Carolyn Schnare:
A strong foodservice program should be a focus for any convenience retailer looking to make it in today’s fast-paced world. Several years ago on this show, Insight Research’s Dan Munford used the term ‘foodvenience’ when referencing the rise in delicious, fast and easy food in convenience stores. Today we’re going to talk with three experts who are not only making the case for having great foodservice but making it convenient for both the customer and the employees creating it. We’re going to talk about profitability, too. Of course, the first goal is to get customers from the parking lot into the store to buy prepared food. But, just as important is to serve it quickly, consistently and safely so that customers come back again to continue to increase sales. And, it is vital to minimize waste and maximize staff to keep operational costs in check. Because without that, profits are hard to realize. We’re going to dive into all of this….after the break.

Carolyn Schnare:
Welcome back. During the next twenty minutes, we’re going to talk about foodservice and how beneficial an efficient and safe operation can increase sales and most importantly, profits. We’re going to hear from 3 guests and get their take on the benefits of foodservice. First, we want set the stage for the financial implications of executing a foodservice program and doing so profitability. I talked with my colleague, Jayme Gough in the NACS Research department to hear details in the data. First, let’s start with an easy question – how does NACS look at data and in particular, foodservice.

Jayme Gough:
So in convenience, we have two in-store what we call umbrellas: merchandise and foodservice. Merchandise categories are the five categories of prepared food, commissary, and dispensed beverages, hot, cold, and frozen. So when we talk about foodservice, it’s not really a category, but more of an umbrella term that covers those categories. And the reason that it’s so important in convenience is because it’s really about profitability. So in terms of total sales, which would include fuels, foodservice and merchandise categories, foodservice was 8.7% of sales in 2020. But when we look at total gross profit, foodservice was 19%. So that’s because categories like prepared food and commissary and the ones that I talked about earlier are high margin, high profit categories and that’s why it’s really important for convenience stores. If we were to look at in-store categories, which we break into those two segments that I mentioned earlier, merchandise and foodservice, foodservice categories represented nearly 23% of sales, but nearly 35% of gross margin. So what we’re really talking about is almost a third of in-store profitability coming from those foodservice categories.

Carolyn Schnare:
So, it’s been a difficult period in a lot of categories, probably due to safety concerns. What did you see happen over the last several years in food sales since 2019?

Jayme Gough:
So foodservice categories definitely struggled in 2020. I’m not going to belabor the point there because I think we all really know what was going on. The COVID-19 pandemic obviously forced a lot of retailers to have to scale back or to completely stop their foodservice programs. In a lot of cases, consumers were also worried about being exposed to the virus. At that point, we didn’t really know how it was being spread, and if that…if it could be spread through self service operations. So a lot of that had to be scaled back. Foodservice in total was down in sales 9.6% from 2019 to 2020. And a lot of that was in the categories of prepared food hot dispense beverages, cold dispense beverages, and frozen dispense beverages. A lot of those that had more high-touch that were either self-serve or prepared by one of the store employees. The one bright spot in foodservice categories last year was in commissary.

Jayme Gough:
So these are items like pre-packaged, pre-prepared items, grab-and-go items or things that were already put in a container sealed and what consumers would consider a little bit more safe for picking and going. So we really did see a pickup of that category for items that were seemingly more safe to grab for customers who were really trying to get in and out of a store as quickly as possible to minimize their exposure and who weren’t feeling comfortable necessarily doing, pouring their own coffee or grabbing something off of a roller grill, just because they weren’t sure about the level of exposure they were going to get from that.

Carolyn Schnare:
And, what about more recently this year, have you seen improvement? Throw some numbers at me, Jayme.

Jayme Gough:
Our NACS CSX database is a really great resource for retailers who want to track how their sales are going throughout the year. We do month-to-month reports. We’ve also pulled data looking at January to July of 2021 versus where we were at in that same period in 2020. And right now foodservice – total foodservice sales – were up 16.4% versus last year. So we’ve really recovered over that 9.6 loss that we’ve had that we had last year to this point. So right now things are looking really good. In terms of the category specifically, prepared food is up 26.6%. Commissary is still up 6.8% which is really great, especially because we had so much growth last year. It means retailers are continuing that growth customers came into stores last year, looking for commissary products and what they found is that convenience has a really great offer for them.

Jayme Gough:
And it looks like that has stuck and that they have continued to come back, moving in so far till July of this year.

Carolyn Schnare:
Last, do you have any advice for listeners?

Jayme Gough:
So in terms of advice, I’m a little skeptical on giving advice because there’s never a one-size-fits-all in convenience retail. It really depends on what your goals are as an operation, what you’re trying to do, where you’re located, all these things really compound what your strategy is going to be as a business. But in foodservice, one thing that I will say is that in the past year, convenience retailers have had this exposure to the products that we offer in a way that we’ve never had before. When customers needed convenience and they needed to go in and get something to eat and they were not sure…they couldn’t go into restaurants, they didn’t want to pay the delivery fees or what have you, they saw what we had to offer, and there is no greater exposure than that people being physically forced into your store. And they saw all of the wonderful foodservice programs that are going on in our industry. All of the different commissary offerings, all of the grab-and-go, all of the dinner offerings, everything that retailers have been working really hard on for the past way more than two years. But that finally drove customers in to see what’s there. And so that’s really the best thing that can happen for you is letting people know what you, what you have to offer. So continuing to promote what you’re doing in foodservice, why you’re doing it, are you baking things fresh every morning, are you doing fresh-never frozen, how you’re doing things in your foodservice programs, promoting that and making sure people are aware of it.

Jayme Gough:
Social media is a really great tool for doing that as well. Definitely telling them why, where are your products sourcedfrom, are you using locally sourced eggs, are you using locally sourced produce or meats or any of that stuff? These are things customers really, really want to see and it helps them make a choice of your brand over somewhere else, because if that’s something that’s important to them being a local community-sourced retailer. That going to make their choice,much easier than going to a QSR across the street or something.

Carolyn Schnare:
Thanks, Jayme. Our next guest is a retailer who lives and breathes food. He came to his company from QSR and thrives on serving customers fast and fabulous food. Greg Watson is the Regional Foodservice Manager for Tri Star Energy who operates the Twice Daily convenience stores in the Southeastern United States. The name says it all. Twice Daily. They plan for customers to come for breakfast and coffee and come back again for lunch or dinner – and sometimes both! I kicked off our conversation with the question of they day – how did that name come about?

Greg Watson:
In 2011 is when the first Twice Daily opened up. And it was the new concept coming to the convenience business in the Nashville area, for sure. When I first started with the company I was hired on as a general manager. Shortly after I started, I transferred into the training department in Human Resources and while I was training one day, I was out at one of our stores and a guest came in and said, “Hey, I’ll see you again later because we know this is Twice Daily.” And later on in the day he came back and I had my back to the window and the trainees that I had were pointing outside and when I turned around that gentleman that was in earlier, was jumping up and down, waving his arms because he was coming back again when he came in bacj through the door and he said, I’m back because this is Twice Daily, but we’ve had many guests say thrice daily, or even go farther than that. We’ll see the same person in four or five times a day.

Carolyn Schnare:
That’s funny. I don’t even know what the term after thrice is. Greg, what sets Twice Daily, apart from other retailers?

Greg Watson:
You know, in the beginning, in basic convenience stores, when I started 70% of the folks didn’t come inside the building, they just pulled up, filled up with gas and left. They might come in and grab their tobacco products or grab beer or snacks and things like that. But for the most part, folks just tended to get in, get out, get going on their way. And with Twice Daily, having the opportunity to come in and to get that fresh baked donut in the morning or that fresh made a breakfast sandwich or lunch item, I think really, really is a big driver and it really does bring folks in. So foodservice for us is really a really big thing. And it’s a real big push this year, especially, and it will be for years to come.

Greg Watson:
And I think that for our guests, the better fresh food we can provide, the more variety that we can provide. It’s just going to keep them coming back over and over again. And not only the food, but I think the guest service is a big, big part of it as well. The team members really go out of their way to make sure that the guests are happy. We have a lot of guests that come in that have special requests and we can do any of those for them. So I think that’s a big thing, but making sure that our food is fresh, making sure that it’s out there. If it’s supposed to be hot, it’s hot. If it’s cold, it’s cold. And I think that’s what that guests really, really like is the fact that more than anything that when they come in, it’s ready to go for them. So they don’t have to wait.

Carolyn Schnare:
I want to focus on your foodservice items. Can you tell me a little more about what you serve?

Greg Watson:
The majority of our foods are made in store. Now, we do purchase from a vendor outside for fresh deli items, but more and more and more, we are starting to do our own handcrafted items as well. We always used to say hot food, hot beverage, cold food, cold beverage, and bakery. So those are the five main stays that we have so hot, hot food, all of our fresh breakfast items sausage biscuit, sausage, egg, and cheese croissants. So on lunch items, we have our cheeseburgers, bacon cheeseburgers, a Nashville hot chicken sandwich, our bakery items. We have fresh baked donuts. We actually have designated cooks or Foodservice Leaders as we like to call them inside every Twice Daily location seven days a week. So there’s an actual cook in the store specifically for the fresh food that goes out or for a fresh food item that a guest wants at any time.

Carolyn Schnare:
It seems that you have an incredibly profitable offer, but it’s imperative to keep costs in check. Let’s talk a little bit about waste, which can really be a huge expense. How do you combat that?

Greg Watson:
Honestly, nobody likes to talk about waste pretty much. Nobody wants waste at all. Unfortunately in my opinion, waste is somewhat, sometimes in necessity, just because of our industry. Our waste in some of our stores…we’ve got stores for breakfast, which is our biggest time of sales, let’s put it that way, especially between 6:00 AM and 8:00 AM is our definitely our biggest time of sales. We have stores that do less than 4% in waste but we do have some stores that might push 12% in waste. We try to keep as minimal as possible, but I think the big things is that having the ability to get three deliveries a week really helps that out. It keeps our waste to a minimum by also having three deliveries a week. It helps us to maintain better storage, better ways to store our food, better ways to rotate food, keeping in practice of dating everything when it comes into the store on the delivery date.

Greg Watson:
So we can keep a better track of rotation that way. Making sure that everybody has a hand in it. So everybody knows what’s going on. It’s not just one person’s responsibility. It’s, it’s a team effort and it’s teamwork that really makes everything work better. Like I said, we try not to focus on waste to the point where we are pinching everything, but if we produced to plan and we produce the items that we’re supposed to, when we’re supposed to then waste is at a bare minimum and we virtually hardly throw things away at all. So that’s a really cool thing.

Carolyn Schnare:
Do you use a system to keep it all together?

Greg Watson:
We use technology a lot. Right now we are using a system by a company called Supplyit. We started testing their new workspace program. We’re able to enter our waste into this program and really watch it from that aspect, but this new workspace program that we have now it’s, it’s awesome. I love this new program. I can’t talk enough about it. And when they get me going in our meetings, they have to stop me. The new program is so much easier to use. It’s so much more user-friendly. It allows us to jump around the program itself, the system going from overnight to breakfast to lunch to snack hour to nighttime items that we might do. It allows us to really delve into what we’re doing. It gives us every day for every location that’s on it.

Greg Watson:
And right now, actually we only have a handful of stores on the program. Like I said, we were testing it, the really cool thing that we found was that the five test stores that we started with comparing the four weeks before the test to the first four weeks of the test we had increased our sales by 10% overall for those five stores, which was, we thought phenomenal. It was a great, great test that we that we started and now we’re rolling it out to every store in our company, every Twice Daily store.

Carolyn Schnare:
Greg continued to tell me more about the cost savings they realized by really keeping track of what’s going into recipes and what comes out of the kitchen. I also asked him about keeping up with excellence throughout this ongoing labor shortage. The one thing he came back to is teamwork and leadership. Everyone is cross-trained, recipes and processes are well-documented, and those things are consistent across every single location. I like to go back to a final closing question with many of our guests – why do customers shop at convenience stores, Greg?

Greg Watson:
My opinion, get in and get out. They, like I said, they’ve got a lot of places to go and people are busy, especially in this day and what we have going on everywhere and we have to be ready for them. Making sure that, that we have everything they want or everything that they need. If we don’t have something and they come back the next time, if we don’t have it again, they may not come back a third time. There’s a lot of choices out there and we have to make sure that we do it better than the other guy. And for us in middle Tennessee, especially when I first started our vision statement is “we will be the mid-south premier convenience retailer providing a differentiated food and fuel experience that excites our guests and our team members by delivering top tier performance every day on every site, while leading in community support and involvement.” And if we can do that and we can live our vision statement out, those guests are going to continue to come back and with what we offer. I think they come back and they just keep coming back.

Carolyn Schnare:
I was intrigued about the program that Greg says has helped with a 10% increase in food sales so I reached out to someone at that company to hear more. This is Thomasin LaMacia, a Partner at Supplyit and Jera Concepts. Because Supplyit is interested in managing expenses as a means of increasing profit, I jumped right into the topic to ask her about food waste and keeping it under control.

Thomasin LaMachia:
Well, food waste can originate at the ingredient level with expiring items, preparing too much of something. The focus a lot of times in the convenience store channel is on the retail food waste. So it’s been made and it doesn’t get sold. That’s probably the bigger challenge that we tackle, but there’s definitely ingredient waste. And when you talk about, say a commissary, you can have just waste from the equipment or different types of ways, but let’s talk about first kind of what I think is the biggest challenge, which is managing that retail waste. So why is that such a challenge in this channel? I think the biggest reason is the convenience factor and the shelf-life factor. So convenience means somebody comes in, it’s hot, it’s warm, it’s fresh, they want to buy it. That’s convenient. But you have to know the trends and the patterns to get it right. Otherwise you’re putting out say too much food. And there’s a lot of ways because if you don’t expire things with their shelf life, then the product becomes…the quality of it degrades and people get a bad sense of your food. They’re like “I bought something there, it was awful.” So quality is super important along because that’s quality and the value. So how do you manage this? First of all, You need to know what am I going to sell on that? You know, so forecasting becomes really important. What am I going to sell? And then delineate that further. This is the more important thing with controlling waste and why it’s such a problem.

Thomasin LaMachia:
When do I make it? Because you can know that you have to provide 20 breakfast, egg, and cheese sandwiches, but if your window is four hours and your shelf-life is one hour, if you guess wrong on your traffic, you’re either shorting your guests and they’re coming in and not buying so you’re losing sales or you’re over-producing and wasting too much. So there’s this like really delicate balance between merchandising and freshness and appearance and not over wasting. And it’s a challenge. It’s probably one of the most difficult things that convenience stores deal with because of their convenience,

Carolyn Schnare:
That is a lot to digest, no pun intended. Thomasin in working with retailers, what would you say they pay attention to in order to make the most of employee time, of technology, and to satisfy customers,

Thomasin LaMachia:
Making it simple is key because we know right now labor is difficult, turnover’s high and you need anybody on the team to be able to execute because you don’t know who is not going to come in today. That’s the environment we’re living in. If execution of your foodservice program is difficult, you’re just not gonna be able to do it make it easy to be trained, give them tools where they don’t have to redo things, go from the computer, to plug into the printer, to record their…no. Having the right things on the shelf for the consumer at the right time. If you’re relying on employees for entering, there’s a lot of kind of babysitting making sure it’s right, because obviously if they don’t enter certain things like ways that makes them look better, maybe there’s a plan around it.

Thomasin LaMachia:
So you need to let the technology do it. And also that they’ll appreciate the fact that they don’t have to actually record it. Ringing by variety is huge, and this is a difficult one. Ringing by variety really gives us the basis for these forecasts. And we do have solutions around what I call category-level ringing. But obviously if you can ring by variety that is just going to make the plan better. And what I mean by, let me explain a little bit, category ringing would be like all of roller grill gets keyed under roller grill. So you just don’t really know what the makeup of it is underneath it to forecast. So you have to start using other other methods for determining that. So I think again, as people are going into this area, if there’s any way they can, can implement something that is ring by variety, where it’s scanning and making it easy for the person not to make an incorrect ring, those are all super important again for the accuracy and transparency in your solution.

Thomasin LaMachia:
So I think those…the use of technology in those ways, integrating systems. I mean, we have some commissaries where they invoice in us, the stores, and then they grab those invoices from us into their back office platforms. Again, taking out all that manual, back and forth. We can even bring data from our system into other systems. For instance, if they don’t have waste in their other system, but they want it in their other system, they can take it from us or vice versa. They’re recording it somewhere else. They can put it back into us. So a lot of looking at where the data lives, how it gets created and then passing it to the right platform so it can utilize it, report on it, make better decisions. I think that’s where technology is powerful. The next thing is just what I mentioned before, which is it’s gotta be easy to be executed. So if you have the best technology in the world, but the team can’t execute it, who cares? You know, we’re really focused on simplifying our user interface so that training is like ‘here’s your little video now, you know how to use it.”, Like again, turnover, right? You lose somebody or somebody has to step in, it should be easy. It shouldn’t be difficult.

Carolyn Schnare:
Let’s get past the basic monitoring and execution practices. What are some things that you’ve been focusing on recently?

Thomasin LaMachia:
This past year we’ve really focused on the when. So how do we look at sales by time and trend that based on some historical…well past four weeks, a year back…but we’re able to kind of take periods of time, basically usually built on shelf-life and say, ‘okay if your product is two hours and you want to…” This is an efficiency that I might not have mentioned, but let’s say you want your cooks to cook at five, seven and nine, then we’re going to say, ‘okay, in this window between seven and nine, on the average you sell 10 bacon, egg, and cheese, whatever, 15 breakfast burritos, et cetera. And that’s going to be based on your historical sales over the same day.

Thomasin LaMachia:
Let’s just say four weeks back,’ although that can be variable at four weeks back, it’s going to take that average and add in some kind of a waste factor because you don’t want to just forecast exactly what you’re going to think you’re going to sell because you want to have merchandise. So those are the components that we’re dealing with today. But again, I don’t, I think that what you bring up we are now kind of trying to figure LTO is like limited time offerings. We should trend those based on another common fact, another product, because we don’t have history on those things. You know, all of a sudden you introduce a new product or let’s say you promote a product, how does that affect other things in your chain? And I think the future of forecasting is fascinating and there’s a lot of things that kind of come into it.

Carolyn Schnare:
As we close out Thomasin. And do you have any advice to retailers getting started in foodservice or growing a program?

Thomasin LaMachia:
I think it’s really important to understand getting commitment and a champion. We’ve worked with a lot of groups where we don’t have that and they expect certain things to happen, but without that champion at the top – and this is talking about kind of rethinking or redesigning or designing an offering – if you don’t have that champion and that real buy-in from upper management, it just will not,…it’s going to be difficult for everybody and it’s very frustrating. So I think of all the things I’ve found frustrating, it’s either having it and losing it or just not having that buy-in and not wanting to work. We really do want to work with our customers as a partner. I mean, it’s just paramount to success. We feel like we’re part of their team, but we’re not in the company.

Thomasin LaMachia:
So sometimes it’s a fine line between knowing what you want to have happen and haven’t made getting it to work out. So if you can get that champion on your side, it’s going to really help with the foodservice program. Also again, I think people have to believe in the chain that this is going to reinvent them and create sales that they really do. They have to understand that it’s not going to be easy. It’s new and there are challenges with foodservice and there’s a lot of thought that should go into, like, how do we want to deliver this? You know, foodservice is challenging, but it can be really rewarding. So, doing the homework and putting in the effort and the controls and understanding kind of what the process is going to be…super important to success.

Carolyn Schnare:
Well, that’s it for this episode in this special series on convenience categories. We hope you learned some ways to increase sales and profitability of the category by managing expenses. We will be bringing you more episodes like this in the near future. If you have suggestions for categories to cover, drop me a note in the suggestion box on our website. While we talked a lot this week about preventing food waste at the source, sometimes, like our guests said, food waste is not only expected, but necessary. In next week’s episode, we’re going to talk with the retailers from Kum & Go who have mastered a food donation strategy working with local food banks in order to ensure the leftovers get to people in local communities who really need it. If you don’t already, subscribe or follow our show and let your phone do all the work of letting you know when we drop that and all our new episodes. Thank you for listening to Convenience Matters brought to you by NACS and produced in partnership with Human Factor and a special thanks to Greg, Jayme and Thomasin for their insights. To learn more, visit convenience.org.

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