Retailers can’t dip a toe into foodservice and expect to turn a profit. Often they need marketing, outstanding food offerings and a sense of economics to make a positive splash.
By Marilyn Odesser-Torpey, Assistant Editor
It takes more than some new equipment, a menu and even the most eye-catching in-store signage to turn a fledgling foodservice program into a star attraction in a convenience store.
Ask any of the retailers who are running profitable proprietary or co-branded programs and they’ll tell you that you have to have a substantial amount of skin in the game and both feet planted firmly on the ground.
The biggest mistake retailers make is considering only the hard costs—costs of equipment and product—when trying to determine if and what kind of foodservice program they should undertake, according to John Matthews, founder and president of Gray Cat Enterprises, a strategic planning and retail consulting firm.
“Much of the time they don’t take into account expenses for labor, training and marketing,” he said.
Whether the concept is proprietary or co-branded, the biggest expense is labor, said Scott Zaremba, owner of Zarco USA stores in Kansas. At one of his stores he has a combination of these two concepts.
De Lone Wilson, president of Cubby’s convenience stores in Nebraska, Iowa and South Dakota, many of which also have both proprietary and co-branded concepts, explained that his company hired foodservice managers for each location and is planning to hire a foodservice director.
To cover the several co-branded foodservice concepts at the E.J. Pope & Son Handy Mart convenience stores in eastern North Carolina, the company has an operations manager to handle the day-to-day oversight and a director of foodservice operations, said Link Cook, who holds the latter position and is also the operations supervisor for any new brands brought on.
“Even retailers who choose to co-brand as the franchisee need people with foodservice expertise to run their programs efficiently and effectively,” Matthews said. “If you don’t have employees that think like foodservice people, even the best concept can fail miserably.”
Training those employees can also be pricey, particularly for a proprietary concept where the training program must be developed from scratch. High employee turnover can rapidly escalate training costs, also.
Cubby’s foodservice budget includes keeping the operation sufficiently staffed at all times.
“You have to have enough people to make sure the product is always fresh and available when customers want it,” Wilson said.
For example, at Cubby’s, pizza is sold from 6 a.m. when the first breakfast pies are put out until 9 p.m. or 10 p.m. In some instances pizza is sold around the clock.
“If a customer comes in and sees there is just one pizza left in the chute, the likelihood is that he or she will not buy it,” Wilson said.
LEAN & MEAN
Although the saying goes that you can’t please everyone, some retailers try by creating extensive and often unwieldy menus.
“Offering too many products was having a negative effect on our freshness, speed of service and waste,” Zaremba said. “We decided it would be a lot better if we did a few things excellently, so we cut out a lot of stuff and we still have a lot more to cut.”
He also reduced the size of his inventory and waste by making his grab-and-go sandwiches from the products used in the made-to-order component of his foodservice program. Once the menu was trimmed, Zaremba was able to save even more by locking in the best prices for his proteins and breads with his suppliers. For produce, he prefers to shop locally and purchase in-season whenever possible.
But no matter how lean the menu is and how efficiently the ingredients are sourced and used in product offerings, operating a foodservice program almost always entails some waste, which is a thought that makes many retailers cringe.
However, it’s a sliding scale, and indicator of a healthy foodservice program.
“If you don’t have 10% waste, you’re not putting out enough product,” Zaremba said.
Wilson agreed that “if you’re not throwing away some product, not enough is being made,” but he still carefully records waste and constantly reviews the tracking sheets to see how it can be minimized.
“We’re tweaking and adjusting all the time,” Wilson said.
While rain, snow or other unavoidable factors might alter the amount of product sold on any given day, Cook feels that “faithfully” following the prep lists provided by his franchisors gives him a good handle on waste.
“One of the main reasons we prefer working with franchisors is that they have the advantage of the controls and systems they have developed and tested,” he said.
Marketing is an expense that may be larger than many retailers anticipate. For Cubby’s proprietary pizza and deli and Zarco’s Sandbar Subs, start-up costs included designs of logos, printed packaging and interior and exterior signage.
“You could use a generic bag or pizza box,” Wilson said. “But then you wouldn’t really be building your brand. It’s worth the investment of time and money to design your own.”
One lesson that Zaremba learned after opening his first Sandbar Subs location about four years ago is how critical it is to allot enough money to cover extensive marketing for the first six months of business.
But, Matthews explained, it isn’t enough to have in-store banners, balloons, email coupons and sampling for a few days, weeks or even months to launch a new concept.
“Sales might be great for the first 60-90 days, but as soon as you take your foot off the pedal and stop the marketing efforts, five other brands move in,” Matthews said.
Matthews explained that foodservice companies like the quick-service chains know they have to market aggressively and consistently to prospective customers within a two-mile radius of the store.
“Very few convenience stores do that,” Matthews said. “Keep in mind that McDonald’s spends $2 million-$3 million a day on marketing and that’s a brand everybody knows.”
Cook focuses a lot on keeping Handy Mart’s brands top of mind for consumers in the stores’ market areas. He might do simple things like going out to local schools and developing relationships with their PTAs for fundraisers or visiting local businesses to shake hands and deliver complimentary platters of wings or other products available at the stores.
The costs entailed in these efforts are employee time and product.
He can also spend “several thousand a month” on a regular schedule of couponing. One of his most successful vehicles is the heavy stock postcard from the United States Postal Service’s Every Door Direct Mail program. Cook rotates sending to nine different carrier routes around the locations to keep consumer interest from becoming fatigued with the mailers or get them too used to coupon discounts.
After determining that much of Handy Mart’s customer demographic is heavily into social media, Cook hired a third-party company to manage its local Facebook pages for its Wing Zone concept for a test period of a year. The provider puts out two or three posts a week, many of which feature food photos taken at the stores and some promoting special offers.
“Outsourcing this job made sense for us timewise as it better ensures timely relevance,” Cook said. “And we’re seeing consumers going to our site liking, keeping and sharing the posts.”