Fresh Food Focused

7-Eleven is making strides in foodservice, with some areas to improve

A key avenue of 7-Eleven Inc.’s journey to change is fresh food. Perhaps nowhere is 7-Eleven’s innovative spirit demonstrated more clearly than in the chain’s foodservice offerings.

In 2013 alone, the retailer rolled out its first warm bakery item, a Pillsbury Cinnamon Roll; new hot snacks including corn dog bites, mozzarella sticks and chicken chipotle taquitos; Latin-inspired products such as breakfast empanada bites and mini chicken chipotle tacos; and heartier fare in the form of two premium sandwiches, the Steakhouse Roast Beef and the Bistro Deluxe. 7-Eleven last year also hosted its first “Fabulous Fresh Foods Friday,” a late February event that featured free samples of the chain’s prepared foods and hot beverages.

“7-Eleven is focused on creating foods and beverages that are not just convenient, but also delicious — especially delicious,” said Larry Hughes, zone leader for Oregon and Washington 7-Eleven stores. “Whether someone is hungry for breakfast, lunch or a snack and drink to tide them over between meals, our stores have something tasty to offer…I think once people taste for themselves, they’ll consider 7-Eleven as an alternative to the typical fast-food restaurants.”

Former 7-Eleven foodservice executive turned industry consultant Joe Chiovera, founder of XS Foodservice & Marketing, said 7-Eleven’s strategy of delivering high-quality product at a competitive price is on point. All 7-Eleven stores carry the retailer’s cold grab-and-go foodservice program, but franchisee stores have to be selected to carry the hot food program.

“When you look at what 7-Eleven does, their quality of product is excellent. The quality of product they serve has a lot behind it — a lot of due diligence and a lot of research on the consumer side,” Chiovera said, noting that the cold program is more developed than the hot food program because it’s been around longer and is easier for the franchisees to execute.

When asked how 7-Eleven stacks up to its peers, Chiovera contends that it’s not fair to 7-Eleven to make comparisons between what it offers and what “super regionals” Sheetz, Wawa, Kwik Trip and QuikTrip offer. “Those chains aren’t convenience stores anymore, they’re QSRs [quick-service restaurants],” he said. “The channel blurring is done with them and they have crossed over.”

Researcher Technomic Inc., as part of its latest Consumer Brand Metrics (CBM): Convenience Store Shopper Insights Report, surveyed more than 4,000 c-store shoppers to gain insights and understanding of the factors driving their prepared food purchase habits. The research showed that 7-Eleven is the leading c-store chain for foodservice patronage, with 39 percent of c-store foodservice users reporting that they purchased a foodservice item at 7-Eleven during the past two months. This was an increase from 7-Eleven’s 2012 patronage score of 37 percent. 7-Eleven more than doubled the next highest patronage score of 17 percent for Circle K, one of the convenience store divisions operated by Alimentation Couche-Tard Inc.

Although 7-Eleven has strong patronage, its overall composite score (the percentage of respondents who ranked it very good or good) is slightly lower than the c-store average. The average is 74 percent, while 7-Eleven stands at 69 percent. In 2012, its composite score was 75 percent.

The latest Technomic study also looked at how convenience foodservice operators like 7-Eleven perform against specific food and beverage attributes. 7-Eleven saw year-over-year declines in several of the metrics, including foodservice/prepared food variety, food quality and food taste/flavor. The chain saw one of its most significant declines in availability of healthy options, going from 63 percent in 2012 to 51 percent in 2013, a 12-point drop.

7-Eleven, however, did hold steady or improve in other areas. For instance, 84 percent of consumers who visited 7-Eleven on their most recent c-store visit said beverage quality was very good or good; that’s consistent with 2012. Also in the area of value, its rating improved.

The “perception gap” on the part of consumers is 7-Eleven’s biggest foodservice challenge, according to Donna Hood Crecca, senior director at Technomic. “C-store retailers face a two-pronged battle. One is to provide food that’s fresh and healthy, whether it really is or whether it’s perceived. The other is to heighten the awareness around these offerings. 7-Eleven is making the investment on both of those fronts,” she said.

One thing that 7-Eleven does very well is target its fresh food initiative. “The terminology they’re using around their food and beverages taps into terms important to Millennials,” Crecca noted. “They’re also ‘on trend’ with a lot of the items they’re doing — the egg-white breakfast sandwich; healthy, tasty renditions of some of their favorite foods; low-fat dressings for salads; and they have a broad selection of sandwiches. They provide a range of choice, which is important. They’re also hitting on the snacking occasion, which cuts across dayparts.”

To overcome the perception gap, she said 7-Eleven needs to aggressively communicate “the freshness element,” focusing the messaging on its same-day prep and delivery.

FRANCHISEE BUY-IN

With 75 percent of its stores operated by independent franchisees, 7-Eleven’s foodservice success relies heavily on their buy-in and effective execution of the chain’s fresh food programs.

One Florida franchisee, who spoke to Convenience Store News on the condition of anonymity, said 7-Eleven corporate is doing a lot of “good things like expanding hot foods and expanding the bakery.” However, he feels that profit margins for these new items are low compared to other quick-service franchises such as KFC, McDonald’s and Dunkin’ Donuts.

“Margins for foodservice have been falling under 30 percent, which is not good. Margins should be 45 to 50 percent,” he said.

While the consensus among industry insiders is that 7-Eleven is on the right path with its fresh food focus, there’s also agreement that 7-Eleven can do even more to move the needle.

Getting its franchisees to not only buy-in, but also really understand what it takes to execute fresh food correctly is crucial to 7-Eleven’s success, Chiovera said. “They start managing costs instead of driving sales. That’s the challenge of foodservice in general,” he added.

To overcome this, he said 7-Eleven must continue to get that culture of fresh and perishable in the mindset of the operator, which requires “everyday education and positive reinforcement.”

“There’s a constant paying it forward with foodservice,” Chiovera explained. “With retail, where products have a long shelf life, there’s immediate gratification. But with foodservice, when the clock is ticking as soon as that product is put on that truck, it’s a different ballgame.”