Foodservice veteran Dick Meyer shares lessons learned over more than two decades.
By Dick Meyer, President, Meyer & Associates
In 1993, I was blessed to begin my new consulting firm when the co-founder of Subway, Fred DeLuca, asked me to help them develop win/win development strategies with operators of c-store chains. Fred’s initial charter to me was simple; “educate the c-store industry on the benefits of a co-location with a QSR” and they’ll select the concept(s) they feel work(s) for their company, whether it be QSRs or proprietary foodservice initiatives.
His vision proved right on target.
Subway’s consumers’ top-of-mind awareness programs (e.g. “Jared,” $5 footlong” and “six grams of fat or less”) triggered phenomenal growth during this time frame. They’re now at 42,000 Subway restaurants globally in over 100 countries with over 10,000 of these in “non-traditional” units (e.g. c-stores/truck stops, colleges, military bases, hospitals, airports, etc.), with almost 5,000 sites in our industry.
Benefits of QSR Co-existence
Consider these most-reported benefits of QSRs from industry retailers.
• Leveraging the c-store’s real estate investment: By redesigning existing or new square footage for a “trusted” QSR brand, albeit with proper pole and fascia signage.
• Definable capital investment: National QSRs
typically provide computerized stores’ design options (with cap exp estimates), including footprint/placement of the QSR inside the c-store (or travel center) to enhance peripheral in-store customer flow.
• Rent (to franchisee) or operate options: Many chains opt to lease to licensed franchisees of the QSR. This dramatically reduces their cash outlay and infrastructure pressures, while reaping a reasonable rental income stream. Alternatively, many retailers elect to operate the QSR.
• New traffic: If your name, history and “culture” is similar to that of Wawa, Sheetz or Casey’s General Stores, you’ve invested in and earned the trust of your clientele with your hoagies, MTO or successful proprietary pizza and other foodservice offerings. Absent such regional strength and execution capabilities for proprietary foodservice consider the plethora of c-store chains and travel centers that leverage QSR brands to attract new customer traffic.
• Other benefits of QSRs: Some of the surprise paybacks from QSRs, as reported by early co-existing chains included: (a) monthly inspections by the QSRs, which compelled attention to strict operational standards; (b) lower turnover rates of employees of the QSR versus c-store staff; (c) the feeling of enhanced security with the presence of a second business in-store; and (d) and capitalizing on the QSR’s national advertising.
• Performance metrics: Measuring (a) in-store (non-QSR) sales and gallons sold trends of comparable facilities, with and without QSR profit centers; (b) incremental per-store profits (excluding fuel margin); (c) monitor sales and labor dollars per hour; and (d) traffic counts/per hour. Most QSR’s sophisticated point-of-sale (POS) terminals generate these major productivity measurement tools.
Evaluating Core Competencies
Our industry sustained an extensive (and expensive) learning curve when many convenience store chains initially ventured to embrace foodservice into their cultures.
I personally cringed at seminars where I would see too many colleagues return home with a laundry list of details they’d need to investigate to create profitable foodservice programs. Further more, do we recall the almost endless efforts of multiple major oil companies to create and promote their new foodservice concepts hoping they’d increase profitability for their company operations and dealer programs?
Almost 20 years later, I ask retailers that continue to examine proprietary foodservice programs to trigger two due-diligence items.
First, honestly look at the profitability of proprietary programs, in terms of incremental per-store profits and return on capital.
Then, most importantly, ask yourself if you have the key core competencies, including: minimal turnover of managers and staff at store level; market dominance of your “brand;” consistent execution; and 100% commitment from your top management.
In closing, CSD’s July 2014 article “Designing a Foodservice Plan” includes great ideas on how certain chains have embraced QSRs. In the article, Ed Heath, Folk Oil’s vice president of operations, touted the benefits of their Subway decision for the company’s PS Food Marts.
Following their less than desired results with proprietary foodservice, he described their QSR choice as: “high quality…ease of execution and powerful marketing muscle.” Heath also cited reaping the “buying power” of a large QSR and, most importantly, “customers like the predictability of an established brand.”
About the author
An industry veteran since 1977, Dick Meyer is considered a c-store expert in analyzing major industry dynamics. A past Big 8 CPA, and a retailer and supplier executive in the industry, Meyer served as past chairman of NACS’ Suppliers’ Board of Directors and was a co-founder of CSX LLC. He welcomes your feedback at [email protected]. CSD