white castles twopronged attack

Hamburger chain gains entry into the c-store industry through co-branded restaurants and frozen foods.

By John Lofstock, Editor

White Castle might not be a household name in the convenience store and petroleum industry right now, but give it a few more years and it might become the next brand customers crave.

The Columbus, Ohio-based hamburger chain now operates in 10 states ranging from New York in the Northeast to Minneapolis/St. Paul in the Midwest. Over the next several months it’s hoping to extend that reach as its store count surges past 400 restaurants. Of the existing restaurants, 16 are teamed up with convenience stores.

Restaurants aside, the brand has the unique experience of also offering a frozen version of its sliders that are selling in popular chains throughout the industry—chains like 7-Eleven, Quik Check and Kum & Go, to name a few. Combined, the two points of distribution are opening doors.

“White Castle will always take a look at opportunities when they present themselves,” says Rob Albert, director of real estate for the brand. “We’ve had some challenges reaching new marketers in the past, but I think we’ve turned a corner.”

One reason the chain has had difficulty making a splash in the co-branded market was it lacked the size and muscle of mega-operators like McDonald’s, Taco Bell and KFC.

“We have had some general discussions with the Big Oil companies over the years, but White Castle is simply not large enough to make it worth their while. The economies of scale are not there,” Albert says.

White Castle is now pursuing co-branded sites with convenience store and petroleum marketers, “who want to offer a restaurant facility to their customers without shouldering the burdens of being a restaurant owner or franchisee,” Albert says. “Many times we are approached by independent operators that understand the value of having a freshly prepared food operation within their c-store, but do not know how to do it themselves or don’t want the hassle of managing foodservice operations.”

White Castle will lease the space, install the equipment, hire a staff and operate the restaurant within the convenience store. To ensure it’s a good fit for both parties and to make sure the unit is located in an area that puts it in a position to be successful, the company’s development team works with retailers to go over site selection, engineering and construction.

Business terms are negotiable, but it typically gets a fiveyear primary term and a series of five-year options. On the operations side, White Castle requires approximately 1,200 to 2,000 square feet for kitchen, storage and dining areas. A drive-through is also mandatory.

Historically, Albert says, successful co-branded operators meet the following criteria:

  • Five or more locations;
  • Units that are at least 3,200 square feet;
  • Generate fuel volumes greater than 120,000 gallons per month;
  • Produce monthly in-store sales of at least $50,000; and
  • Have a minimum of 25,000 combined in-store and fuel customers per month.

While it prefers units to meet all five of these standards, the company said these are not prerequisites, but rather benchmarks. It regularly considers sites that meet three or more of the standards.

Part of the reason White Castle remains flexible is because it keeps tight control of restaurant operations.

“White Castle does not franchise so anytime you see a White Castle restaurant in a c-store, it is a corporate operation,” Albert says. “We simply lease the space, which is a good selling point to c-store operators. Not only are they getting a corporate guaranteed lease, but the day-to-day food operation is being run by White Castle, not a franchisee.”

White Castle is also looking at c-store retailers that want to build freestanding sites. Its goal is restaurant proliferation in order to increase brand awareness and continue adding value to the White Castle name. These units go through similar site selection. “We typically require a relatively high population density and traffic count, as well as close proximity to points of destination and activity generators, with minimal sales impact to our surrounding restaurants,” Albert says. “We have a strong preference for corner locations at signalized intersections with easy access to two streets and good visibility.”

Consideration will also be given to shopping centers, existing freestanding buildings that do not exceed 3,500 square feet, with drive-thru capabilities and off corner locations with good access and visibility.

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