Article from Convenience Store News Magazine August, 1, 2008 Volume 44/Number 10.
While many c-store operators view foodservice a a panacea for their business, experts warn that rising costs of ingredients and financially strapped consumers are impacting foodservice operators both in and outside the convenience store industry.
Seattle-based foodservice consultant and special guest at CSNews’2008 Foodservices Best Practices Rountable, Dean Dirks, told attendees consumers are trading down in their choice of restaurants, and some quick-service restaurants (QSRs) are showing sales gains because of this, including McDonald’s and Arby’s, both of which saw a 5 percent increase in sales for the first quarter of 2008. Dirks also noted that mid-priced restaurants are poorly positioned in this environments.
To prevent a sales slump, QSRs are offering special promotions that are enticing customers to buy, including Subway’s recently extended $5 Footlong sub promotion and Dominos’ $4 pizza deal. However, such promotions are also reducing margins for franchisees. Dirks cited Subway, which was experiencing a 7 percent decline in sales before the promotion. While the deals caused sales to jump, it also created pushback from franchisees who said profits were down due to the additional food and labor costs to accommodate for the increased sales volume.
one roundtable attendee with Subway franchises in his stores, Chad Prast, foodservice director for Village Pantry, put the sales increase into scale. “There’s been at least a 50 percent sales increase” at those franchises in Village Pantry stores, he said.
Dirks also detailed some efficient operational strategies used by QSRs that c-store foodservice operators should take note of, including:
- Build smaller footprints and kitchens to cut energy use and increase efficiency.
- Keep separate profit and loss statements for labor allocations in foodservice vs. other store employees.
- Strive to get $8,000 a week in foodservice sales per store, and keep labor costs at 25 percent of that, even though with minimum wage increases, the number may be closer to 28 percent.