When it comes to foodservice, breaking with tradition can be good—and even offer a more sustained avenue of growth. This is especially true when it comes to signing with a foodservice franchise, where up-and-coming brands are focusing on the c-store channel as a fast, more economical way to get known in the crowded space.
Several factors are driving interest in nontraditional locations overall, says Aziz Hashim, president and CEO of NRD Holdings LLC, an Atlanta-based franchisee-sponsored and -managed equity fund. Among those factors include saturation of traditional sites and the need to find growth opportunities for mature brands. But for developing brands—those whose locations number in the hundreds, not thousands—it is especially attractive, considering the premium on real estate for freestanding locations.
“For emerging brands, it’s a quick and low-cost means for entry,” says Hashim. “These are high-traffic locations, a natural place for people who want to ramp up development. Nontraditional is all the rage—it’s how you find additional ways to get units visible to the public.”
Jennifer Durham, vice president of franchise development for Checkers Drive-In Restaurants Inc., Tampa, Fla., says c-stores are a recent nontraditional growth opportunity for the hamburger concept, which goes by the brand name of Checkers or Rally’s, depending on the region. She describes Checkers/Rally’s food—hamburgers, chicken wings and heavily seasoned and battered fries—as the type of food customers say they “would make at home if they could.”
The franchise, with 800 locations in most states east of the Mississippi as well as Texas, California, Nevada and Arizona, just signed on its first of six c-store franchise sites 18 months ago. These include Good Oil Co., a seven-store chain based in Winamac, Ind., which opened a Rally’s at its Warsaw, Ind., Good to Go store in July. For Checkers/Rally’s, one appeal of the convenience channel is that retailers are simply ready to go.
“They’re business owners, entrepreneurial, they certainly have great experience, and in many cases a significant amount of net worth behind them to have the financial capacity to grow,” says Durham. “They also make wonderful franchisees.”
The average Checkers/Rally’s is 900 square feet of kitchen with restrooms but no indoor dining space, and can be built into an existing c-store or next to it. Each employs 25 to 30 workers, including management. The total investment starts at $165,000, with an initial franchise fee of $30,000, and an ongoing 4% royalty fee on gross sales, which Durham describes as “very competitive” with the burger franchise average of 5%.
While c-stores show great potential for Checkers, there’s one critical element they must fulfill.
“Drive-thru is a critical component for us,” says Durham. “It’s what our brand is built on, and what we look for are sites that can have that.” In fact, the franchise has turned down c-store operators because they lacked the necessary lot size to flow traffic for a drive-thru.
According to Hashim of NRD Holdings, Checkers reflects the majority in this regard. “Drive-thru almost becomes a deal breaker going forward; so much foodservice business is done through here,” he says. Next on the list: facility size, ample parking, adequate egress and ingress, and the ability to strike a clear identity.
“They will want to look not like an afterthought, but will want their own exterior image,” says Hashim.
CONTINUED: Sandwich Switch
Sandwich Switch
Link Cook understands this dynamic well.
Cook, director of foodservice operations for E.J. Pope & Sons Inc., Mount Olive, N.C., had been looking for a sandwich franchise for two of the family-owned retailer and fuel distributor’s 40 Handy Mart stores, located throughout the Carolinas and Virginia.
While E.J. Pope was a happy Subway franchisee, its markets already had been saturated by the brand. Cook was looking for something different for two sites in Jacksonville and Cape Carteret, N.C.
Unfortunately, his first few attempts to sign on a franchise fizzled. “Every single one was interested in growing in eastern North Carolina,” Cook says. “As soon as I said I was director of foodservice at a c-store company, they immediately turned back on their heels.”
Cook believes this reaction was tied to negative connotations between c-stores and food. While acknowledging it has been a factor in the past, Hashim of NRD Holdings says the perception is changing thanks to the foodservice reputation of operators such as Sheetz and Wawa. He also points out that some mature brands may have existing agreements that prevent additional development around freestanding locations. Also, nontraditional sites tend to average fewer sales than freestanding locations.
“For a brand that has $1 million in average unit volume, a c-store is $600,000. That’s a tough decision,” Hashim says. Once a brand grants that license, it locks out territory for the surrounding half-mile, or whatever space is stipulated in the franchise contract. It becomes a balancing act for brands that want to grow but not short their growth potential.
Regardless of the reason, Cook found himself searching for a partner. Then a colleague mentioned Dallas-based Which Wich Superior Sandwiches, a sub franchise famous for its unique ordering system: Customers select their sandwich type and toppings on a brown paper bag printed with an ordering form. They then hand it to the cashier, who clips it to a zip line and shoots it down to the sandwich assemblers behind the counter. The stores have a bright feel, with stainless-steel, blondwood and yellow accents.
Cook liked the concept because it offered quality food, had millennial appeal and was straightforward to manage. But mainly, it was different.
“There are a lot of Subways around but not a lot of Which Wiches around,” says Cook. “We’re trying to grow our c-store brand. If I’m going to put a food concept on a c-store site, we’re going to find a site that will make sense for the c-store because that’s the main traffic driver.”
The Which Wiches are located in what Cook describes as a “snap-on” prototype, or two-unit strip center, with a 3,200-square-foot c-store attached to the 2,000-square-foot restaurant space. Both are connected by an 8-foot hallway and share restrooms, but each has its own entrance, parking and delivery door.
It’s a conscious choice on the part of E.J. Pope, and one that reflects Which Wich’s preferences. “One thing we’re adamant about was to not dilute the brand and its identity,” says Jeff Vickers, senior vice president of development for Which Wich Superior Sandwiches. The franchise has 300 locations across the United States, as well as a few international sites. With the two Handy Mart locations, Which Wich has four c-store sites so far.
For Which Wich, nontraditional locations such as c-stores have given them an additional development path.
“The markets we’ve gotten into have been smaller markets where traditionally we may not have an opportunity to do a store,” says Vickers. “It gives us flexibility to really build the brand from an awareness standpoint and capitalize on real estate from c-store investors. It’s given us an opportunity to really diversify the brand.”
While the traditional Which Wich averages 1,600 square feet, the c-store locations have averaged about 1,000 square feet with 20 mostly part-time employees. They are completely self-contained, including the back of the house, kitchen and seating. Start-up fees average $300,000 with a $30,000 franchise fee, 6% royalty fee and 10-year franchise term.
And Which Wich is also introducing drive-thrus to its concept, with digital kiosks where customers can place orders. The sandwich chain has three locations with drive-thrus in Florida and Illinois. C-stores that have space for a drive-thru will be at an advantage, says Vickers.
As a c-store pioneer for Which Wich, E.J. Pope is happy so far with the fit and its performance as a nontraditional location.
“We were the first c-store location, and Which Wich didn’t know what to expect,” says Cook. “We knew what to expect.” Both sites are enjoying above-average unit volumes; the Cape Carteret site, which is in a tourist area, is seeing 60% to 70% higher-than-average sales during the summer, says Cook. E.J. Pope is planning two more Which Wich sites for 2015 and 2016.
CONTINUED: Pioneering Pita Pit
Oh, Pioneer!
Similar to E.J. Pope, Elliott Oil found its new franchise partner after failing to seal an earlier deal. The Ottumwa, Iowa-based retailer owns 17 c-stores in Iowa and Missouri; it has Godfather’s Pizza franchises, as well as sites connected to McDonald’s and Arby’s. But as Andrew Woodard, vice president of Elliott Oil Co., explains, it was looking for something different for its new build in Ottumwa, which already had two Godfather’s Pizza locations. Then that chain’s foodservice director asked Woodard if he was familiar with Pita Pit. The concept is centered on made-to-order pita-bread sandwiches with Mediterranean-inspired meat and vegetable fillings, cheeses and sauces. It has 200 locations in the United States.
The healthful angle of the offer appealed to Woodard, especially considering the potential appeal to students at Ottumwa’s junior college, and a local hospital.
“We feel like it will be a very attractive offer because it’s fast food that you can feel good about,” says Woodard. “There are 20 traditional American cheeseburgers and sandwiches, but Pita Pit is more of a fun Mediterranean sandwich with different types of fillings.”
Pita Pits average 1,000 to 1,500 square feet, which includes counter space, a prep and make table, griddle, walk-in freezer and refrigerator and storage racks. Elliott Oil’s Pita Pit will have four tables, offering dining for more than 12 at a time, as well as a seating bar at the store’s front window and Wi-Fi. It will employ a full-time manager with four to eight part-time workers.
Potential locations need good egress/ingress, high vehicle or foot traffic and visibility, among other criteria. Startup costs average $187,000 to about $315,000, with $25,000 franchise fee, 5% royalty fee and 10-year franchise agreement.
With the Ottumwa site, Elliott Oil will be among only a few c-store franchisees for Coeur d’Alene, Idaho-based Pita Pit USA, and the first Pita Pit in the southeastern part of the state. The store will also have a walk-in beer cave, along with a first for Elliott Oil: a frozen-yogurt bar, featuring Honey Hill Farms frozen yogurt sourced through wholesaler Farner-Bocken.
As a pioneer, Elliott Oil has had an opportunity to educate Pita Pit on the intricacies of the c-store business. For example, when Woodard asked the franchise for permission to advertise his new restaurant on a local highway department of transportation sign, “They said, ‘We never had anyone do one of those,’ ” he says.
Cook of E.J. Pope had a similar experience after he asked about advertising the Which Wich restaurant on his fuel pumps, a tactic for which the franchise had not yet developed marketing material. “If I ask a question they’ve never come across because there are only 300 locations, they’ve got to have a quick meeting about it and say, ‘What do we want to do?’ ” says Cook.
At the same time, he appreciates the accessibility of a small franchise. “With Which Wich, they have the ability to be more responsive because they’re smaller,” he says. “If I need to get someone, I just pick up the phone and they’re there.”
It’s a responsiveness that reflects the value emerging foodservice brands place on the potential of the nontraditional channel, says Hashim of NRD.
“The foodservice industry is very cognizant of the reach of c-stores,” he says. “That’s a ton of distribution points. They also have the power to sell a lot of food on their own, and that can cut into foodservice revenues. It’s good for both parties to work together.”
CONTINUED: An Untraditional Three
An Untraditional Three
Checkers/Rally’s
- Headquarters: Tampa, Fla.
- The concept: Burgers, chicken sandwiches, chicken wings, seasoned fries and shakes
- The sell: “Crazy good food.”
- Total investment: ~$165,000
- Franchise fee: $30,000
- Royalty fee: 4%
- No. of U.S. locations: 800
- Nontraditional notes: Drive-thru is a critical component of this franchise, so interested c-store retailers would need room on their lot to be considered.
- More franchising info: checkersfranchising.com
Pita Pit USA
- Headquarters: Coeur d’Alene, Idaho
- The concept: Made-to-order pita sandwiches with Mediterranean-inspired fillings
- The sell: “Fresh thinking, healthy eating.”
- Total investment: $187,000 to $315,000
- Franchise fee: $25,000
- Royalty fee: 5%
- No. of U.S. locations: 200
- Nontraditional notes: This franchise looks for locations with good egress/ingress, high vehicle or foot traffic and visibility.
- For more information: pitapitusa.com/franchise
Which Wich
- Headquarters: Dallas
- The concept: Sandwiches made to order; customers order by filling out form printed on sandwich bags.
- The sell: “Crave interesting."
- Total investment: $300,000
- Franchise fee: $30,000
- Royalty fee: 6%
- No. of U.S. locations: 300
- Nontraditional notes: Which Wich prefers a separate space, entrance and parking for its concept. It is looking for nontraditional spaces that can accommodate a drive-thru.
- For more information: whichwichfranchising.com
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