Sac-N-Pac Opening Eight Schlotzsky's Delis

Retailer looking beyond fuel, c-store products to foodservice for revenue

SAN MARCOS, Texas -- Sac-N-Pac Stores Inc. has purchased eight franchise agreements from Schlotzsky's to open delis in its convenience store/gas station locations in Kyle and Buda, Texas, as well as other markets, reported the Hays Free Press.

The first eatery is targeted to open March 16 in Buda.

Two more restaurants will be coming soon to Kyle, Raymond Cavazos, Sac-N-Pac's director of food operations, told the newspaper. "Schlotzsky's had their issues," Cavazos said, referring to the deli chain's bankruptcy filing. "They regrouped, were purchased by Focus Brands and are up to about 240 stores. They're up and coming."

Nationwide, the deli chain has plans to open 50 to 60 stores this year alone, he noted. Sac-N-Pac expects to break ground next month on a combined gas station and Schlotzsky's, with a planned opening in June or July.

For its second Schlotzsky's restaurant in Kyle, Sac-N-Pac is considering an existing store, Cavazos said.

Each restaurant will share a building with the fuel/convenience retail store and have its own entrance, a separate drive-thru and a connected pass-through in the building, said the report.

Cavazos said changing markets have driven Sac-N-Pac to look beyond fuel and traditional c-store products for revenue.

"Before, if you needed a loaf of bread or a gallon of milk, you would typically go to a convenience store," he said. "Now you have so many options. You can buy milk or bread at CVS or Walgreens or a dollar store. The market share is shrinking, so the national trend for owners of convenience stores, everybody's leaning toward restaurants as a draw."

The company does not consider sales at the fuel pump a strong moneymaker, he said, so Sac-N-Pac has extra incentive to find new ways to lure customers into its 45 stores for inside sales on higher-margin products.

"If you have a restaurant at your store, somebody who might not typically go in might walk over into the store to buy something," Cavazos said. "You consider that an incremental sale."

Sac-N-Pac is also undergoing a rapid expansion in its own right, the report said. Earlier this month, the company opened a convenience store and Quiznos near Uhland, Texas. Company officials are also discussing plans for a store behind the CVS in downtown Kyle, added the report.

"We're talking about putting a store and restaurant there, but it's probably a couple years out," Cavazos said.

Schlotzsky's, formerly based in Austin, Texas, filed for bankruptcy protection in 2004 and closed numerous delis in the process. Atlanta-based Focus Brands, the parent company of Carvel and Cinnabon, has owned Schlotzsky's since 2006, according to the report.