The Feeding Frenzy for Foodservice in C-stores

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The Feeding Frenzy for Foodservice in C-stores

By Bonnie Lawrence, RedPrairie Corp. - 09/24/2012

It seems like they're everywhere these days: convenience stores offering freshly prepared food, such as sandwiches, pizza and salads, along with the usual staples of bread, milk, beverages, chips and other packaged goods. And why not? It's a trend that certainly makes sense from the standpoint of both the convenience store and its customers.

On the seller's side, foodservice offers several benefits, not the least of which is the opportunity to improve store profitability. It also helps increase store traffic, as hungry yet pressed-for-time customers pop in for a meal they can grab quickly rather than driving past the convenience store to get to the next quick-service restaurant. With a quality food offering, convenience stores can build customer loyalty, leading to more add-on sales.

On the customer's side, foodservice within a convenience store fills the gap between quick-service restaurants and grocery stores. Since a convenience store is not tied to a particular menu niche the way a typical quick-service restaurant is, it can offer a wider variety of options and change those options more frequently. (This also benefits the store since customers can come back on consecutive days for completely different meal choices.) The menus at convenience stores tend to have more healthy choices than quick-service restaurants, although that varies with the store.

While it's true that many full-service grocery stores also offer a wide variety of prepared foods and healthy choices, it typically takes far longer for a customer to select and purchase the meal from entry to checkout, making them a poor choice for customers on the go. The convenience store offers the best of both worlds, without the drawbacks of either.

The Breakfast Rush
The typical point of entry into the freshly prepared food market for convenience stores is premium coffee and breakfast items. While some options, such as doughnuts and pastries, are often brought in from outside vendors, others like breakfast sandwiches are now being made on-premise.

Again, customers rushed for time may not have time to make breakfast, but they can find a couple of minutes to stop in for a cup of coffee and a pastry or pre-made breakfast sandwich. The sheer amount of radio advertising for breakfast items during drive time shows how this trend is exploding.

Breakfast is also popular with convenience stores because there aren't as many variables or customer expectations of variety. That makes it easier to manage, while giving convenience store operators a way to test the viability and in-store execution of offering freshly prepared food without as much risk.

Challenges With Full-Time Food
With so much opportunity, it's hard not to wonder why more convenience stores aren't jumping into full-scale foodservice. The answer is simple: once a convenience store moves into lunch or dinner, things get much more complex -- especially if they are committed to preparing the fresh food on-premise. There are many more variables in preparing these items, such as ingredients that make them much more complicated to stock and manage than pre-packaged items like chips that don't require any preparation before they are sold to customers.

Take something simple such as a ham sandwich. Of course, both ham and bread are needed. Which bread choices will the convenience store offer -- white, wheat, light rye, dark rye, pumpernickel, Kaiser roll, something else? Bread goes stale fairly quickly, so order too much and there is a lot of spoilage; there goes the profits. Order too little and create unhappy customers who will go elsewhere the next time they're hungry.

The same goes for cheese, condiments, vegetables and anything else customers may want on a sandwich. The convenience store needs to be able to forecast usage for each component in order to minimize spoilage, while keeping adequate stock on hand. They also need tracking capabilities in case there is a recall on any ingredients.

And that's just one item. Spread that challenge across two dozen or more menu choices, many of which cross over onto each other, and it becomes apparent that the convenience store needs technology tools in place to be successful -- and why convenience store systems designed strictly for packaged goods might not be up to the task.

The Right People at the Right Time
Another major complicating factor is labor management. Staffing a foodservice operation is very different than hiring counter workers for a traditional convenience store. To offer fresh food, managers with foodservice experience and workers who are comfortable with the fast pace and delivering friendly, responsive customer service are needed. A convenience store also needs to understand what the labor costs and implications are.

Having the right workforce management technology in place to handle scheduling for peaks and troughs throughout the day and week is essential for maximizing profitability, while maintaining a high level of customer service. Additionally, such a system can help optimize labor scheduling based on the amount of promotions and food prep that needs to take place to prepare for those key peak periods driven by foodservice sales.

Some convenience stores attempt to solve their foodservice issues by co-locating with a national brand, such as Subway or McDonald's. They essentially rent space to franchise owners with expertise in foodservice, and use the brand as a draw. But there are downsides to that approach: it really doesn't establish the convenience store's brand as a seller of foodservice; it limits the menu choices that can be offered; and it doesn't deliver the same level of profit that a well-run, internal foodservice offering can deliver.

Putting the Pieces in Place
Adding foodservice operations to convenience stores is a trend that is expected to grow substantially over the next few years as operators compete for customer loyalty, increased same-store visits and greater share of wallet. While foodservice offers many benefits, it also carries a fair amount of challenges and risks.

Starting slowly with a well thought-out plan that includes pilot programs in a cross-section of stores with varying demographics is important. Convenience stores need to make sure they include a cross-section of stores -- from the high to the moderate performers -- to ensure the concept can translate across the entire chain. And having inventory management and workforce management systems in place to address the nuances of running a foodservice operation is also critical to success.

It's obviously not something to be entered into lightly. But with the right plans and systems in place, convenience stores will be in a great position to take advantage of the fresh food feeding frenzy.

Bonnie Lawrence is RedPrairie Corp.'s industry principal for grocery, petroleum/convenience stores, foodservice and hospitality. RedPrairie is a global supply chain and retail technology provider.

Editor's Note: The opinions expressed in this article are the author's and do not necessarily reflect the views of Convenience Store News.