Convenience Quick Serve, A New Store Strategy
At the most recent National Coalition Board of Directors meeting in Ponte Vedra Beach, Florida, FOA presidents, vice presidents, and vendors had the chance to hear about a new store strategy from SEI Vice President of Merchandising Jesus Delgado Jenkins. The strategy represents a pulling together of resources, and a redefining of food retail channels to include a new class of retailer, “Convenience Quick-Serve.”
Jesus told the Board that three trends are defining the business today: cigarettes are in permanent decline (minus 4 percent per year), food on-the-go is increasing, and customers are looking for value. While c-stores have grown 5 percent in sales over the last five years, units have declined 11 percent, traffic counts have declined 10 percent, and fresh foods has grown to 8-11 percent of total sales.
Operating strategies, he said, have to protect traditional categories like coffee, beer and tobacco while we drive other parts of the business. So when the economy is contracting like it is now, one objective should be to increase business in the store in unit share rather than dollar share. Our retail objective should be to increase sales by giving our customers more value and more compelling reasons to come to our stores more often.
To describe the company’s new strategy, Jesus coined a new term for retail food channels, called Convenience Quick Serve. This is a combination of the terms c-store channel, and QSR (quick-serve retailer, MacDonald’s and Dunkin’ Donuts). For 7-Eleven, becoming Convenience Quick Serve involves a new Concentrated Market Rollout (CMR) strategy to drive traffic, build profitable sales and create new business.
According to Jesus, with the CMR strategy, SEI will concentrate on amassing resources in a market. Over the next 18 months, market by market, beginning in the Northeast and Pacific Northwest Divisions, SEI will AQIP all the stores, add hot foods and updated coffee service, and then apply a large dose of advertising and media support. The result will be to present one face to the customer for all the stores in the market with modern equipment, and hot foods, supported by advertising. The areas of focus for franchisees, he said, are “fresh, well-stocked, clean, friendly, and plus selling.”
There is something new here that is different from the way we looked at things in the past. This seems like a more coordinated strategy than when SEI would AQIP a store here and there, replace a grill, or install a new coffee program without a coordinated advertising strategy for support. Now, when a store goes through changeover SEI is not going to install the new hot foods program based on your grill sales. Now the company will go to market by having every single store in that geographic area on board with a more modern look, hot foods and the new coffee program. SEI is looking to have an impact by presenting the same customer experience at every store in a geographic area, and supporting these stores with advertising.
Perhaps the biggest drawback to this strategy is that we don’t have it implemented already. Then again, the process is to learn and refine implementation as we slowly go across the country, and the casino games program evolves and improves as it rolls into different markets. According to Jesus, hot foods could be a big factor in attracting people into our stores. Quick-serve is a $600 million dollar business, and when compared to cigarettes, a $40 billion business, the tradeoff looks pretty good.
Unfortunately, implementing a strategy is not the same as talking about it, but I am ready to try anything to revitalize our business in the face of merging channels and 10 for $10 sports drinks at drugstores, and 69 cent coffee all day at MacDonalds. We want a piece of their business, and we are already in convenience, so quality hot and fresh foods could be a good fit.
Now the downside. Jesus wants us to be clean, clean, clean. Clean enough to eat off the floor. We have to be well-stocked 24 hours a day, we are supposed to “welcome” our customers as opposed to “greeting,” and our clerks must all plus-sell one additional item to each customer. Jesus also talked about building a franchisee foodservice culture. He wants us to focus on four strategic businesses—proprietary beverages, fresh foods, private label and services.
Variations on this concept have been tried before, and we are still living through the last one, the CDC, which is not living up to its promise of the freshest product at the lowest prices, and everyday store delivery. The CDC has yet to generate additional or more profitable sales. After 10 or more years of the CDCs we are still only about 8 percent fresh foods at best.
I am happy to report that the National Coalition has been working on eliminating the CDC flat fee in those areas that have it, and Bill Merrigan, VP Operations for SEI, announced a new pilot for eliminating the CDC flat fee and the rollout of the pilot over the next several months. Instead of the flat fee, franchisees will have a distribution percent charged and a real cost of goods. Heavy products, like milk, will be charged as heavy products, and lighter products, like pastry, will be charged as light products. Easier to handle and easier to transport items will have smaller distribution costs. We can look at it as a positive step.
Still, at the end of the day franchisees are in a “wait and see” pattern, because we have heard about great programs before. This time, we want financial details on how the CMR program works, and we want positive results.