Gross Profit And Product Selection In Hot Foods
In December, we had more stores reporting a decline in gross profits than in previous months. I asked some franchisees what they thought could be the cause of this decrease and one of their responses was, “We have too many promotions.” While it is true that we need promotions to help drive traffic into our stores, we are not obligated to run every single one. It is best to seek out those promotions that are fully funded by the vendor, that work best for your store and customers, and that generate the best gross profits. Also, I believe that properly managing your hot foods program will further help boost your bottom line.
When it comes to selecting which promotions to run, it’s a bad idea to click and accept all the promotions just so you could be done with that task. In my store, I go through each promotion to find out if they are fully funded or not, and to look at the return on gross profit. The fact of the matter is that sacrificing gross profit dollars in order to drive business on a non-funded program doesn’t have a positive affect on your store or your profitability. These are usually short promotions that don’t help you keep the sales momentum, anyway.
Additionally, going through the monthly POP, I encourage you to look through each promotion and designate the ones that are best suited for your geographic area and promote those that you feel will bring in the most traffic. I also recommend that you strongly advertise the fully funded promotions, which can be done without really sacrificing gross profit dollars.
Next, I suggest that you promote your hot food offerings by letting your customers know that we carry a great selection at a very good price. Show off your hot food items and have your employees promote them even further by bringing them to your customers’ attention. Pizza should always be part of your selection because it attracts many new guests. It’s a great product at a great price. Pizza is actually driving our hot foods business, and with that comes incremental sales.
Over time you will be able to fine-tune your hot food offerings by evaluating the data and deciding which products are not working for your store in terms of generating sufficient gross profit dollars. I believe that no one at SEI would argue that you cannot carry or drop a certain item as long as you have the sales data to back you up. So it’s important that you keep a record of each item’s monthly performance. It’s my hope that management at SEI are themselves evaluating the hot foods sales data throughout the country to help make deletions and bring in new products.
I believe that employing this strategy of carefully deciding which promotions to participate in and fine-tuning your hot food offerings will help you maintain a gross profit percentage you will be happy with. In the end, no one knows his or her store better than you, the franchisee, and ultimately any decision regarding promotions and hot foods is yours.