C-store Retailers Explore Options to Find the Right Foodservice Formula

NATIONAL REPORT — When Jimmy Bir Singh was looking to add a foodservice component to his new 11,000-square-foot travel plaza with a convenience store currently under construction in Dandridge, Tenn., there were two key things to consider: He needed a concept that would allow him to offer prepared food items from early morning through evening's end, and one that would be competitive while differentiating his store from the branded restaurants already in his market.

Singh ultimately settled on Jack in the Box, a San Diego-based quick-service restaurant (QSR) chain that has 83 units at c-stores nationwide, with additional signed deals in the pipeline.

"I chose Jack in the Box because they checked all of the boxes. It is an iconic brand that offers a great menu for all dayparts, including breakfast, lunch, dinner, snack occasions and late night," said Singh, who believes truckers and motorists will enjoy the variety he's able to offer. "I considered opening my own concept, but I am located next to Interstate 40 and I believe Jack in the Box will bring in more people."

Singh is just one of the myriad convenience store operators navigating the world of foodservice today — a world that all c-store retailers must explore to remain competitive in today's highly competitive, continuously evolving marketplace.

Foodservice, of course, is nothing new to the convenience channel. Van Ingram, vice president of franchise development for Jack in the Box, said he's seen the category trending since the 1990s when he worked on the wholesale petroleum side of the industry.

Back then, there was a different c-store business model. "There was one clerk to take care of inside customers and to make sure gas customers didn't pull away," he recalled. "That evolved and people started seeing the benefits of having a national brand."

Ingram compares today's relationship between c-stores and foodservice to a three-legged stool — the three legs being gas, inside sales and branded foodservice concepts. This relationship has become more important than ever in today's climate, he noted.

Industry data reveals why. Foodservice purchases have a higher gross margin than most of the other product categories c-stores sell, and the foodservice category was an important factor in last year's industry in-store sales increase, according to NACS data. In 2022, foodservice sales represented 25.6 percent of average monthly in-store sales and 36.1 percent of in-store gross margin.

A Look at the Options

There are several ways convenience stores can compete in the foodservice arena. 

According to Ingram, there are three main categories from which to choose: a national brand QSR, a national branded foodservice concept or a proprietary foodservice program.

National brand QSRs include companies such as Arby's, Jack in the Box, Wendy's and Taco Bell. "These are large QSR franchises where you are required to pay an initial franchise fee and royalties, and there is a national, regional and local advertising contribution for the system," explained Ingram.

Another QSR option is leasing space to the QSR, according to industry consultant Tim Powell, principal of Foodservice IP in Chicago. "Effectively, the c-store gets traffic for its store and receives rent from the QSR," he said.

A national branded concept includes operations like Krispy Krunchy and Hot Stuff. "Some of these will be defined as a franchise opportunity, but they do not have the consolidated marketing and they take their portion on purchases rather than sales," Ingram pointed out. "They have a trademarked product and process, but they are not as structured as a national franchise."

Proprietary foodservice programs are those c-store retailers build and operate themselves.

Many operators don't commit to only one program. "In our latest research of retailers, 77 percent of c-stores offering foodservice have both a national brand and a proprietary brand," Powell shared.

Beloit, Wis.-based Broaster Co. sees this combination model among its convenience store partners. "Broaster Co. partners with a wide range of customers — from just equipment partnerships with large multiunit chains using their own brand and condiments to smaller independents using our fully branded trademark programs," said Marketing Manager Katie Klaus.

Some c-store retailers are also going down the path of using a well-known brand with ties to the local community to enhance its proprietary foodservice program.

Des Moines, Iowa-based Kum & Go LC is one example. In January, the chain started featuring Lola's Hot Sauces in the condiment bar at all its stores, and in the hot buffalo chicken and brisket taco bowls on its made-to-order menu in Des Moines, Little Rock, Ark., and Omaha, Neb.

"In developing our new, made-to-order food program, we knew it needed to be fresh and different — something not offered in the c-store space. In order to do this, we needed creative flavors and toppings, and Lola's was the perfect partner for this," said Taylor Boland, director of communications for Kum & Go. "Lola's Hot Sauce provided for a great partnership for multiple reasons, including their family-owned Iowa roots, common values and mission, and desire to bring delicious food to our communities while also doing good. While local, Lola's has a national footprint and distribution, which pairs well with our 13-state footprint."

The Benefits of Branded

There are several reasons c-store retailers should consider partnering with a brand. Credibility, recognition, turnkey convenience and product consistency are among them.

Credibility and recognition are especially important for smaller independent stores, according to Broaster's Klaus. "When using a partner, whether that's a national brand QSR like Subway or a trademark program like Genuine Broaster Chicken, you are able to tap into their tried-and-true program and foodservice knowledge," she said. "The program should be turnkey, an easy plug-and-play addition to your location. This saves operators from having to source ingredients, develop recipes and menus and, most importantly, develop their own brand and the costs associated with that."

Brian Ferdig, sales manager at McCormack Distributing in Le Mars, Iowa, a company that services Fargo, N.D.-based Petro Serve USA, echoes Klaus' comments about the benefits branded foodservice programs can deliver.

"A major benefit is consistency throughout multiple locations, meaning consistent product and consistent training for staff," he said. "Customers always get the same delicious food."

Petro Serve USA, which has 29 stores in North Dakota alone, offers Genuine Broaster Chicken at most of its locations. "They like that every store has the same flavor profile and customers know them for their high-quality chicken," Ferdig added.

Having marketing and supply sources already in place is also a plus of branded programs. And the fact that trademark programs have procedures, recipes and ingredients already determined is another benefit c-stores reap in today's labor-challenged environment.

"Developing a brand strategy from scratch can be a challenge, particularly in c-stores where the reputation is not that far above vending for most consumers. Existing QSR and turnkey brands like Chester's and Piccadilly [Circus Pizza] already have trust built in," Powell said.