The Power of Partnerships
Convenience store operators today have more options available to them than ever before not only to create their own foodservice products, but also to partner with established quick-service restaurant (QSR) brands to do the heavy lifting. In fact, more and more QSR brands are looking to c-stores as franchisees because they understand the growing popularity of the convenience channel for freshly prepared food.
“Legacy QSR retailers realize c-stores are stealing customers so it’s either become a c-store or license to them to get a share of the market,” said Steven Johnson, consultant and Grocerant Guru at Foodservice Solutions in Tacoma, Wash. “For c-stores, acquiring a branded product is the easiest way to improve foodservice skills and consumer adoption without a huge investment in training, development and research.”
Whether it’s sandwiches, pizza, chicken or burgers, there are a multitude of QSR franchise options available to c-stores. When making the decision on which one to partner with, operators should look at surrounding competition, demographics and location, said Johnson, who recommends analyzing what brands are already in the area; what brands are not yet populated there; what would be the most profitable; and where the location is, such as a downtown city or a major highway.
“C-stores need to do their research and get the right people helping them,” agreed Alison Leiszler-Bridges, executive vice president of Leiszler Oil Co., the operator of 16 convenience stores based in Clay Center, Kan.
Leiszler Oil offers a variety of branded foodservice depending on the location, including Papa John’s Pizza, currently at one location, but expanding into another this summer; Which Wich at one location; Hunt Brothers Pizza in seven stores; and Champs Chicken in one store. The chain also operates a standalone Dunkin’ Donuts location, along with another Dunkin’ Donuts within a c-store.
“We have to do something to strengthen our offering in the marketplace, and foodservice is a good way to do that,” Leiszler-Bridges explained.
The good news for c-stores is there are more QSR franchise options available today than ever before. Some brands have been present in the convenience channel for years, such as Subway, which has been offering franchising to c-stores for more than 20 years and has just shy of 4,400 c-store locations worldwide, or Champs Chicken, which has been licensing to c-stores for 16 years and is in more than 300 c-stores in 35 states.
Then, there are other QSRs previously unavailable to c-stores — or those that have not made the segment a major focus until now — that are becoming available.
Checkers Drive In Restaurants Inc., offering burgers, fries, chicken and more, began increasing its focus on c-store opportunities last year, and has just under a dozen locations with four in the pipeline for 2015, according to Jennifer Durham, vice president of franchising. In its freestanding locations, 80 percent of sales are via the drive-thru, so a c-store would need a drive-thru to qualify. This year, the chain is offering an incentive to new franchisees: If an operator can open the restaurant within six to nine months, they can receive six months of half-price royalties. Also, anyone who opens two or more locations within a year is invited on a cruise.
“Not including rent, the profit in one year is almost $300,000 with our franchise, which is a 71-percent return on investment and the biggest motivation for our franchisees so far,” Durham noted.
Subway also offers an incentive to qualifying operators. If the chain is a dealer or franchisee of a branded c-store or gasoline retailer in good standing, they may be eligible to pay half of the full franchise fee, said Allison Morrow, assistant director of new business development at Subway. “The reduced fee is typically half of the standard fee. In the U.S. for qualified franchisees, the reduced initial franchise fee is $7,500, whereas the standard initial franchise fee is $15,000,” she explained.
Another sandwich franchise now available to c-stores is Which Wich, based in Dallas and operating more than 300 locations in eight countries and 39 states. Which Wich is currently franchised in four c-stores, with two more under development for 2015, reported Dustin Griffiths, real estate manager for the company.
Leiszler Oil opened a Which Wich at one of its Kansas stores — the first Which Wich in the state. The retailer is very happy with how well it is doing and has received great feedback from the community, said Leiszler-Bridges. The chain recently sponsored Kansas State University’s men’s basketball team and gave out coupons for Which Wich.
“We have been pleasantly surprised with the numbers, and everyone is really happy with it,” Leiszler-Bridges said. “…“The national advertising of known brands is the biggest benefit for us, and also the experienced team of people to show you how to operate it is great.”
Leiszler Oil also brought in Papa John’s at one of its stores, which is another QSR company making c-stores more of a focus in the last three years, according to Joe Smith, vice president of global development at Papa John’s. The pizza company is currently franchised with 15 c-stores throughout the U.S. While the chain had been working with five or six c-stores in the past, it was a case of the c-stores approaching them. Now, Papa John’s has started reaching out to c-stores itself.
“I saw an advertisement in one of the magazines for Papa John’s and contacted them,” recalled Leiszler-Bridges. The business opened last April and takes up approximately 800 feet in the middle of one of the company’s strongest stores. “We had roller grill in the past, but it was not as successful as it should be for the strength of that store, so we thought we had to come in with a bigger brand.”
Since opening, the response has been great. The store competes against other pizza brands, including Gambino’s and Pizza Hut, but has not seen that affect sales at all. In fact, sales continue to increase and the retailer is thinking about expanding into delivery.
“Our customer count hour by hour has gone up, and we have a drive-thru window where customers can get their pizza along with anything in the store,” Leiszler-Bridges said.
Also new to the convenience channel within the last couple of years is Pita Pit, with five units currently open in c-stores. The concept only needs 300 square feet of space up front because the food is cooked on a grill in front of customers, and the majority is just reheated, said Bill Wilfong, vice president of franchise development.
“We also allow for flexibility on the point-of-sale system so customers don’t have to make two stops. They can just go pay at one register in the front for everything,” he noted. “Our total equipment package runs from $75,000 to $150 000 on the high end.”
Elliott Oil Co., based in Ottumwa Iowa and operating 17 c-stores recently tore down an older location to build a 4,200-square-foot store with a Pita Pit. Andrew Woodward vice president and general manager at Elliott Oil was familiar with the brand and so was his foodservice supervisor. There was also nothing like it in the area.
“We called Pita Pit introduced ourselves and it all came together pretty quick,” said Woodward. “We wanted to have something different than [the] other c-stores and also fast-food chains in the area because that is also our competition.”
For those operators looking to incorporate a branded chicken option Champs Chicken offers a lower cost of entry and while it’s available in 300 convenience stores to date the company will be expanding into strip malls and standalone locations in the near future, according to CEO Shawn Burcham.
“To get started in a business-within-a-business location, like a convenience store, the cost ranges from $10,000 up to $75,000 per location,” Burcham said. “Unlike traditional franchises, we don’t have a franchise fee and we don’t take royalties. We also have marketing development funds where we rebate operators with money back on the purchases they get from us. The fund builds every 28 days, and then we also have annual volume incentive rebates based on the volume the stores purchase.”
Jernigan Oil Co., based in Ahoskie, N.C., discovered Champs Chicken through its wholesaler, Southco Distributing Co., when attending one of its trade shows. The company operates 46 Duck Thru convenience stores and offers Champs at nine locations.
“We were looking for programs without the 10-percent franchisee fees, and it was also a lower investment to get into business,” said Jernigan Oil President Michael Harrell.
The Duck Thru chain also offers Hot Stuff Pizza at 12 locations, and has been with that company since 1997. In 2001, it added Sub Express to eight locations another concept signed onto through Southco Distributing. Many of its locations also offer proprietary foodservice products through the chain’s Duck Food Deli concept.
“If we have the branded concept in the store most of them will offer Champs Chicken Sub Express and Hot Stuff Pizza side by side in a food court concept and we are continually adding Champs to more locations,” Harrell explained.
Duck Thru stores are spread out geographically so the chain wanted a program it could follow to remain consistent at each location. Company leaders also wanted the added assistance you get with a franchise operation according to Harrell.
“We wanted help making our foodservice consistent and correct at every location,” he said. “In the past if we were eating proprietary chicken at Store 20 and then went down the road to Store 25 it was all good but it didn’t taste the same. We were looking for consistency across the board.”