The Business of Bulk

Is a commissary right for your foodservice operation?

Abbie Westra, Director, Editorial, CSP

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It’s control. It’s distraction. It’s a point of differentiation. It’s a liability.

It’s a commissary, and for many c-store retailers, it’s the solution for bringing foodservice into their busi­nesses. Some build their own commissary and distribution centers, while others partner with a third party to receive product to unique specifications. Both camps face a deluge of steps before the first cookie rolls down the conveyor belt.

CSP spoke with retailers, consul­tants and equipment manufacturers to chart the critical steps needed to build a commissary-based foodservice pro­gram. Within these steps lies the answer to whether a commissary is right for you.

A Tale of Two Retailers

Walk into a Stinker site in Idaho, and you wouldn’t suspect the chain has an entire wholesale distribution arm, Arrowrock Supply, spawned from a back-room kitchen.

It started in 1986, when the Boise-based chain built a store with a large back area meant to be prep space.

“The idea was the graveyard person would have extra time on their hands, and they could make sandwiches for that store and some of the others in the Boise area,” says Shawn Davis, co-owner and COO of Stinker Stores.

The idea took off, and at one point 11 staffers and a dedicated manager worked out of that kitchen. “We got to the point where we just outgrew the space, so we leased a commercial facility in an indus­trial park,” says Davis. The site focused on baked treats and sandwiches, delivering products 300 miles north and 300 miles east of the facility.

The commissary business continued to grow, and in 1991 Stinker Stores went all in. It moved across the street to a 32,000-square-foot facility with a large commercial kitchen amid a warehouse operation housing grocery, tobacco and candy products.

The wholesale center brought distri­bution under Stinker’s control, but there was another element to the growth. “To be honest, the business model wouldn’t have worked if we hadn’t gotten some outside accounts very quickly,” says Davis. The company received big business from vending companies such as Canteen Vending Services, “[which] allowed us to have the volume and critical mass to buy right and produce efficiently.”

At its peak, Stinker was making upwards of 2,000 sandwiches and 3,000 cookies a week. Since then, the vending business has waned due to other factors, and Stinker has downsized a bit. It ser­vices about 80 outside accounts plus 65 Stinker stores.

About 13 full-time employees work in the commissary, making products under the Petticoat Pantry label and Stinker Stores’ own Polecat Pantry brand.

“All in all, it’s a great business,” says Davis of the commissary. “We’ve always thought of it as a point of differentiation.”

Meanwhile, across the country in Massachusetts, another retailer saw the commissary not as an opportunity but as, frankly, a distraction. Nonetheless, it’s a necessary one.

Tedeschi Food Shops, Rockland Mass., purchased its commissary partner, DSD1, in 2011 after the companies worked together for two years. “We wanted control over our destiny,” says Joe Hamza, vice president of sales and marketing for the 194-store chain. “Our fresh-food initiative is strategic in nature, and having control from point A to point Z is extremely imperative to us.”

Running the commissary has proven to be more efficient, more consistent and even profitable for Tedeschi. Hamza attri­butes the success to one element: volume. Tedeschi stores move a lot of foodservice items, so vendor costs are reasonable.

Owning the commissary and dis­tribution also allows for flexibility and control. Anything can be put on those trucks, and similar to the operation at Stinker Stores, they can be used to dis­tribute other products as well.

Tedeschi recently partnered with another commissary, one that special­izes in heat-and-eat Middle Eastern and Indian entrees. Flavors include chicken curry, saag paneer and channa masala, retailing for $4.99. The company drops the product at the commissary, and Tede­schi gets it out to the stores.

Tedeschi’s foodservice team knew it couldn’t manufacture this type of prod­uct itself. “To do something like that internally would be very costly. Why do that when you can have partnerships with these companies that don’t have distribution so you can bring to market a really unique product, and not just as another retailer carrying Middle Eastern or Indian food?” says Hamza. Unlike Stinker Stores, Tedeschi isn’t making products for any outside accounts. The company is busy with its own growth trajectory, including an upcoming move into a larger facility.

When Tedeschi was deciding whether to purchase the commissary, it found most retailers were going the opposite direction, forming relationships with outside commissary partners vs. running their own. “So we’re bucking the trend in that manner,” says Hamza.

And trend bucking isn’t easy. “[The commissary] takes you away from your core business,” Hamza says, “so you have to have a strategy for how you’re going to keep your business running and keep focusing on innovation and new prod­ucts, while also managing a commissary.

“But the advantage—if you think fresh food is part of your strategy, then you have to have control over it. I believe in that,” he continues. “The ingredients, the quality, the distribution and the frequency: That’s your competitive advantage.”

Doing the Due Diligence

Still think you want to run a commissary? Gather some critical tools to help you make the right decisions.

  • Hire a Consultancy: A soup-to-nuts consulting firm can equip you with an ROI analysis to show to your bank, along with design schematics, equipment expertise and even food-safety programs.
  • Build Your Menu: You won’t know what type of equipment you need until you have a menu.
  • Know Quantities: Steve Young, principal and director of design for Wil­liam Caruso Associates in Denver and member of the Foodservice Consultants Society International, recommends deter­mining the units per day of each item you need to sell. Hamza of Tedeschi recom­mends using reverse engineering to deter­mine what your retail price will be based on production and distribution costs.
  • Calculate All Costs: Speaking of costs, many factors need to go into any production analysis, including the costs of building, equipment, utilities—which may be shocking once all that equipment is up and running—staffing and ingredi­ent purchasing. “These guys aren’t typically used to buying raw food product, so they may be going to a different vendor and they may not have the buying power that a grocery store or restaurant may have,” says Young.
  • Consider Your Geography: How far you are delivering and how often you can get to each store will affect what products you can make and how you transport them.

Distribution costs could also send you reeling. Distributors’ costs are much lower because they are delivering to hundreds of stores. “If your stores are apart, I would not recommend it whatsoever. Or you might have a distribution partnership with someone else, so you take the cost manage­ment away from you,” says Hamza. “No matter how well managed it is, it will still be inefficient when you compare it to an established distribution model.”

The Equipment Equation

Outfitting a commissary with the proper equipment depends on the menu, the distance to stores and any amount of prep that is completed at the store. Regardless, you’ll likely need products for the following stages:

  • Food Holding: reach-in or walk-in freezers or refrigerators to store the prod­uct before and after preparation.
  • Prep: prep tables, undercounter coolers/freezers, mixers and chopping/ slicing tools, warewashers. Certain baked goods will require proofers, retarders and other specialty equipment.
  • Cooking: convection ovens, steam­ers, combi ovens, rotisseries, grills and deck ovens. Young recommends asking yourself, “What can I do to economize?” If you have five items to be cooked, can you cook more than one in a multi-use oven such as a combi oven, or does your quantity require separate methods, such as a steamer oven for one item and a con­vection oven for another?
  • Transportation: speed racks, dol­lies, carts, holding cabinets that may need to be insulated.

Temperature is a critical aspect of food safety and should guide your equipment purchases and production process. Blast chillers or freezers may be needed to get food out of the danger zone (40 to 140 degrees Fahrenheit) of microbial growth quickly and safely. Set up prep areas to make all food handling safe and efficient.

Sheer quantities will also open up new categories of equipment to you. Tilting kettles cook upwards of 80 gallons of soups, sauces, stocks and stews at a time. Tilting skillets can grill, fry, simmer and braise large quantities. Floor mixers can hold up to 140 quarts of your soon-to-be-signature pizza dough. And don’t think your flashy high-speed oven will work in the commissary; leave that in the store, where its small-quantity production makes the most sense.

When developing the menu and creat­ing your wish list of equipment, consider what will be done at the store.

“There’s going to be elements you’ll want to do from scratch, elements you want to do speed-scratch (use of conve­nience products to eliminate time and labor during prep), and other elements you just want to finish at the store level in front of the customer—the theatrical element,” says Alison Cullin-Woodcock, corporate executive chef for Manitowoc Foodservice, New Port Richey, Fla.

For Stinker Stores, no hot foods are transported to stores. Instead, items such as chicken, jojos (potato wedges) and corn dogs are prepared on site. If a store can’t cook its own food, says Davis, it doesn’t get hot food.

“The commissary lends itself well to making take-and-bake pizzas, things that are more manufacture-style food as opposed to prepared food,” he says.

Safety First

Perhaps the scariest part of running a commissary—yes, scarier than the oven that costs more than a Lexus—is food safety.

“It’s a whole different mindset, and you’re crazy if you don’t bring people with foodservice background in to handle this,” says Davis. At Stinker Stores, the commis­sary foodservice manager is responsible for the entire food-safety program.

At Tedeschi, bonuses at the commis­sary are weighted heavily on food-safety goals and guidelines.

What’s more, food safety isn’t run on an honors system. Once a company steps over that line into food production, it is treated quite differently by health inspec­tors, the FDA and the USDA.

“You can do a lot of things on site that you can’t do at a commissary,” says Davis. “We can’t use tortillas because of FDA regulations. To make a tuna fish sandwich, you need the same stringent HAACP program that you would have to sell exotic Japanese blowfish.” A single store could make all the tuna sandwiches it wanted; for Davis, it’s cost-prohibitive.

Food safety is another area in which the right consultant can create a com­plete program with handling protocol, date coding, and time and temperature conditions.

Meeting Your Match

So you’ve run the numbers, and building your own commissary just isn’t in the cards. How do you go about finding the right commissary to partner with? By asking many, many questions.

“Do they have the capacity and room to expand? Do they have the staffing to make quick changes as the menu devel­ops? Typically, central commissaries are set up to do batch production for a very large quantity,” says Cullin-Woodcock. “If you just wanted 50 stores worth of product, will they have to set up a separate line for you? Who is going to administer the process? How is going to handle HAACP? How will they get the products to you?”

Jason Prondzinski, vice president of national accounts for ITW Food Equip­ment Group, Glenview, Ill., stresses one big thing: “Food safety, food safety, food safety,” he says. “It’s not the commis­sary that will take the fall [if there’s a food-safety crisis]—it’s the Wawa, or the 7-Eleven. They’re going to go after the big name, not Joe’s Commissary.”

Davis advises looking for a partner large enough to do the job efficiently, but not so large that it can’t cater to your needs. Also, see the facility—top to bot­tom: “Spend an entire day there, watch an entire production line happen,” Davis says.

Hamza recommends agreeing on product specs before entering into the relationship. And above all, seek quality and uniqueness—items that will set you apart from competitors.

“Choose a partner that is reputable and hold them to the specifications and standards through quality management [programs],” he says.

Quality, control, safety, point of dif­ference: Apply these elements of a com­missary operation to your business and determine … is it worth it?

Call of Duty

A menu will drive your equipment needs. Here are some common menu items and the equipment required to do the job, courtesy of Alison Cullin-Woodcock, corporate executive chef for Manitowoc Foodservice, New Port Richey, Fla.:

  • Sauces and soups: A steam-jacketed kettle, ideally something with an auto­matic tilt/power lift; blast chiller or freezer to bring the food down to a safe storage temperature; speed racks, dollies and carts to transport big batches to and from the kettle and storage cooler/freezer.
  • Pizza dough: High-quality scale, floor mixer, proofer and retarder; if par-baked at the commissary, rolling system, deck oven or combi oven set to dry heat, refrigeration, packaging equipment.
  • Meat for sandwiches: a tumbling/ marinating system; walk-in cooler space; cooking equipment based on preferred method (a combi oven allows you to cook in bulk while retaining moisture); a rapid-chill system; and slicers to cut the meat for final sandwich building.

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