Banking on Big Branding

When it came to choosing between a bank and quick-service restaurant to complement a Tom’s Convenience Store in a travel plaza just outside State College, Pa., Tom’s parent company, Shipley Energy, placed its money where the mouths are.

It’s a decision that could pay big dividends for York, Pa.-based Shipley Energy, owner and operator of 23 Tom’s c-stores in Pennsylvania.

"We think it’s a synergy for the whole property," said Shipley Energy President Lloyd Midgett, on the company’s decision last year to place an Arby’s restaurant at a Tom’s in Milroy, Pa. "One helps the other, and it’s certainly the best foodservice offering we’ve ever done."

A variegated energy company with roots curling almost 80 years into Pennsylvania’s past, Shipley Energy has spent decades mastering its energy solutions, everything from air conditioning and oil heating to fuel distribution and automotive fueling stations. But it was in the foodservice program at Tom’s c-stores that Shipley Energy was having trouble, Midgett said.

Shipley worked on the hem of the c-store industry for years, operating service stations in Pennsylvania and a grocery outlet called Kwick-Stop, what the company calls the "prehistoric forefather" to Tom’s Convenience Stores. The first Tom’s c-store opened in 1985, and about two decades later has grown to a 23-store chain throughout Pennsylvania.

 

Commitment to Food

Tom’s foodservice program has historically centered on self-branded items, including made-to-order subs, sandwiches, pizzas and side dishes at Tom’s Café, a self-branded deli located in 11 of 23 Tom’s stores. (A staple Tom’s Café item has been the "Boss Hawg," an impossibly huge pulled-pork barbeque sandwich.) Some of the smaller Tom’s stores lack a Tom’s Café, though they offer sandwiches delivered by outside vendors, Midgett said.

The self-branded foodservice program at Tom’s didn’t work as Shipley had anticipated, largely because the company didn’t have the resources and volume of a larger chain, Midgett said, adding: "We’re quickly finding out that we may be better suited for national franchises."

By co-branding some of the Tom’s stores with a national foodservice franchise, Shipley could capitalize on ready-made plans for branding, employee training, store design, menu items and name-brand recognition.

Midgett learned about Arby’s franchising particulars through Cato Inc. of Salisbury, Md. A full-service energy company and fuel distributor, Cato owns and operates 11 Goose Creek convenience stores on the Delmarva Peninsula in the Delaware and Maryland area. The company became an Arby’s franchisee 10 years ago when it co-branded its Goose Creek store in Woodside, Del., said Greg Stutzman, Cato’s vice president of retail.

Cato now has nine Arby’s restaurants: five standalone and four co-branded with Goose Creek. The co-branded locations outperform the standalone Arby’s, Stutzman said.

"Three of our four highest-volume stores are co-branded locations," Stutzman said.

Arby’s started targeting the c-store industry to grow its brand name, said Karen Peterson, Arby’s director of nontraditional development.

"Our convenience store model offers the full Arby’s menu including the breakfast daypart," Peterson said. "We’re always looking at multiple ways to add more Arby’s units to improve customer convenience and c-stores are an important part of that strategy. Ultimately, we look for people who have foodservice experience and have the infrastructure in place to support a restaurant operation so both sides can be successful."

Arby’s convenience store franchisees need at least 650 to 1,600 square feet of space to accommodate the restaurant, as well as 144 square feet for cold storage and 92 square feet for dry storage. Arby’s also prefers its c-store franchisees offer a drive-through, though smaller conversions have gone without them, Peterson said.

The $12,500 fee for Arby’s c-store and truck stop franchisees are a far cry cheaper than the fee required for traditional standalone stores, which pay $37,500 for the first restaurant and $25,000 for each thereafter. All franchisees pay a 4% royalty fee, while advertising and marketing costs range from 1.2% to 2% of gross monthly sales.

Shipley opted to test the Arby’s co-branding at the 4,500-square-foot Tom’s store in Milroy, which was converted three years ago from an old travel plaza. When a restaurant at the site had closed and plans to lease the space to a bank didn’t blossom, Shipley opted for Arby’s, Midgett said. The Milroy site also had a 72-seat cafeteria and plenty of space for a drive-through expansion.

Signing on as an Arby’s franchisee rather than leasing space to a fast-food chain, Shipley was able to gain total control of the Arby’s program, particularly the profit margins, Midgett said. The more roast beef sandwiches sold at the Arby’s in Milroy, the greater Shipley’s profit.

"(Arby’s) has a great program," Midgett said. "The training program is phenomenal for the managers and staff; it’s a cookie-cutter process" that enables all employees to learn the foodservice business, along with the salient sanitation and safety measures the brand is committed to.

The Milroy Tom’s and Arby’s entertain little co-mingling of capital and resources, other than sharing bricks and mortar and a single supervisor for the entire site. Arby’s employs 35, while Tom’s employs 20.

For now, Tom’s in Milroy is the only Shipley c-store to co-brand with Arby’s. But the company is drafting plans to install Arby’s at three more Tom’s stores, Midgett said.

"In fact, we’re even going to build some standalone Arby’s," Midget said.

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