CSD: Proprietary Perseverance
By Kate Quackenbush
Through special arrangement, what follows is an excerpt of a current article from Convenience Store Decisions magazine, presented here for discussion.
There’s more than one way to skin a cat, just like there’s more than one way to run a convenience foodservice program. Some retailers don’t know where to start, so they team up with branded concepts that lay everything out for them. Others know what they want to offer and choose to work independent of branded concepts – preferring not to have a brand’s parameters get in the way.
Both Indianapolis-based Village Pantry LLC and Pittsfield, Mass.-based O’Connell Oil offer national branded concepts at a handful of locations. Some Village Pantry stores feature Cruisin’ Chicken, Noble Romans and Charlie and Barneys, while O’Connell still has a strong partnership with Dunkin’ Donuts and Subway. But both chains have expanded beyond their branded programs and have created proprietary concepts that pull even more customers to their lots.
“In most cases, we prefer to go unbranded. You can still offer a high quality product but at a better cost and it lowers retails for the customer,” said Chad Prast, foodservice director for 148-store Village Pantry. “The benefit of proprietary programs is that you can tweak them to better serve customers. Say you offer a ham and Colby cheese sandwich, but your customer wants Swiss. With a proprietary program, I can accommodate customer requests. If it’s a branded program, you have to follow the guidelines.”
Village Pantry’s vendors have been an invaluable resource to the chain as it strove to enhance its programs. The company has teamed with Bob Evans to further strengthen its breakfast program, and its doughnut vendor, Maplehurst, also offers ideas almost weekly on how to better its products.
“Most of our food ideas are created in-house, but our vendors have a lot of input and we appreciate everything they offer,” said Prast. “Foodservice represents about 13 percent of our total sales and about 22 percent of our profit generated inside the stores.”
Foodservice began at O’Connell Oil 25 years ago when the company installed its first roller grills. It has since evolved into a flourishing deli program with a focus on giving customers healthier options than what most quick-service restaurants (QSRs) are putting out there.
O’Connell acknowledges that while national branded programs were a big reason some of its foodservice customers may have first visited, it’s the ingenuity of its proprietary programs that have kept them coming back.
“We may not have had a chance to serve some of our customers if they weren’t attracted by Subway or Dunkin’ Donuts into our stores,” said John Gaudrault, senior vice president for the 32-store chain. “But once they’re in, they see how much care we put into our food program. With a proprietary program, we can run our own specials, pricing and we have the leeway to work with our team to develop new sandwiches, testing and how we’ll go to market.”
Discussion Questions: What do you think is the best strategy for convenience stores in maximizing their foodservice departments? If stores do partner with a brand, what are some ways to capitalize on the popularity of restaurant franchises yet still make it your own? What are some common mistakes to avoid when working with a branded franchisee?
I tend to agree with Phil that managing one’s own proprietary perseverance is a cardinal idea but filling your stomach where you fill up on gas and buying Power Ball lottery tickets does not seem like “Breakfast at Tiffany’s” or “Luncheon at the French Laundry.”
Thus, I’d try to enhance my offerings, such as Super America’s 2 Oscar Meyer hot dogs – with abundant enhancing adornments – for 2 bucks … but I’d shy away from offering Oysters Rockefeller.
I think it depends a lot on the locations and the size of the chain. If you’ve got less than 10 stores, it’s probably going to make more sense to pursue a branded food service opportunity–but choices may be limited if those stores are already surrounded by big branded QSR chains. If you’re larger, you’ll have more infrastructure and the ability to support specialized food service expertise within the management team–ingredients that may make a self-branded QSR possible and more desirable.
But I’ve definitely seen it work both ways–the gas station that started selling barbecue out the back door, which eventually became a restaurant, which actually became the basis for big-time expansion for the company. And the local owner-operator who landed a McDonald’s and does great. It just depends–on a lot.
The key to chain convenience store and foodservice is having foorservice operations management on board. Traditional C-store operations personnel are often oil people and definitely retail focused. They don’t understand foodservice! If they don’t understand it, they won’t even manage a hot dog heater or coffee pot correctly. Franchising won’t really help if there is not an operational understanding and commitment to foodservice. An independent operator will always do a better job at foodservice because THEY have to buy the equipment and will insure that they get a return on their investment. Don’t get me wrong, foodservice isn’t hard, but you have to pay attention all the time. C-stores are not noted for the ambition of their employees. It falls on management to outline and plan in-store discipline for these employees. Unless foodservice is a major part of this plan, consumer acceptance will be poor.
Any independent retailer stands to gain sales from selling national brands. But is the uptick in sales worth the downtick in margin and the lost opportunity to build your own brand?
When you introduce a brand into your store, it is imperative to learn the impact on your regular operations. So you want to set up a test during which you collect lots of information and analyze carefully. Which category fell most sharply as a percent to total business? What was the impact on average customer sale, average number of transactions? If you are able to measure margin, what did the overall store do against a controlled store? If you have a customer loyalty program, how did your loyals respond?
You could find out that the introduction of a brand has an overall negative effect on the store’s margin. Or it could be very positive. Testing is what retailers with lots of stores can easily do. But curiously, it is rare to find good testing practices especially in independent stores.
I think there is nothing better than owning and leveraging your own brand whenever possible! When I think about the successful foodservice operations seen at retailers such as Wawa and Speedway, I can easily see the power and advantages of self-managing the foodservice program.
If I were a very small operator it might make sense to partner with a third party but I’m guessing there would be a loss of control in terms of employee quality, sanitation, food quality, etc. which could negatively impact my business.
I think vendors will always come to you with ideas regardless of the size of your operation….
Personally, I think variety wins the day. Partnering can get fresh faces into a convenience store, and present options that most might not have known about otherwise. A local convenience store just re-opened recently, sporting a built-in chain sandwich shop. One of my favorites…so I went in…only to discover the convenience store also carries my favorite specialty health snacks. It’s a win-win.
Under the “do not do” section, one thing immediately comes to mind: POS convergence. I should not have to stand in line twice in the same store. My health snack and sandwich should be immediately processable by the same attendant. If not, the consumer will feel frustrated and move on to something easier (or skip the health snack all together!).
Certain brands, like Dunkin’ Donuts or Starbucks, are hard to beat. Other brands have minimal attraction. And many convenience stores don’t have experienced first-class food service executives. A convenience store chain with 100 locations has the luxury of testing different concepts, homegrown or not. But some chains just don’t want the distraction. They’d rather get the rights to a well-known brand and adopt their system. Based on local conditions, the most-valued brands might not be available or the price might be uneconomical, even if the sales are spectacular.