Branded Check List
Retailers planning to add a branded foodservice program should consider the start up cost as well what long-term factors will influence profitability such as additional labor and rising food costs.
“You have to decide what’s best for you,” said Sandy Arrasmith of J&H Family Stores. “Take a look at the brand you are considering, how they have been performing overall in other chains, look at their sales records, financial strengths and what they bring to the table,” said Arrasmith.
Scott Zaremba, president of Zarco 66, recommended also paying attention to the brand’s expertise and the company’s enthusiasm for the products they sell. “Having people who are excited about what they’re doing shows strong leadership from the top down and spreads through your entire organization,” he said.
Given the state of fuel margins, foodservice is the direction c-store chains must consider to grow revenues. “Retail sustainability isn’t going to come from the profit margin on fuel, so being able to combine a trusted foodservice partner is something we’re going to have to do whether we want to or not,” Zaremba said. “If retailers look at and analyze it the right way they can be very successful.”
While retailers have been warned not to look at foodservice as a silver bullet, there is no denying the category’s enormous potential and its ability to attract customers.
Retailers now have many choices for adding a foodservice program, and partnering with established brands has proven to be a winning choice for many industry operators. Adding a branded food concept gives convenience stores the opportunity to reap the benefit of an experienced product customers know and trust, as well as the expertise of companies with an extensive background in foodservice, instead of blazing an unfamiliar trail alone.
All programs, however, are not created equal and each demographic responds best to different offerings. Plus, chains shouldn’t feel pressure to operate the brands themselves. Many operators have had success leasing space to local franchisees that already have foodservice experience. In addition to generating a steady rent check every month, the site still benefits from the increased traffic the brand attracts.
“You have to figure out who your customer is—your core demographic that will support your brand,” said Sandy Arrasmith, vice president of foodservice and operations for J&H Oil, which operates 34 J&H Family Stores in Grand Rapids, Mich. “If you have 10 other pizza places in the area, it’s probably not a good idea to put in another.”
Scott Zaremba, owner of Zarco 66 Earth Friendly Fuels, which operates eight stores in Kansas, agreed and stressed the importance of doing due diligence. “I’ve felt we needed foodservice for the last five years, but finding the right combination and the right companies to work with, and finding the right dynamics for our area, has taken time,” he said.
Zarco started by adding a Scooter’s coffee franchise to its Earth Friendly location in Lawrence, Kan. in 2008 after reviewing upwards of eight coffee franchises before making a decision. Next the chain added a number of food concepts into its Oasis location in Ottawa, Kan., including a Scooter’s coffee house, Hot Stuff Foods pizza and a Sandbar Subs franchise. It’s also adding a Godfather’s pizza program in the first quarter of 2010. The chain has spent the last four months remodeling the location and is preparing to remodel the rest of its locations, adding the identical foodservice portfolio to all eight stores over the next 12-18 months.
What’s In a Name
Most retailers bringing on a branded option are looking to use the name to generate business. J&H Stores brought on Subway in 1995, hoping the brand recognition would be a secondary draw to its locations. Today it offers the Subway franchise at 11 (soon to be 12) of its 34 stores and has co-branded with Piccadilly Circus Pizza at 12 of its stores as well. It is currently contemplating an additional brand to add to five more locations.
“Primarily we brought Subway in to be a secondary draw, but the results have been increased profitability for our locations, not only on our foodservice side, but also on the c-store side,” Arrasmith said.
The brand has helped drive sales, even in a tough economic climate. “Most of my Subway locations have been up 10% over last year each and every week for the past year even with the economic situation as it is,” Arrasmith noted.
When the pizza concept was added to stores in Michigan, the chain gained a 25% lift in c-store sales. “While the economy has caused sales to be flat lately, I think without the program c-store sales would be further diminished,” Arrasmith said.
With branded foodservice now in two of his c-stores, Zaremba also noticed a 25% increase in overall sales, and has yet to see what the full potential will be when it’s included in all his locations. But he also cautioned that it’s important to consider much more than just the power of a brand. Feeling comfortable with the people you’re working with through the franchise program also is imperative.
“Being a franchisee is only as good as the franchise you’re dealing with. It may be a great name, but if you don’t get along with the people or feel that they’re helping you, you’re not going to be successful,” Zaremba said.
Arrasmith found that bringing on a franchise made foraying into foodservice easier for her chain, from planning the menus to having the supplier set up and put advertising promotions in place. “I didn’t have to do a lot of homework,” she said. “The brands I’m dealing with have a model to control food costs and control expenses—they contract with certain suppliers to bring savings to equipment I may have to buy, so they really present a total package and it saves me time and expense.”
One branded partner also has a group that helps negotiate food prices, helps set up the program and train the employees. Plus, they have advertising and promotions set up throughout the year and supply all the menu boards—all without charging a franchise fee.
For Zaremba, having a large amount of control over his food programs was ideal. While Hot Stuff Foods offers promotional ideas, the chain can decide whether or not it wants to participate. “It’s very helpful when you get into the retail food world to not have someone dictate to you that you have to do something, so that’s another thing we looked at— that we didn’t have to do something, but if there were national campaigns running that we wanted to be part of that we could participate,” he said. “That gives you a level of latitude to run your business your way.”
A branded food program, also can help retailers navigate the complicated world of food safety. “They make sure you are not only making a quality product, but are extremely safe in how you’re handling all your foods. Those are huge factors for people that have not been in the foodservice industry that need to be at the forefront at food safety,” Zaremba said. CSD