Finding the Next Level for Your Foodservice Program

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Finding the Next Level for Your Foodservice Program

By Bob Phillips - 01/30/2016

Foodservice — including fresh food, prepackaged food, cold dispensed beverages, frozen beverages and hot coffee — is a key element of today’s convenience retail environment. After all, “grab and go” has become a c-store mantra, perhaps the most important characteristic separating convenience from all other channels of trade. Marketed effectively, your foodservice program can draw customers in from the pumps and is a key tool in driving incremental sales. With healthy margins and high volume, it is only logical that taking your foodservice program to the next level should be an important consideration when designing future plans.

Beverages play an integral role in the foundation of a foodservice venture. “Beverages bring consumers into the store,” said Convenience Store News How To Crew expert Tim Powell, vice president of consulting at Q1 Productions. “This is the distinct advantage most c-stores have over all other foodservice competitors.”

Dispensed and packaged beverages — particularly high-margin items such as sparkling water and fusion beverages — can attract new customers (primarily women and millennials) and foster loyalty to your brand. Beverages also provide incremental revenue when packaged as an add-on in combo meal deals.

“Most operators can price a meal deal so that beverage profits make up for lower food prices,” continued Powell. “As for what share of sales foodservice should generate, that really depends on the strategic focus on each concept. Sheetz obviously is more geared toward it, while Thorntons and Speedway are still trying to master executing foodservice systemwide.”

You can include Murphy USA Inc. in that latter scenario, too. “Our business is different than most convenience stores,” explained How To Crew retailer Chad Prast, senior category manager of fresh foods and dispensed beverages for Murphy USA. “Since we have 1,320 stores, but only 235 have foodservice, the percentage of foodservice to overall sales is much less than a typical operator. But in our large-format stores that do have foodservice, the importance is growing each year.”

Fellow How To Crew panelist Mathew Mandeltort, vice president of foodservice strategy at Naperville, Ill.-based convenience distributor Eby-Brown Co., explained the importance of foodservice to a c-store’s bottom line this way: “With the continued decline of cigarette and fuel purchases as primary traffic and revenue drivers, having a replacement revenue/traffic driver such as foodservice is critical.”

According to CSNews’ 2015 Industry Report, foodservice accounts for 15 percent of in-store sales (excluding fuel). However, Mandeltort pointed out that “top-producing operations should expect to find themselves in the 30–35 percent range.”

“Foodservice is very important,” concurred How To Crew expert Dean Dirks, CEO of Gig Harbor, Wash.-based Dirks & Associates. “The channel has succeeded in overcoming the stigma of being thought of as ‘just gas stations’ and there is a lot of concern these days about the long-term profitability of fuel. Strategically, foodservice is the most important revenue stream driving profit growth.”

IMAGE MATTERS

Perhaps the biggest challenge a c-store faces in promoting its foodservice operation to regular and prospective customers and reaching that next level is creating an in-store environment that mirrors a quick-service restaurant (QSR) — on a c-store budget, of course.

Toward that end, there is a wide array of cost-effective strategies available to convenience store retailers, according to our How To Crew panelists. Digital menu boards can be a solid, low-cost option to “upscale” a foodservice operation. “Dressing up the image of the food area can really make a difference with your customers,” explained Murphy USA’s Prast.

Quick-serve is a model that requires serious thought to replicate, advised How To Crew retailer Jack Cushman, director of foodservice for CST Brands Inc. “If you’re going this route, you need to consider things like interior design, staff development and menu engineering.”

For starters, the store must be clean, well-lit and organized. Given the multi-channel competition, foodservice should be front and center in a c-store’s business plan and in the store itself.

“When you walk into a QSR, you know exactly where you are standing and exactly what to expect,” said Mandeltort. Likewise, a c-store’s merchandising executions need to be visually compelling. “Make use of bold graphics and directional signage,” he added.

And if you focus on coffee, make sure your guests are aware of this as soon as they enter the store. In a perfect world, they should be made aware of this even before they enter.

Additionally, a c-store should make liberal use of quality and freshness cues in signage, packaging and processes (e.g., taking product temperatures frequently, having coffee on timers, replacing product on roller grill that has expired, etc.).

“Signage on the foodservice operation gives a QSR look to the unit,” said Dirks. Signage includes everything from branded cups to table tents to signage on the fuel dispensers. “And don’t forget to focus on hiring great employees,” he said.

How might a c-store effectively differentiate its foodservice operation — including cold/frozen dispensed beverages and coffee bar— so that it is truly unique and difficult to copy?

“Price is probably the key, since beverages are inherently a commodity product,” said Powell.

One tool readily available to c-store retailers trying to develop a unique in-store environment is bundling a beverage with a private label or exclusive menu item available only at your store/chain (or at least in your immediate area). Particularly in coffee, private label can become a must-have product (perhaps price driven or maybe the number of styles, flavors and creamers available), making your store a destination.

“Rutter’s [Farm Stores] has been successful with baristas,” cited Powell. “This is definitely a differentiator. And with only 61 stores, it’s hard for larger chains to emulate.”

CONSISTENCY OR QUALITY?

Which is more important to a c-store’s foodservice success and its ability to jump to the next level: consistency or quality? In many ways, the argument is quite similar to the old Miller Lite campaign, “Tastes Great/Less Filling.”

“Consistent crap or consistent food your customers crave?” joked Powell. “Food must have a solid flavor profile, taste, quality and presentation. After this is achieved at one store, it must be executed systemwide for every customer on every visit.”

A better way to phrase the question might be: quality food or atmosphere?

“The answer is food first, along with service and store appearance,” continued Powell. “Those are the basic ingredients of foodservice success.”

Regarding the Miller Lite reference, it should be obvious that consistency and quality are equally critical to the overall success of a c-store’s foodservice operation. “Consistency is really important because c-stores tend to have customers who visit your store daily,” noted Powell. In order to build brand loyalty, customers must have confidence that your breakfast burritos will taste the same every day.

“Whatever your opinion of McDonald’s may be, they offer the same products day after day,” Powell pointed out. “Remember, they are your competitor.”

Eby-Brown’s Mandeltort emphasized that building and maintaining a successful foodservice program is not a game — although what’s at stake is indeed winning or losing. Bottom line: A c-store must consistently deliver quality food.

“Do you really want to position yourself as the chain that consistently puts out poor quality food?” he asked rhetorically. “You certainly don’t want to offer your customers ‘quality surprises.’”

And then there’s the importance of effective brandbuilding. “The value of branding foodservice is the clean look that builds customer loyalty,” explained Dirks. “C-stores are competing with McDonald’s, so you need a crisp, clean brand to compete.”

CST’s Cushman suggests that in order to create a unique brand, a c-store should go through a copywriting and logo design process to develop marketing campaigns that resonate with local customers and literally breathe life into startup brands.

“This is very difficult work,” he conceded. “It takes time, marketing and employee participation.” But, he added, albeit tedious and time consuming, this step is well worth the effort and an integral component for developing and maintaining a successful foodservice business.

“Our coffee and fountain products are branded proprietary names to differentiate us from our competitors,” said Prast, adding that Murphy USA’s dispensed beverages are branded under the ICEE banner because of the enormous brand equity it yields. “For the most part, our fresh foods are private labeled with a note to the item’s brand, since we do not make fresh sandwiches in-store.”

LISTENING IS KEY

It’s not exactly breaking news, but nonetheless worthy of reinforcing, that soliciting input from your regular customers — and then acting on what they tell you —is a basic, indeed critical, component of Convenience Retailing 101. Customer intercepts is a strategy that can be enormously effective in gathering information about what your shoppers think. But intercepts shouldn’t necessarily be executed by the retailer.

“Customer intercepts can be beneficial, but they are best implemented by an experienced third-party vendor,” suggested Mandeltort. “You want to make sure you have a representative sampling of responses from a diverse body of participants. If you only ask questions of older males, you are only going to get one perspective.”

A wide array of information can be gathered via intercepts, including but not limited to:

  • Demographics
  • Date/time of visit
  • Items purchased
  • Purchase drivers
  • Visit drivers
  • Frequency of visits
  • Distance traveled
  • Appealing/unappealing location attributes
  • Attribute awareness

Also, never underestimate the value of hospitality when competing with the big boys, a.k.a. the QSRs. Any advantage they have in terms of marketing budgets can be effectively countered with some good, old-fashioned handshaking.

“One of the most critical elements of building a profitable foodservice program is ensuring that your staff demonstrates the requisite levels of hospitality,” explained Dirks. This involves much more than simply nodding or saying “hello” to customers at the door or register.

“Customers are more receptive to spending their money where they feel the service staff is genuinely happy to see them, are accepted for who they are, and are at ease interacting with the staff,” he continued. “Every time a customer walks in, it can be challenging to make communication seem genuine, but a successful foodservice staff is able to achieve this on a steady basis. It’s all about knowing your customers.”