Food for thought: 11 things operators should know before getting into the foodservice business
Many c-stores successfully enter the foodservice business. What started with coffee and baked goods expands at some locations to significant foodservice offerings. There are, however, a few things that should be considered.
1. Labour advantage: The two greatest expenses in food service operations are labour and cost of goods. Foodservice cost of goods, like retail cost of goods, is effectively 100% variable. C-stores have a labour advantage over restaurants as little, if any, additional labour is required to provide foodservices. C-stores should purchase prepared foods (e.g., pizzas, meatballs, sandwiches, baked goods, etc.) to further capitalize on this labour advantage. By generating foodservice sales with limited additional labour, c-stores will generate margins that make traditional foodservice operations jealous.
2. Food safety: An outbreak of foodborne illness can be devastating for a foodservice operation. Many c-stores have hot food held in a steam table or warmer. Other food may be in a cold display. Food is often stored in refrigerators prior to use. Operators must regularly check temperatures of food and coolers to make sure food isn’t spoiling. The hot displays are important, harmful bacteria can grow quickly in food held in the danger zone of between 4 and 60 degrees Celsius. Raw foods must be handled properly. Preparation areas and tools must be cleaned and sanitized. Operators and employees serving food should have a foodservice handler’s certificate.
3. Food handling: Related to food safety but worth mentioning. Employees should wash hands before handling food. To capitalize on the labour advantage, service utensils can be used by cashiers to avoid touching food when serving it to customers. However, a hand sink near the service area is important.
4. Fountain drinks are profitable: A significant portion of c-stores sales are bottled beverages. Beverage suppliers like this as bottled beverages are more profitable for them than fountain beverages. However, many c-stores are benefiting from the increased margins offered by providing fountain drinks. These should be considered. Allowing customers to pour their own fountain drinks and coffee helps adds to the labour advantage (unless COVID-19 restrictions do not allow self-service beverages). Cups may be held for purchase at the cashier station for an element of control. These beverage stations will require regular cleaning.
5. Space allocation for foodservice is important: As every operator knows, sales per square foot is a key metric. Determining how much space to allocate to foodservice is important. Generally, beverage stations are profitable and can be in the back of the store allowing customers to pass items that may be purchased on impulse (even after they have paid for the cups, if that is done in advance as suggested above). Hot food that is to be served for customers should be located near the cash to allow the cashier to serve and maintain the labour advantage over traditional foodservice. For most operators, a six to eight-ft. hot food display proximate to the cash station and a beverage station located elsewhere is enough to generate significant incremental sales.
6. Perishable inventory: C-Store operators typically have some perishable inventory that must be sold by a certain date or must be discarded. The foodservice business is even more difficult from this perspective. Often, food must be sold within hours before it must be discarded. Tracking itemized sales and understanding how demand flows for various products, then using this knowledge to decide how much to order and prepare, helps mitigate this challenge.
7. Menu management: In addition to selecting items that are easy to prepare, pay attention to customer preference. Items that don’t sell should be replaced.
8. Pricing: Restaurants typically markup their menu items by 65% to 70%. But remember, c-stores have a labour advantage. I recommend checking pricing of quick service foodservice operations in the area and price slightly below average levels.
9. Loyalty programs: Regular customers are important to the success of a small business. Rewarding customer loyalty is effective in preserving these important customers. This can be as simple as a beverage card that provides a free beverage after a certain number of purchases.
10. Packaging and presentation: Very few c-stores have seating areas, so the food is sold to go. Packaging must preserve the food quality while it is being transported to where customers will eat it and/or food must be portable—easy to eat while moving. Presentation is important as well, food must not only taste good, but it must also look good.
11. Special diets: The incidence of people with special dietary needs is increasing. A foodservice operation is not required to provide options for all dietary needs, but must be able to tell customers what the ingredients are in an item and how the food is prepared. Some dietary needs are by choice; however, some are due to health implications. For some, ingesting food they are allergic to is life threatening. And though a c-store doesn’t need to accommodate all special diets, having vegan or vegetarian offerings will likely be successful.
Jeff Dover is President of fsSTRATEGY, a consulting firm specializing in strategic advisory services for the hospitality industry, with an emphasis on food and beverage. Jeff is based in Toronto, Canada and can be reached at (416) 229-2290 ext. 2 or [email protected]