Marketing Manual for Retailers and Grand Opening Manual for Retailers, which are available at www.graycatenterprises.com.