Food Sales Are On A Roll

Few things in life are easier than slapping together a sandwich. At home, that is.

For c-store operators, operating a successful sandwich program is a complex matter that takes training, solid management, quality ingredients and, most of all, a commitment to a very different type of business than what they’re used to.

Even then there are plenty of obstacles to overcome.

“We’re learning that now, and I’m sure we’re making mistakes,” said Mike Thornburgh, manager of public and governmental affairs for QuikTrip Convenience Stores in Tulsa, Okla.

The 555-store chain entered the fresh food market nearly five years ago. “We started very slowly. We made sure that we had the commissary and the bakery in place first and that a viable distribution system was set up,” Thornburgh said. “We made sure we had the employees in place and that our stores were designed in such a way that the new offer would be attractive and appealing.”

The change for QuikTrip was a fundamental one. “Did we make mistakes along the way?” Thornburgh asked rhetorically. “I’m sure we made a whole bunch of them because it was brand new for us.”

How can a chain know where it’s going wrong? “If you listen to the customers they’ll tell you,” said Arlene Spiegel, founder and president of foodservice consultancy Arlene Spiegel & Associates in New York City. “Foodservice operators should never feel rushed into putting a product out there unless it meets high standards.”

When operators consider getting into the sandwich business there is typically an evolution that takes and it tends to begin with packaged sandwiches, which was the case with QuikTrip’s Deli Express program.

Part of Deli Express’s solution consists of sizing the program for the operator in order to maximize bottom-line profitability. The company’s foodservice program was developed based on research launched about three and a half years ago that evaluated what was going on in the convenience store channel and what consumers were looking for.

Indeed, one of the areas where Deli Express worked with QuikTrip was on coaching the chain in how to market the program effectively and properly manage inventory based on customer count.

The key for QuikTrip was that during its due diligence phase it found Deli Express to be a program that allowed it to get into the sandwich business with a minimal amount of labor and with a user-friendly ability to manage shrink in a way that allowed them to be profitable. Deli Express did the heavy lifting by sizing the solution for each store size, so the chain was quickly able to offer a sandwich program while realizing a quick return on its investment.

“Shrink is such an important part of balancing your program and helps profitability, but marketing and managing the category are equally important,” Thornburgh said.

Looking at Labor

While some sandwich programs don’t do well, others have proven to be extremely successful in the c-store industry. Whether it’s local, national or a proprietary sandwich, prepackaged or made-to-order, retailers know the difference ultimately comes down to the quality of the product and the execution.

“One of the first things c-store retailers tend to get wrong is they don’t look at the labor needed for a foodservice program, so they don’t assign the labor to the program,” said Jim Monroe, director of foodservice for Handee Marts Inc., which operates more than 50 7-Eleven stores in Gibsonia, Pa. “And if they do assign additional labor to their program, they’re not always including the cost of the labor in the cost of the sandwich. For instance, they’re saying, ‘Wow, I’m making 50% or 60% on this sandwich before waste,’ but they haven’t factored their labor into what the cost of it is. I think that’s a big mistake people make.”

Monroe, who also serves as Handee Marts’ quality assurance manager, has spoken with countless operators over the years that were grappling with figuring out their program costs. “As you get into a food program, what you have to do is separate the food from the convenience store immediately on your financials, and that’s what people don’t do,” he said. “They go into the food program and the numbers are all blurred so they can’t see what their labor is. That’s probably a better way to

say it.”

How far off an operator can be when figuring costs depends on how complicated the program is.

“Years back when everyone seemed to think

they were making a lot of money in foodservice they didn’t realize just how inefficient their programs were. All they focused on were sales dollars,” Monroe said. “But I sat in on several meetings where we broke down profit and loss statements and saw how some of the major players were shocked by what they were finding. It’s a different ballgame when you break down the P&Ls.”

Another common mistake operators make is that they go forward with their programs without being fully committed to foodservice.

“When you decide you’re going to be in foodservice it can’t be an afterthought. Your competitors are McDonald’s, Subway and others, and when they’re in the foodservice business that’s all they’re doing,” Monroe said. “So how do you think you can be successful going against people who do it full time if you’re just doing it part time?”

Of all the stores that have found success with foodservice, it’s those with separate foodservice managers and P&L statements that tend to be the most profitable. “It’s basically a different operation,” Monroe said. They’re running a restaurant with the employees to back it up. They’re not doing the coffee bar or any other thing. Their concentration is the restaurant.”

The Biggest Hurdle
Despite the profit potential of foodservice, convenience retailers still face the daunting task of competing against the likes of McDonald’s, Subway and other foodservice titans. That means price must fall in line with quality, which is a complicated matter for smaller chains that may not have the volume of a Sheetz or Wawa.

“Growth in the foodservice industry can be slow, but that’s OK as long as you’re building a base of consumers and doing things right,” Spiegel said. “It’s better to have slow, methodical growth on a few items than to introduce a full menu that you do very poorly. Customers get excited about menu growth, but turned off, perhaps forever, by poor quality and service.”

Spiegel’s advice to other operators mulling a move into a deli or sandwich program is to begin with the employees. “From the top on down the entire organization has to buy into the commitment of entering the fresh food business,” she said. “If you don’t buy into it, you won’t do well.”

The second part, Spiegel added, is the overall look of your store. “It has got to be clean. If it’s not a clean environment people aren’t going to buy your food. I wouldn’t. If the appearance of your store is shoddy then the assumption is that your merchandise is going to be shoddy, and they’re not going to buy it,” she said.

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