Retailers Leverage Unusual Sites

FORT WORTH, Texas -- While most of the c-store industry scrambles for in-demand high-traffic corners, some are leveraging nontraditional locations for growth, brand positioning and other competitive advantages.

Sports stadiums, airports, dorm complexes, office buildings, malls -- all have housed convenience stores, most often featuring a spin on traditional convenience offer.

"It's an interesting part of the industry; it's often mom-and-pops opening up a single store in a unique location or a location that is ancillary to another business, such as a restaurant operator in a business park opening a convenience location," said Mike Lawshe, president and CEO of Fort Worth, Texas-based Paragon Solutions, who has designed a number of nontraditional locations. "The traditional convenience store model doesn't often work in many of these environments. It takes a new look at different demographics in a different setting. Nontraditional sites can be great opportunities, but sometimes big c-store chains and others in the industry get tunnel vision."

Certainly Tulsa, Okla.-based QuikTrip Inc. doesn't have tunnel vision -- more like concourse vision. The c-store operator acquired naming rights to the Grand Prairie AirHogs minor league baseball stadium in the Dallas market in 2008 and became a founding sponsor of the Sprint Center in Kansas City, Mo., in late 2007, operating stores in both venues.

The naming rights and concession at the AirHog's home, now called QuikTrip Park, were meant to cement the chain's brand in a very competitive market it had operated in for about a decade, according to Jim Denny, vice president, marketing for the 575-store chain. "This allowed us to reach a middle class demographic, but was much less expensive than partnering with Major League Baseball."

With 80 stores in the market, QuikTrip management thought the partnership would be a good branding opportunity -- and one that would reinforce the chain's positioning, which includes high-quality private label packaged products and foodservice items. The concession gives the chain an opportunity to promote its QT Kitchens sandwiches, pastries and roller grill times -- except for hot dogs, which are sold by another concessioner. The chain also sells coffee, hot chocolate and other hot beverages; frozen drinks; Wally kid's drinks; and proprietary Rooster Booster and other packaged energy drinks. Soft drinks are sold elsewhere in the park. "That's one issue with any of these deals -- if you are going to run a concession, you have to sell something no one else is selling," he noted.

Results so far have been lackluster. "It's not doing as much for as we would have liked, in terms of positioning our brand. It's been okay. But attendance figures are not as robust as we had hoped. When the Texas Rangers caught fire and started competing against us for fans with deals on their ticket prices, it hurt our business there," said Denny.

A much more successful venue for QuikTrip has been the Sprint Center in Kansas City, a market the chain has operated in for more than 40 years. "Branding wasn't as big a strategy," Denny said. "We went into this more to promote and give exposure to QT Kitchens [food items]."

The venue books a huge variety of attractions -- some 90 events a year -- from Sesame Street productions to Ozzie Osbourne concerts. The Sprint Center averages a million visitors per year. "We're reaching customers who wouldn't normally stop in the stores, so it's almost like paid-for sampling because they are buying our products," the retailer said.

The store is in the venue's premier location, at the main entrance that leads to escalators to go to the second level. "Everyone lands in front of our store," Denny said.

With the arena averaging 11,000 people per event, the QuikTrip store runs an average of 1,000 transactions per event. QuikTrip's long-time presence in the market has helped drive sales. The c-store retailer has the greatest market share of any c-store operator in the city. The arena store sells products at the same retails found in other QuikTrip stores. "We didn't think it was fair to customers to come in for a drink and have it priced three times the amount they pay in our stores," Denny said, adding the decision was a key negotiating point with AEG Worldwide, which runs the venue.

The result: while QuikTrip sells 22-ounce frozen drinks for $1 including tax, another concessionaire is selling fountain drinks for nearly $5 each. (The retailer includes tax in the prices and rounds retails up or down to the nearest quarter, to keep the line moving.)

With customers coming in waves before the events and during intermissions, QuikTrip has set up the store as a self-serve location, keeping wait times to a minimum. The store is equipped with 20 frozen drink machines, positioned on the outside perimeter of the 900-square-foot store. Three registers are kept open, while one or two other employees -- all regular QuikTrip store associates, assistant managers or managers -- keep shelves stocked and the store clean and well-maintained.

The chain pays Levy Restaurants, the arena's concessionaire, a percentage of the store's sales as it operates through its point-of-sale and cash handling system. "It's a good deal for us," Denny said. "We don't have to worry about making deposits."

For its support as a founding partner, QuikTrip is promoted through signage. The retailer has leveraged its relationship with the other founding sponsors, including Price Chopper supermarkets, United Missouri Bank, which partners with the chain on in-store ATMs, and the local MillerCoors distributor, which has worked with QuikTrip on a number of promotional events inside and outside the Sprint Center.

With a primary goal of brand positioning, food trial and promotion, QuikTrip hoped to break even at the site. It has done that. Exit survey results revealed QuikTrip has the highest brand recognition at the venue -- higher, even, than Sprint.

In other sports venue news, at American Airlines Center, home of the Dallas Mavericks, 7-Eleven is selling Slurpees in 32-ounce souvenir cups. According to one review on yelp.com, the price is $7. (The chain had no comment.)

Big Store On Campus
In another high-traffic spot, 136-store Royal Farms, based in Baltimore, will open a store this August on the street level of a luxury student housing complex on the campus of the University of Maryland.

The complex, called The Varsity, will house the first Royal Farms store to open in the area. The 24-hour location will offer take-out breakfast sandwiches, subs, wraps and fresh brewed coffee, plus Royal Farms' signature take-out chicken, according to The Varsity's Web site.

"We thought this was a great opportunity to have a presence on a college campus," said Ed Stronski, a spokesperson for Royal Farms.

The complex will offer 20,000 square feet of retail space on the ground level, covered parking for retail customers and residents, and a fitness center, business center and game room for students.

Meanwhile, a Wawa college store in Princeton, N.J. has practically become an institution and made news earlier this year when writer/actress Ellie Kemper, who plays Dunder-Mifflin's receptionist on "The Office," blogged about "The Wa," which operates adjacent to Princeton University campus. Kemper wrote an article entitled "Ode to Wawa" for the Princeton Paw, pledging her undying love for Wawa.

"How do I put into words one of the most enduring relationships I have in this world? I'm not sure I know. How do I come to terms with the fact that whenever I come back to Princeton, it is the Wa that I am happiest to see?" she wrote. "I do appreciate Blair Arch, and smile politely at my former professors, and give my friends half-hearted hugs, but it is the Wa that holds my undying adoration.

"The Wa was my Cheers. It made me feel like someone was taking care of me; even though I was no longer at home, somebody still cared enough to make sure I had a hot dog before going to bed."

Sky-High Sales
Another nontraditional venue with built-in traffic counts is an airport, where c-stores are either catering to employees of the airport, car rental services and other nearby companies outside the terminal or to employees and passengers inside the terminal.

"For convenience/service centers on airport property, it's not necessarily the travelers you are attracting it's the people who work there -- hotel shuttle bus drivers, taxis, limos, business and leisure rental car customers, as well as vendors, suppliers and daily visitors to the complex. There could be 22,000 people working in the complex every day," noted Jim Fisher, CEO of IMST Corp., a Houston-based retail sales analysis firm that serves nontraditional retail organizations. "They are cities within themselves."

Airport Plazas LLC, the Jericho, N.Y.-based developer and operator of c-store and gasoline plazas at airports, recently secured financing for a site at the Cincinnati/Northern Kentucky International Airport. The $8.5 million project will feature a 9,800-square foot main building on 1.5 acres just off I-275. The site will include a c-store, light auto repair, car wash and restaurant; it is expected to open by the end of the year.

An existing Airport Plaza store at Newark Liberty that opened last year features a gasoline and compressed natural gas station, 7-Eleven, auto repair, towing and a two-bay car wash. In the works are plazas at John F. Kennedy International Airport in New York, Southwest Florida International Airport (Fort Myers) and Tulsa Airport. In addition, Airport Plazas recently won requests for proposals for airports in St. Louis and several other cities around the country, according to Airport Plazas LLC President and CEO George Abi Zeid.

"Dealing with airports has its own challenges and rewards," Abi Zeid said. "It's a long and tedious process, but at the end of the day you know you will get the approval for a mutually beneficial project. In addition to bringing income to the airport, these stores are a great convenience to the employees and customers. It's a beautiful captive market for us."

Airport Plazas LLC funded the Newark Project with its own capital and resources. The company has a funding commitment for the pending and future airport plazas. In each case, 20 percent of a project's capital will be provided by Airport Plazas, with the balance provided by investors.

The company will own and operate all plaza services, except the food court and quick-serve restaurants, Abi Zeid said. The 7-Eleven at Newark airport is subleased, but future c-stores will be operated by Airport Plazas.

Despite the challenges of operating on airport grounds, most of Airport Plazas' sites are "amazing locations" at the main entrance of the airport, Abi Zeid said. The 7-Eleven c-store at Newark Liberty is reporting double the chain's national average in food sales.

Operating inside an airport brings another slew of challenges. Camden Food Co., which focuses on healthy food choices in a quick-serve setting, is a recent English import, now found inside airports in Indianapolis, Raleigh-Durham and Vancouver. Expansion plans will put Camden Food Co. sites in airport terminals in Houston, Milwaukee, Sacramento, Toronto and New York (JFK).

The chain's offer includes sandwiches, salads, fruit, packaged snacks and beverages that are fat-free, gluten-free, organic and/or kosher.

"For us, operating in an airport does present a set of challenges," said Darleen Nascimento, a spokesperson for SSP America, the Landsdowne, Va.-based division of SSP, which develops food concepts in travel locations worldwide. "We're highly impacted by what happens with the TSA and the airlines themselves. We have a captive audience, which is the good news -- that reduces the amount of competition compared to street-side stores. On the downside, the customers are limited to the number of people inside the terminal and that fluctuates up or down and is impacted by so many things -- weather, the number of flights, how flights are scheduled, flight delays, cancellations, even things like the volcanic ash across the ocean."

Knowing how much food to prepare at what time can be difficult. Customers don't follow normal daypart eating patterns and Camden Food Co. policy is to stay open no matter what happens with flights.

The chain also faces airport-related expenses, such as the fee it pays to get its product from its delivery spot at the airport to the actual site inside the terminal. "You need to consider the time it takes to do that, also," she needed.

Because its locations are post-security points, hiring can be challenging too. "Think about how much you look forward to going to the airport, parking, getting a tram to the terminal, going through security -- not everyone wants to deal with that every day," Nascimento said.

Employees also face detailed security screenings for ID badges that allow them to go through security checks more quickly. "That process can cause hiring delays and plays into the recruiting process as well," she noted.

Still, she said, the process pays off. "Pre-security locations usually aren't as profitable as post-security locations, because travelers want to get through security before they relax and know they have time to think about food."

The Camden Food Co. concept especially appeals to traveling women and families, who want something more nutritious than standard packaged snacks and fast food, she said. The chain is starting to incorporate more local fare, partnering with farmers and artisans within 100 miles of each airport.

"Healthier fare isn't commonplace in the airport, so we want to be a benchmark with what is happening street-side in terms of greener locations," Nascimento said. Cups are made of corn syrup to be biodegradable, for example.

Still, operating inside an airport means making a huge capital investment in locations that are often built into older buildings, taking a certain amount of risk. "Some people don't understand the upfront investment, the process of getting governmental agency approval and all of the extra fees," Nascimento said.

Creating a Destination
Other operators of nontraditional locations don't have built-in foot traffic -- they create it. The Nambe Falls Travel Center, built on Nambe Pueblo tribal land, is 15 minutes north of Santa Fe, New Mexico, off US 84. The site, which sells Alta-branded E10 and E85 gasoline and B5 and B20 Blue Sun biodiesel, was the first retail business of the Nambe Pueblo Development Corp.

"Native American c-stores are often built on remote locations and have to become destinations in their own right, being built in conjunction with other activities, such as a hotel, a casino or further retail development," noted Fisher, whose firm has advised on more than 130 projects with Native American tribes.

The 6,100-square-foot building houses a c-store, Arby's and Java City coffee bar that features a stacked-stone fireplace, free wireless Internet and flat screen television. The store also has a postal station; beer, wine and liquor section; discounted tobacco shop; and two drive-through windows. Open since 2008, the travel center saw first-year sales of just under $10 million, with 40 to 50 percent of that attributed to motor fuels.

"Our goal was to make the store memorable and give it multiple profit centers so that travelers and the short-haul truckers who are going down the road would drive six-tenths of a mile around the loop when there are other c-stores closer to the exit," said Matt Doyle 0f Development Services Group of Albuquerque. "We spent a lot of time making sure we had warm colors and great concepts."

A few advantages of developing tribal stores: Tribal land can be used as equity to gain financing and because the tribe does not pay excise taxes, it is easier to price competitively with chain c-stores nearby. Still, it can be a challenge to move a tribe's governing body to make timely decisions, Doyle said. "Our goal is to make them move quickly and understand the opportunity cost. They don't always understand the revenues they could be making on the land while it sits empty for a year."