C-stores hungry for food concepts
Which Wich has added four convenience store locations in the past two years, like this one, as well as franchisees in the Carolinas and Texas.
With super-slim profit margins on gallons of gas, more convenience store operators are turning to fast-food franchises to boost revenue. For the food operators, the challenge is to avoid being an afterthought.
Forget stale gas-station sandwiches. Convenience store operators are looking to bring in franchise food brands to lure more customers and boost revenue.
Leiszler Oil Co. operates 16 Short Stop and Phillips 66 gas station and convenience stores in Kansas. The company started out several years ago working with food service partners such as Hunt Brothers Pizza and Champs Chicken. Leiszler also had leased extra space to Subway and Wendy’s. But the company recently decided to add its own franchise food operation. The firm added a Which Wich franchise at its Manhattan, Kansas, store that opened in 2014 and a Dunkin’ Donuts that is set to open in early 2015.
“For us, we see a big increase in customer counts,” says Alison Leiszler Bridges, an executive vice president of Leiszler Oil. The food sales also help to drive additional convenience store sales for items such as drinks and chips, she adds.
Franchise brands such as Subway, McDonald’s and Papa John’s have been popping up at convenience stores, gas stations and truck stops for more than a decade. But that presence is growing as more C-store and gas-station operators look for ways to position themselves as a destination for food—and bring in added revenue. Part of that shift is due to the demand from consumers for convenient, quick, grab-and-go food.
Virtually every retailer from Best Buy to Michaels sells some type of food in their stores, at least pre-packaged snacks and drinks, says Jeff Lenard, vice president, strategic industry initiatives for the National Association of Convenience Stores in Alexandria, Virginia. “So, the next evolution with convenience stores is how do they offer more food-service sales?” he says.
C-store operators find that having a regional or national food brand on site helps to boost both customer traffic and revenue. The added business is attractive in an industry where gas margins are incredibly tight. The mark-up on a gallon of gas is about 18 cents per gallon, and after expenses that profit shrinks to about 3 cents per gallon, notes Lenard. “It is a cutthroat business and you make about 30 cents on a fill-up,” he says. “You can make an awful lot more on any item from a QSR. So there is great interest for convenience stores in getting that customer traffic.”
C-stores also are proving to be an attractive option for franchisors looking for expansion opportunities. Convenience stores generate about 1,100 customers per day, including about 300 at the pump and 800 who come into the stores, according to NACS. “If you’re a QSR, that is quite attractive,” says Lenard.
Checkers and Rally’s Restaurants have about a dozen locations within gas stations and convenience stores, such as BP, Citgo and Speedway. The company also has seen a notable increase in new franchise recruits with gas/convenience backgrounds. That’s because C-store operators “are seeing margin erosion in their business, and they are looking for an opportunity to use their existing real estate in a different way to get more profitability out of each square foot that they operate,” says Jennifer Durham, vice president of franchise development for the Tampa-based brand.
In fact, convenience stores and gas stations is a niche that Checkers and Rally’s has made a point to pursue strategically, adds Durham. “We find it to be a really nice infill in existing markets where we may not necessarily have an opportunity to put a restaurant,” she says. Checkers and Rally’s are able to locate within an existing building or on a property the convenience store operator already leases or owns, which helps to reduce the initial investment and ongoing operating costs for the franchisee.
Most franchisors look for many of the same core site selection criteria in a C-store location as in a traditional stand-alone store such as visibility and easy access. Checkers and Rally’s also has brand-specific targets related to overall population, daytime population, retail density and retail activity, median income and ethnicity for the trade area. “Those five things are really what defines success in our brand. So, we don’t compromise on those,” says Durham.
Which Wich has added four C-store locations in the past two years with Leiszler Oil in Kansas, as well as franchisees in the Carolinas and Texas. “All of those, to this point, have exceeded our and our franchisees’ expectations in terms of performance,” says Jeremy Cook, vice president of real estate and construction for Which Wich Superior Sandwiches.
The traditional Which Wich footprint is 1,600 square feet, and so far, the C-store locations that have opened are close to that prototype. The C-stores also use all the same furniture and fixtures, layout and design as a traditional store. Which Wich prefers locations that allow the store to have its own exterior signage, a separate entrance, a lobby and seating so customers feel like they are walking into a standard location. “We want something that has its own identity,” says Cook.
But not every potential location is the right fit for a franchise. “We don’t want to just drop a store in any C-store location. We really want to make sure it fits our brand standards and customers,” Cook adds.