(Click here for previous CSP Daily News coverage of Subway's nontraditional location growth.)
As consumers have gotten busier and thriftier amid the recession, they have been increasing their visits to c-stores while reducing their visits to restaurants. Restaurant visits began slowing in 2007 and then fell 3% last year while trips to c-stores to buy food have been increasing at a year-over-year rate of 1% since 2007, according to the report, citing the NPD Group.
"A lot of people are working two jobs in this economy and are busier and busier, and convenience is becoming more and more important," Quiznos CEO Rick Schaden told the Journal.
Quiznos began opening mini restaurants inside gas stations and c-stores as BP, Chevron and Circle K last year and now has 175, the report said. The Denver-based company plans to double that number next year and then double it again by the end of 2012, for a total of about 700 locations, while also opening about the same number of traditional Quiznos restaurants.
Starting in March, Quiznos will serve breakfastcinnamon rolls and biscuit-and-egg sandwiches, among other thingsat its c-store locations to capture sales from customers who stop in for their morning coffee.
Adding Quiznos to c-stores enables the company to insert itself "in places that normally wouldn't support a traditional Quiznos, like service plazas, truckstops and urban areas," Schaden added.
The store operators, which become Quiznos franchisees, bear the cost of remodeling their buildings to accommodate the restaurant, with its ovens and, in some cases, small seating areas. Franchisees pay privately held Quiznos an annual royalty fee of 7% of the restaurant's sales and make a yearly advertising-fund contribution amounting to an additional 4% of sales.
"A lot of the risk is shifted to the store operator because of the franchise agreement, which provides a barrier of exit that makes it hard for an operator to switch to another franchise," David Bishop, managing partner of Balvor LLC, a sales-and-marketing consulting firm that focuses on c-stores, told the newspaper.
But if the franchise is well run, it can be a way to draw traffic to the c-store and boost margins.
"Their return on investment is a lot greater than having an aisle full of dusty mayonnaise jars," Shultz Hartgrove, senior vice president of convenience development for Quiznos, told the paper.
Gas stations only make about a 6% margin on gasoline salesa number that can be as low as 2% after credit-card fees are assessedwhile fresh food and beverages can ring up margins of more than 50%, according to Bishop.
Quiznos said its c-store locations generate almost double the sales per square foot of traditional Quzinos. The company projects that all of its c-store restaurants will generate a total of $250 million in sales by the end of 2012.
"We previously had our own deli, but it's a name-brand world and people want to know what to expect when they walk in the door," John Shambo, owner of Main Street Exxon in Northampton, Pa., who sought out Quiznos, told the Journal.
Since he opened a Quiznos in his c-store a year ago, he said, his foodservice sales have almost quadrupled. One of his potato-chip vendors has seen sales rise 25% during that time. And the increased visitors are buying more lottery tickets and other items, boosting Shambo's store sales 15%, the report said.
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