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Few in the convenience industry can match the foodservice success that Sheetz, Wawa and Kwik Trip have achieved with proprietary programs. Starting up such an offering is a financial risk that many are not willing or able to take. As a result, many c-stores prefer to implement a proven formula, usually involving a familiar brand name -- even if it means they'll have less flexibility in product assortment and operations.
"We recognized early on the level of commitment needed for a foodservice concept," said Johnny Milazzo, president of Lard Oil, a Denham Springs, La.-based operator of 15 On-The-Run and Jiffy Mart convenience stores. "I didn't believe we could create that internally and do a good enough job to recognize the full benefit of a foodservice offer," he said. "The biggest thing that we offer our customers is a very high level of consistency, and I'm not sure we could accomplish that in a proprietary offer. Not to say there aren't any out there, but our organizational culture was really c-store operators, not foodservice."
While both programs have their advantages and challenges, the choice of implementing a branded foodservice program versus a proprietary one usually comes down to the market positioning and operational strengths of the individual retailer.
For example, La Crosse, Wis.-based Kwik Trip Inc. was able to harness the potential of its vertical integration to create a successful proprietary foodservice program in more than 325 of its stores. Kwik Trip offers two types of proprietary foodservice -- a Hot Spot grab-and-go case with roller grills and a cold fresh case that stocks a variety of salads, fruits, vegetables and cheeses. All stores have installed both cases, said Jay L. E. Ellingson, Ph. D., food safety director for Kwik Trip.
He explained that the cases attract customers looking for quick, quality meals at a good value. And that value starts with the company's vertical integration.
"The premise behind our program is using our vertical integration with people and food. We have our own bakery, commissary and dairy," said Ellingson. As a result, the company's transportation system delivers freshly-made products to the stores daily. "Products are made at the support center [commissary] and delivered to our warehouse within hours of production to provide the highest quality and safest products possible," he said.
Kwik Trip began its Hot Spot foodservice program in 2002, but made the decision to enter into proprietary foodservice years earlier, when it examined the industry's challenges concerning gas margins and cigarettes, according to Ellingson. Once the company saw where the market was headed, foodservice was the one program Kwik Trip felt it had the foundation to accomplish.
"We just looked to see how large we could grow our market," he explained. "Originally we wanted to make the program simple. We asked, 'what's a good product that is fresh.' We had the basics with our bakery and dairy, and evolved into basic sandwiches with our commissary," he said.
That basic idea did not come without a financial commitment, however, and the company faced challenges, such as employing the correct people; having a customer base knowledgeable about current and future food trends; a willingness to invest and re-invent in personnel and capital; and ensuring a safe, quality product.
But there are some advantages, such as dexterity. "The reason Kwik Trip developed proprietary foodservice was that it gives a unique competitive advantage," Ellingson said. "At the end of the day, we know our customer better than national brands out there. It provides a uniqueness and nimbleness, allowing Kwik Trip to change the menu if we need to."
Very few in the convenience industry boast such streamlined integration as Kwik Trip, making a multiple-location proprietary offering difficult to achieve.
The desire to keep product quality consistently high was a main reason that Lard Oil's c-store chain chose to go the branded route. Eleven of the company's stores offer branded foodservice and the company has had success both with Subway sandwiches and Hunt Brothers Pizza. In December, the chain added Krispy Krunchy Chicken foodservice to its stores.
"Our first dabble in [branded foodservice] was with Subway in 1995," said Milazzo. "It was very successful." The second location with foodservice -- this one Hunt Brothers Pizza -- opened in 2003 and was quickly followed by another Hunt Brothers in 2004 and one in 2006.
"With any foodservice business, it's about establishing a whole new culture. From a customer expectation standpoint, there's no excuse or forgiveness for bad quality. In that respect, it was important for us to look at a program with the level of quality, structure and support to make certain we could provide consistency," he said.
Subway's execution is extremely detailed, and its supervision and follow-up is "outstanding," Milazzo said. "Our decision to go with Hunt Brothers was similar. The food quality was outstanding and our ability to execute was very good because of the simplicity of the program itself."
Getting to that point took time, however. Lard Oil spent the better part of a year trying to understand the commitment involved when starting up a foodservice operation, said Milazzo. "But because Subway was with us, recognizing mistakes on an ongoing basis, I have to give them credit for us being in the foodservice business today." When it came time to roll out Hunt Brothers, the company understood the high-level execution required to be successful, he said.
Although branded foodservice adheres to a specific program, it requires store level dedication to see success. "It's unlike the convenience store business. It takes an outstanding manager whose priority is foodservice 365 days a year," Milazzo said.
In addition, a firm grasp of cost control, weekly inventory, product consistency and quality expectations are needed at the store level to succeed, he noted. "Even when there's structured programs, it's a natural instinct for people to think, 'I'll get it right next time,' but customers expect good quality every time," he said.
Another approach is combining proprietary and branded, and this is the path Energy North, operator of seven Fresh Express c-stores in Massachusetts, chose to take. Flexible and seasonal menus in its proprietary Fresh Express foodservice program are complimented by the familiar appeal and national advertising of Dunkin' Donuts, Subway and Honey Dew Donuts.
Benefits of branded include customer loyalty, advertising programs and immediate traffic, said vice president of operations, Pat O'Connell. "I can honestly say only Dunkin' Donuts brings this right away," he added.
However, a proprietary program offers "flexibility, better integration with the store and greater margins and profitability if done correctly," O'Connell said.
Energy North experienced this firsthand when it implemented Fresh Express foodservice at its flagship store. The program, which took six months to get off the ground, offers a full menu of sandwiches, subs, paninis, salads, catering and specialty meals. And it is doing so well that the stores currently offering Subway will switch to its proprietary foodservice program, said O'Connell.
"Our foodservice, in most cases, can integrate better with the c-store and offer more dollars per square foot," he said.
To develop the menu, Energy North hired an industry chef to create unique offerings, and O'Connell credits the program's success to a creative menu that was open to change, with good price points.
Because of the success Energy North had with Fresh Express, the only branded foodservice program it continues to install is Dunkin' Donuts, said O'Connell.
When deciding which path to take -- branded or proprietary -- O'Connell offered points to consider. "Overall profitability and store location; utilization of square footage to maximize profits and traffic to the pumps and c-store; and creating an offering for that particular store that makes sense to those customers," he said.