Top 202: Foodservice Analysis

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Rutter's Farm Stores

Execute well or fail trying. The ability to create consistent, high-quality foods every day and in every store is the secret ingredient of c-store foodservice.

That’s the view of industry foodservice expert Jerry Weiner, who observes that retailers are moving faster and “getting there much quicker” in recent years.

“Chains realize this is a category that will deliver when they deliver, and they are getting into it,” says Weiner, consultant and former foodservice director of Rutter’s Farm Stores, York, Pa.

Those who succeed have been able to create and support a foodservice culture, he says. Failure often falls on those who don’t grasp that foodservice is a different business that demands its own P&L, says Weiner, who retired from Rutter’s in 2015. “You can’t run food like you run the c-store,” he says.

Foodservice winners

Foodservice

Our Top 202 foodservice clusters show that the clear foodservice winners are still a small group. Only 10 retail chains generate more than $500,000 per unit annually in foodservice sales (not counting revenue from franchise QSR units). But a positive note is that 52 companies representing 27,228 stores are generating $250,000 to $500,000 in foodservice revenue per unit. And the lowest end, those generating less than $150,000 per unit per year, represents 8,176 stores.

Consumer attitudes

Millennials eating food

Overall, there are optimistic signs that consumer attitudes about c-store prepared foods are changing. Technomic data shows a bit more than half of consumers (56%) in general say c-stores are just as capable as restaurants in offering fresh foods and beverages, with 67% of millennials and 60% of Gen Zers in agreement. And the share of consumers who say they are purchasing foodservice items in c-stores has risen 9 percentage points since 2013 to 29% in 2016.

“The future consumers were not alive when c-stores were selling 21-day-old sandwiches and brown water,” says Weiner, “so there’s no negative perception to overcome.”

The well-documented trend in snacking during the day is also driving changes in c-store foodservice. Smaller portions of hot foods are satisfying the snacker both in the hot-foods case (chicken wings, onion rings and other appetizer-type items) and the grab-and-go cooler, where better-for-you items continue to gain traction.

Some of the latest trends in food, as reported by Technomic in its Hot Concepts Q4-2016, are suitable for c-stores. These include customizable bowls with fresh ingredients and toppings, and sandwich “bites.” Online ordering and takeout also offer opportunity. Nearly half of all consumers (47%) say they would use call-ahead ordering, and 41% say they would be very likely to use online ordering for takeout orders if it were offered.

Technomic’s 2016 Takeout & Off-Premise Dining Consumer Trend Report reveals that  younger consumers are the ones driving takeout business at c-stores. More than three-fifths (61%) of 18- to 34-year-olds order prepared food or beverages to go from c-stores at least once a month, compared to 42% of consumers overall.

Manufacturers also earn a nod for their efforts in the channel. “They’ve seen the huge potential” and are creating equipment with smaller footprints, easier labor requirements, faster cook times and attractive designs, Weiner says.

1. Hungry Travelers

Buc-ee’s

On the road and looking for a bite? The Hungry Travelers have you covered and will take your foodservice dollars, thank you very much. This cluster of 10 companies generating the most per-unit foodservice revenue represents only 3,400 stores, but the size and volume of the stores is what matters. These 10 chains average way over the cluster’s half-a-million-dollar parameter, at $1.6 million in foodservice revenue per unit per year. Compare that to the average for the Top 202 at $275,000. They average 7,700 square feet vs. the 3,050 Top 202 average.

Peruse the list, and two characteristics stand out: truckstops and Buc-ee’s.

Truckstops make up nearly half of our top 10 foodservice sales generators. In terms of methodology, Technomic’s DRL does include a chain’s proprietary restaurant concepts in its numbers, but not franchised QSRs, which would boost their foodservice revenues even higher. Buc-ee’s, with only 32 sites, takes foodservice revenue to new heights, with stores topping 30,000 square feet and full-service restaurants inside. Other members of the cluster segment are QuikTrip, Sheetz, Thorntons and First Coast Energy (Daily’s).

The Hungry Travelers benefit from the size of their traveler-and-trucker-customer base. A few offer proprietary programs that show they have learned how to craft menus that meet their customers’ demands for taste and convenience, and how to execute consistently at every store, every day. But more square footage definitely translates to more dollars in foodservice. And it’s a fairly small group: Hungry Travelers make up 5% of the companies on the Top 202, and its stores represent only 7% of all the stores operated by the Top 202.

2. Taste of money

Casey's foodservice

Size does matter. Store size, as well as the size of the chain, affects foodservice performance. So before addressing Taste of Money, an examination of the chains making the most money off foodservice is in order.

Stores that fall into higher-square-footage specs are the fastest growing within the Top 202, with those bigger than 4,000 square feet adding nearly 12% more units in 2016 vs. 2015. Compare that to the average unit growth rate of 6.8% among the Top 202 overall. Now layer foodservice revenues on top of that, and larger stores are generating considerably more foodservice revenue per unit and more revenue per square foot. But this 4,000-square-foot-and-up group is a small one, making up 11% of the total Top 202.

Another group of stores, those in the 2,000- to 4,000-square-foot range, is more the norm. Ninety-four companies strong, the Taste of Money cluster represents the most  stores (32,512) when segmenting the Top 202 by foodservice sales and square footage, with an average store size of 3,200 square feet.

These stores often have been remodeled to make room for more foodservice, pulling space from other less-profitable categories. And it’s enough room to create a viable offering. On the basis of foodservice revenue per square foot, these chains generate an average of $75. The average annual foodservice revenue per unit is $245,000.

Representative chains in the cluster include Wawa and Casey’s, with the former focusing on in-store delis and the latter developing a takeout specialty in pizza. Others are Giant Eagle Convenience Division (GetGo), Huck’s and Wallis Cos., which got a commissary this year with the acquisition of U-Gas. This is not to preclude c-store giants 7-Eleven and Circle K; while not known for their innovative offers, they have brought scale to grab-and-go food, roller grill and hot snacks.

It’s no surprise that stores across the industry are getting larger as c-store operators invest more space in properly executing foodservice. Many new-to-industry units are topping 6,000 square feet, but it will take time for more chains to hit that lofty range. Those there today generate an average $975,000 annually in foodservice revenue per unit, and an average of $105 per square foot, with the top skewed by megastores such as Buc-ee’s. ( Click here for more on these players.)

The chains with stores smaller than 2,000 square feet have the least flexibility in generating foodservice dollars. A big part of the industry is in this segment, with 43% of the Top 202 companies operating smaller stores. But brands such as Enmarket, NOCO, Family Express and Dodge’s Stores prove it can be done, pushing the average foodservice revenue per square foot to $80.

Top foodservice performers

Sheetz

While travel centers dominate this list of top foodservice-revenue-generating companies (presented alphabetically) on a per-store revenue basis ($500,000 and over), the presence  of top-performing c-store chains is a testament to the industry’s potential for foodservice greatness.

  • Buc-ee’s
  • First Coast Energy (Daily’s)
  • Love’s Travel Stops & Country Stores
  • Meijer Gas Stations
  • Pilot Flying J
  • QuikTrip
  • Road Ranger Truck Stop
  • Sheetz
  • Thorntons
  • TravelCenters of America