Revamping Foodservice Can Help Fix Your Profit Problem
With tobacco unit sales continuing to decline, trips down, and operating expenses soaring, many c-store retailers are turning to fresh food as a way to replace lost revenues, drive independent trips, and give a much-needed boost to the balance sheet to achieve foodservice profitability. But for new or revamped foodservice programs to help keep companies in the black, they must have the right structure and discipline. Use these guidelines to build in profitability from the start.
- Be true to your brand. Relevancy matters across every category in your store and fresh food is no exception. Retailers that are well known for unique, craveable, and with tangible value are consistently more successful than companies with weaker or less defined brands. Think through how fresh food can become a pillar in your overall retail brand’s success. Consider the white space and how a foodservice program can help you stand out and succeed in a competitive landscape by driving meal mission trips to your store.
- Keep it simple. While there is certainly value in variety, c-stores often fall into the trap of trying to be everything to everyone by introducing a large number of menu items—hot dogs, pizza, and chicken, for example. However, instead of translating into incremental sales growth, this often results in cannibalization with retailers selling less of each item. Sales do not go up exponentially, but costs always do. So does the complexity of the operation with more equipment, more supplies, more training, and more skills required to run the program.
- Select a focus category or signature product. Focusing on doing one thing really well is an excellent way to optimize the menu for profitability. QSRs like Chipotle and Chick-Fil-A that have adopted this model, as well as c-store retailers including Royal Farms, which specializes in fried chicken, and Casey’s, known for made-from-scratch pizza, benefit from being the go-to destinations for their signature items. Instead of spreading themselves thin across a buffet of sub-average offerings, they have the space, time, and resources to remain laser-focused on perfecting the quality and the experience of the food items that differentiate them.
- Focus on fresh. C-store retailers often gravitate toward a batch production / grab & go model because on paper, it appears to be the easiest and most cost-effective to operate, especially from a labor standpoint. In reality, inferior quality from product sitting too long, coupled with higher waste, often offsets any labor savings gleaned from this approach. It’s well worth exploring the advantages of a made-to-order model including freshness, quality, and less waste. This approach offers cost structure advantages as they lend themselves to a “made-on-demand” operating model as opposed to relying on demand estimation — forcing to retailers to produce finished product well in advance of the customer consuming it. From a top-line perceptive, both models allow companies to expand sales opportunities and add value for customers. For example, simple line extensions and limited time offers that draw from existing raw ingredients (rather than new or single-use items) are a way to add variety while limiting additional complexity or cost. Remember that fresh doesn’t have to be complicated. Even bananas and bakery, displayed in a compelling way and priced aggressively, can deliver the fresh halo effect. This technique helps establish your store as a fresh food option, builds trust in your food offering, and can help drive trial of the other fresh food items you offer.
- Invest in operational standards. Making any foodservice program successful depends on consistency and efficiency. This comes down to the right methods, processes, recipes, work design, and kitchen layout. The more you can optimize and standardize the various inputs, the better the outputs will be, both from a product quality and cost perspective. Remember that operational standards, once developed, need to be continually reinforced, reviewed, and improved upon. Creating strong reference guides and investing in proper training will be key. But discipline is essential or operational efficiency can easily erode over time.
- Motivate your people. Building consumer expectations for high-quality food in a convenience setting can take some legwork. And your team members play an important role in getting the job done. When your people act as food program advocates and perfect the art of suggestive selling, it can go a long way toward accelerating the success of new or revamped food offerings. The best way to bring team members on board is to reward success and make the results transparent. A little healthy competition between sites in your chain, complete with ample kudos for the top performers, can be extremely effective.
- Incorporate the right technology and analytics. Successful foodservice, like almost every other aspect of c-store retail, relies on the right digital backbone. This can include customer-facing technologies, such as frictionless ordering kiosks, as well as technologies for production planning, recipe management, inventory management, and—perhaps most important—foodservice accounting. A cross-functional approach and a focus on data integrity will be important to obtaining visibility of factors such as costs, waste, shrink, and productivity that can point to problems or opportunities for improving profitability. Companies that truly wish to drive foodservice profitability need to create alignment between business and technology strategy to ensure a clearer path to success.
Think both short- and long-term.
When c-stores take the time to consider all areas of a foodservice program through the lens of a foodservice profitability assessment, there are often immediate opportunities to optimize processes, close gaps, and capture dollars. We recently helped a major c-store retailer implement menu and operational changes that removed 15% of waste from the system, generated significant margin improvement within just 90 days, and put the company on track to save $3 million in year one. And that’s just for starters. Our operational improvement plan for the next several years will generate even greater compounded savings going forward. For c-sore retailers looking to replace tobacco as their primary in-store sales driver, the potential is there. And while it can take some time to get all the pillars of profitability right, a few strategic tweaks will allow you to begin seeing the impact right away.
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