Starting a proprietary program can be complicated and expensive. A more cost-effective way to enter the foodservice arena is to partner with an established brand.
By Marilyn Odesser-Torpey, Associate Editor
Adding a foodservice concept may be a proven way to bolster a c-store’s bottom line, but only if it’s the right program operated the right way, said Rob Gallo, senior principal consultant for Impact 21 Group, a Lexington, Ky.-based consulting firm.
The right program, Gallo said, is one that fits the stores’ customer demographic and marketplace competitive profile as well as the retailer’s capabilities and long-term goals.
Retailers who lack foodservice experience or who just want some additional support should seek out partners that can offer quality products and solid ingredient and equipment sourcing, training, operations and marketing programs, Gallo explained. The partner should have experience co-branding with similar-size convenience store chains.
“A well-known and highly regarded partner brand can also bring a halo of credibility to the c-store that can extend well beyond foodservice,” Gallo said.
Before selecting partners, retailers should talk to customers to find out what foodservice concepts they would like to see and do some homework in their markets to see what the prominent foodservice offers are, not only in nearby quick-service restaurants and other convenience stores, but also in other competitive channels like supermarkets.
Prospective brand partners should also be able to bring some of this information to the table, Gallo said.
“Unless they’re simply leasing a space to a quick-service restaurant and letting that company operate the concept, retailers shouldn’t expect co-branding to be simply plug-and-play in which the partner installs the foodservice concept and the retailer just collects a check,” Gallo said.
The positive to having the restaurant run the operation, he said, is the retailer gains a foodservice program without investing in labor. The c-store can also benefit from increased traffic. Gallo acknowledged the downside to this approach is that the retailer makes less money and if the restaurant suffers, the c-store operation may suffer as well.
APPROACHING A PARTNERSHIP
If the c-store runs the foodservice operation, it’s much more profitable, but the retailer then has to deal with labor and waste management, he said. To be successful, this approach requires both partners to work together.
Picking the right partner has paid off for more than two decades for Tres Amigos, an eight-store (a ninth is currently under construction) chain in west Texas. Tres Amigos chose the partnership route because, according to Britt Hennings, the company’s food service director, operating a convenience store and foodservice concept “is essentially like running two different businesses.”
“We needed a food concept that would provide us with ingredients, marketing and support so we wouldn’t have to do it ourselves,” Hennings said. “We chose Hot Stuff Foods because they already had a proven concept that would be new to this region and profitable for us.”
To supplement its cornerstone pizza offering, Hot Stuff’s parent company, Orion Foods, also offers breakfast burritos, biscuits, burgers, chicken sandwiches, egg rolls and hot wings.
“It allows us to cover every daypart from breakfast to late-night snacks,” Hennings said.
For the Hot Stuff program, Orion provides Tres Amigos with marketing, store layout and new products every quarter. Hennings pointed out that Orion is based in South Dakota, where the food culture differs from Texas.
“We try everything they have to offer, but they also listen and provide what we want,” Hennings said. “I would encourage every retailer to speak up about what works for them. If products don’t meet your expected margin let them know because, in the end, you will bite the bullet. Or if they have a new limited time offer that won’t work in your region, work with them to create something that will work so both companies benefit.”
Limited time offers (LTOs) are one of the things that Amarinder Singh, owner of 340 Depot stores in Virginia, likes about his two-year partnership with Hunt Brothers Pizza. Last year, he had outstanding success with a chicken bacon ranch LTO. In the two months that this pizza was available in his store, he saw a 172% increase in total pizza units sold.
What first attracted Singh to Hunt Brothers were the product flavors and the fact that the pies could be customized at no additional charge and made fresh to order. Prior to Hunt Brothers, he had partnered with a brand that offered only pre-topped, frozen pies.
In addition to whole pies, Hunt Brothers features grab-and-go “Hunk A Pizza,” a quarter of a whole pizza. Even on slow rainy days, Singh said he sells between 35-40 servings to hungry customers.
He noted that the hunks are effective basket-builders for his stores, explaining that customers who purchase them will often also grab other items such as a 20-ounce soft drink, chips and gum.
CO-BRAND BENEFITS
Holt Oil Co.’s Holt C-Store operation in North Carolina has a history of successful co-branding with Subway, going back to the late 1980s, said Hannah Holt, the marketing and operations director for the 22-store chain.
“Most of us wear so many hats that we don’t have time to dedicate to marketing, operations and sourcing,” she said. “The right partner, like Subway, will do that legwork for you.”
Late last October, Holt introduced a second partner brand, Brrrberry Frozen Yogurt Bar, a regional concept. The initial success with the concept resulted in a rollout to a second Holt store in March.
Even though frozen yogurt is usually associated with summer treating, Brrrberry has “exceeded our expectations” in sales so far, even on days when the temperature does not go above 30 degrees, Holt said. She noted that the concept has broad appeal whether it is in a rural, urban or suburban setting, an important quality if it is to be put into more stores.
It was Holt who approached the owner of Brrrberry to initiate the partnership because she was so impressed by the product, the merchandising and the promotional materials.
“I think it will particularly appeal to women and children,” Holt said.
Although Brrrberry’s owner is new to c-store co-branding, she has already demonstrated that she views the endeavor as a true partnership.
“She initially thought that we should feature a flavor of the month, but when we explained that this would require us to put in another machine that we didn’t have room for she listened to us and understood,” Holt said. “For us, she has taken all of the guesswork out of launching and managing the concept and that’s what co-branding should be all about.”
