Ready for lunch?
Becoming a lunch destination means ensuring your store is top of mind for consumers when it is time for lunch and they have decided to purchase a meal instead of eating at or bringing food from home. They will consider area restaurants and choose a location. Often, consumers will have a stable of foodservice operations in an area that they will rotate through. Your goal should be to have a spot on the rotation and, ideally, be selected more often than your foodservice competitors. Origin demand occurs when someone is hungry and a foodservice operation is proximate to their location (i.e., they are in the area, driving or walking by and choose a foodservice operation in the area). Destination demand occurs when a foodservice operation because of its unique offerings, rather than its convenience.
Convenience stores can generate a strong lunch business based on, as their name would suggest, convenience. With the right offering, convenience stores can drive destination demand. Destination demand would likely be generated from a closer area than a unique full-service restaurant; however, more than demand from the people living or working in the immediate area of the store. What is important is quality food, speed of service and value pricing.
Menu selection
To drive destination demand, it is important that a convenience store’s menu offers a selection of products that are consistent with foodservice trends, which change over time. An independent store is able to change its menu as required to be consistent with local food trends. If an item is not selling, replace it on the menu. Popular menu staples include pizza, chicken sandwiches, Jamaican patties, hot dogs and sausages, and pasta dishes. Destination restaurants have at least one unique menu item to drive visitation from outside the immediate area (i.e., an item they are known for, that is superior to competing products in at least one aspect).
Destination foodservice establishments must offer quality food products. It is important the food looks and tastes good.
Given almost all convenience stores do not have customer seating areas (and, in most provinces, providing seating requires providing access to washroom facilities), menu items should be portable—items you can eat on the go walking or driving. Foodservice products are considerably more perishable than convenience store items and, as a result, I recommend selecting menu items that can be prepared in small batches to minimize waste. Menu items that hold their quality for long periods of time should be chosen. Further, menu items should be selected to be quick to serve, which is discussed further below.
READ: Consumers turning in greater numbers to c-stores for their foodservice offerings
Speed of service
When designing a menu, a store must consider speed of service. If staff are serving the menu items (foodservice items should be positioned near the cash register), they should be quick to prepare (or be already prepared and quickly served by the cashier, another employee or, for some items, by the consumer). Quick service is important, not only for the foodservice customer, but also for any customers queuing behind them.
Production planning is important. Stores should track demand levels and prepare food accordingly—enough prepared items to meet demand and avoid lost sales, but not so much as the quality deteriorates before it is sold. If you run out of product too often, consumers may cease to consider your store to meet their foodservice needs.
Emphasize value
Foodservice at convenience stores is more profitable than typical restaurants. Cost of sales is a fully variable expense. The other two main foodservice expenses are labour cost and occupancy cost, which provide convenience stores an advantage as they have no or limited incremental expenses in these areas. Note: the sales per square foot for the area of the store used for foodservice should be greater than the overall sales per square foot in other areas. This advantage allows convenience stores to sell products at lower prices than traditional foodservice competitors, while at the same time generating greater margins.
The biggest indicator of foodservice demand is consumer confidence. Consumer confidence is slightly positive in Canada at 51.74 for the week ending May 17, 2024 (consumer confidence of 50.00 suggests no net positive or negative views of Canadians with respect to their economic mood). Almost half of the population; however, have a negative view, which adversely impacts discretionary spending and commercial foodservice demand.
Convenience stores can use their cost advantages with respect to labour and occupancy expenses to price menu items suggesting value. If the prices are perceived to provide value and the food quality is good (i.e., a strong price/value proposition), the store will have a competitive advantage. Advertising the value of the menu items will help drive both origin and destination demand. Advertising could include in-store displays, outside facing window posters and web site promotions. A store may want to reach out to potential demand drivers outside the immediate area, such as office buildings and schools, and market your menu offerings and prices.
The relatively significant value proposition puts convenience stores at a competitive advantage and, with the current state of the Canadian economy, the advantage is significant.
By following the above best practices, your store can become a lunch destination. The same principles apply for other meal periods; a great baked goods and coffee program can drive breakfast demand. Plan accordingly and look forward to increased foodservice revenues as you add destination demand to your foodservice origin demand.
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 a Certified Management Consultant and a member of both the International Society of Hospitality Consultants and Foodservice Consultants Society International.
