McDonald’s has it. Dunkin’ Donuts has it. And if your c-store doesn’t have it, you’re likely losing customers to the QSR down the street. In 2010, featuring a value meal with your foodservice offering is essential to driving new customers through your doors and securing them as regular visitors.
C-stores with foodservice programs are facing growing competition from QSRs on cheap, tasty eats. KFC recently launched its first national value meal featuring nine items priced between 99 cents and $1.99, and Hardee’s rolled out a smaller, less pricey version of its premium Thickburger. Meanwhile McDonald’s continues to entice customers with its dollar menu, while Dunkin’ Donuts has expanded its bundle meal options.
Curt Erikson, operator of 20 Gas Stop Convenience Stores—three in Minnesota and 17 in South Dakota—agreed value is a necessary component of a foodservice offering. At seven of his stores, Erikson includes a Hot Stuff Foods pizza program and recently added Hot Stuff’s new Medium Value Pizza (MVP) to better compete with QSRs such as Little Caesars. The 10-inch MVP retails for just $5.99, and Erikson expects to see a 5-10% sales lift from the program.
“Little Caesar’s has a $5 pizza that customers can walk in and leave with, and that’s why we jumped on the MVP pizza. A lot of times impulse is everything, so when someone comes in during the afternoon, now we have the perfect size pizza. It’s a good value to the customer, our gross profit is very workable and it’s been quite successful thus far,” he said. Most stores already are selling around 10 pizzas a day.
Gas Stop Convenience Stores also offer Ball Park hot dogs on the roller grill as well as roller bites and taquitos, and they also carry a value meal for each daypart. Such promotions have included a free 20-ounce pop or a cookie with a six-inch pizza, or a pizza bundled with a two-liter bottle or 12-pack of soda to take home.
The chain is also planning a deal that would give a discount on a 20-ounce soda from nearby ice barrels when customers purchase two hot dogs. Erikson has yet to bundle the MVP pizza because it is still new, but he did offer a discount to get customers to try the offering. The breakfast crowd, meanwhile, can combine a breakfast sandwich and 16-ounce coffee for $2.99.
“These days, in a QSR, bundle meals are pretty much a must-do. It’s not so much something they do because they have to, but because the bundle meal is an avenue to increased sales,” said Brandon O’Dell, president of O’Dell Restaurant Consulting.
Decades ago when bundle meals debuted, they originally were used at QSRs to entice customers to order an entire meal, instead of just a sandwich they might pair with a drink they purchased somewhere else.
“Now the industry has changed based on this value by bulk purchasing. QSRs created the value to where they actually changed the whole mindset of the customers who are now looking for that full meal when they enter those stores,” O’Dell said.
Paul Servais, foodservice zone leader for La Crosse, Wis.-based Kwik Trip., said customers now have come to expect a value meal option from all foodservice providers. “We’ve just done some focus groups recently where that topic came up a lot—customers want value. And if you associate that with food, a value meal.”
Some c-store retailers might be reticent about incorporating a value meal because, while they know it will lead to higher volume purchases, they worry it won’t raise their gross profit enough to justify the deal. Customers may be demanding cheaper food, but ingredient costs are growing making it harder to turn a solid gross profit. Still, without a competitive value offering, c-stores are hard pressed to compete with neighborhood QSRs.
“Everyone is after customers so you have to do what you have to do to drive traffic into your stores, and food and value are both hot buttons,” Servais said. “If you’re going to grow your business right now you have to play the game,”
Another key is to differentiate discounts and value meals. C-stores should look at value meals as something that will grow their business. “A discount would be like offering $2 off a meal or 15% off with a coupon,” O’Dell said. “The value meal is an incentive to get customers to spend as much money as possible while offering them a bargain for getting everything instead of just a few things—it’s the same concept as buying in bulk.”
Catering to Customers
Kwik Trip, which operates more than 360 stores in Iowa, Minnesota, and Wisconsin, has been successful with its $1 sandwich deal on Wednesdays, which it began offering two years ago and that continues to drive customer interest in its food. Each Wednesday features a different $1 offering, such as a chicken or rib sandwich or a cheeseburger.
“It has been working tremendously. Customers now know that we have quality food and they’re not afraid to buy from us anymore. They’re willing to take a risk when it’s only a buck. It has helped our hot food program and given us about a 10% lift for the year,” Servais said.
On weekends Kwik Trip offers various four for $1 food promotions, on products such as doughnuts, and consistently offers two for $2.22 roller grill items and sandwiches. Another deal offers customers a cup of soup for just $1.29 when they buy a sandwich.
The breakfast combo, however, has been the most popular at the chain. For $2.79 customers can get a 16-ounce coffee and a breakfast sandwich. “We’ve been offering that forever and that’s been very successful for us,” Servais said.
The C-Store Advantage
Lunch/dinner customers at a c-store are really no different than at a QSR in that anybody who comes into the store has the potential to spend more than what they planned.
But Erikson and Servais agree bundling in the c-store channel can present unique challenges, especially for those offering grab-and-go. “When you go to McDonald’s and want the value meal they get it all for you. So when you walk into a c-store the customer has to know up front that if they’re going to get the value meal they need to go get all the stuff and take it to the register, which makes the bundling more of a challenge,” Servais said.
Both Kwik Trip and Gas Stop Convenience Stores use signage to draw customers to their grab-and-go area and alert them to the deals. Erikson finds presenting the meal as a “free drink” with a $2.99 sandwich inspires customers to grab a drink more than marketing it as $2.99 for a sandwich and drink combo.
Both warn that while having a value meal is essential, customers won’t change their shopping patterns overnight, meaning c-stores new to these value offerings need to stay with the program and give customers a chance to experience the offering through sampling, coupons and other incentives.
“If a customer shows up at 1 p.m. and the sandwiches are gone how many chances are they going to give you when they can go to the QSR down the street with a drive-through?” Servais warned. “If they normally go to McDonald’s at noon to buy a value meal and you start offering a dollar menu, you’re going to have to start convincing them to come to you instead.”