C-stores Well Positioned to Take Advantage of Restaurant Rebound

NEW YORK -- Consumers are returning to restaurants -- albeit cautiously -- and convenience stores are well positioned to capture share of stomach given the food quality upgrades and increased marketing that’s occurring throughout the channel, according to the authors of the just-released "AlixPartners North American Restaurant & Foodservice Review."

"A lot of convenience stores have taken advantage of quick, low price and healthy, and that’s a good combination for today’s consumers," Eric Dzwonczyk, co-author of the study and director in the Restaurant & Foodservice Practice of Alix Partners, told CSNews Online.

According to the research report, the restaurant industry is beginning to rebound after several years of sluggishness, however challenges remain. A continued downward trend in per-meal spending is expected over the next 12 months, meaning menu pricing will have to remain flat to continue the traffic rebound. In addition, traditional promotions and heavy couponing will continue to be the most effective ways of enticing new and existing customers to dine.

The good news for convenience stores is their food offerings carry that lower price point consumers are still seeking, said Adam Werner, the study’s other co-author and managing director, head of the North American Restaurant & Foodservice Practice for Alix Partners.

In fact, c-stores are doing such a good job of investing in foodservice that they’re making it quite difficult for quick-service restaurants (QSRs) to get ahead. On top of high unemployment taking its toll, QSRs are getting squeezed on both sides, according to Werner. Health-conscious consumers who can afford it are trading up to fast casual restaurants, while customers who used to frequent QSRs are going to c-stores instead now that their food quality has been upgraded.

A lot of quick-serve chains are still doing well, though, Dzwonczyk noted.

For 2011, he expects fast-feeders to focus on putting healthier items back on their menus, and make a greater push in generating late-night sales (after 10 p.m.). Meanwhile, Werner said he expects QSRs to continue with their high/low strategy, which has proven effective. He also believes breakfast will remain a major trend, and anticipates more innovation in that daypart.

"But as long as unemployment stays high, it will be harder for that to bear fruit," he added.

Given these factors, same-store sales for QSRs are expected to be negative in 2011. C-stores, on the other hand, can expect to see their food sales continue to grow, the researchers stated.

The research report offered the following c-store figures:

-- 5.5 percent same-store growth for c-stores, vs. 1 percent for QSR and fast casual.

-- 48 percent increase in promotional spending on food sales.

-- 43 percent increased food sales in 2010.

-- Top 49 percent of c-store customers purchase food at least once a month.