The Growth Of Fresh Foods
As you all may be aware, SEI has set a goal to have our fresh food sales make up 20 percent of all our sales by next year. As it currently stands, there is some uncertainty within the franchisee community that this objective will be achieved.
Customer’s perception of 7-Eleven is the key to this whole endeavor. If we are not pulling additional guests from the street and somehow making them feel we are a fresh and hot foods destination—whether it’s lunch or dinner—it will be very difficult to reach that goal. Primarily, when someone is going by our store or making the decision to pull into our parking lot, the first thing they look at is our storefront, which has not changed in years. Our stores look the same as they did 20 or 30 years back.
I understand we are a huge company with many units and it’s tough to change everything, but we should be making gradual progress towards upgrading our outdoor physical plant. Up until late last year, we were under the impression the CMR program was being reworked and redesigned to have a bigger impact on how we look from the outside, and then it would be rolled out the beginning of this year. However, the news from the facilities department is that there are no current plans to roll out another CMR or similar program. The focus is back to rolling out more hot food to stores or hot foods equipment. It appears everyone understands we need more CMRs, but somehow we are not ready to commit the money.
The hot foods program seems like a big component of SEI’s growth plan, but it continues to be challenging for a lot of stores. Some stores do a great business in hot foods, but many struggle despite their best efforts. Maybe we need to look into another cook-to-order strategy or some other plan that would allow everyone to offer hot foods 24-7. With the new oven, it’s possible to cook-to-order. Most of the food that we serve is cooked within three minutes. Fresh product cooked right before your eyes, from a guests’ perspective, is a positive thing. So cook-to-order is not a bad strategy. We have the equipment and we have the tools.
The other challenge we are facing with hot foods is we are selling product at a very aggressive retail, and we have to be careful about how long we can continue to do that. With this big push to keep our hot food cases full, we are writing off a lot of product because it is time sensitive—expiring within an hour or two, then it needs to be thrown away. Write-offs are affecting our gross profits. Also, with the aggressive pricing on pizza and tacos we are not making much GP. On a $5.55 selling price, we might make 40 cents. We understand we need to promote these items at these prices in order to get the market, but we need to be careful how long we keep these promotions. If you get people used to buying a pizza for $5.55, the moment you raise the price so you have a decent margin guests will feel you are gouging them because are used to the lower price.
Another element affecting the success of the fresh foods program is advertising, which also remains a challenge. Everyone agrees we should advertise just like our competition does, but right now we are limited to our POP/POS and in-store advertising rather than a full-scale media blitz. Also, despite the company’s push for franchisees to get on board with social media coupons and attracting more folks to sign up for our 7-Eleven app, it is slow to get started. We need to focus more on advertising our fresh and hot foods selections and making our social media coupons more attractive in order to bring in more new customers.
We know we need to grow the fresh and hot foods category to stay relevant moving forward. We get the big picture. But we need innovative ideas and more novel strategies to make it work. As it presently stands, the fresh foods program offering needs to improve. We haven’t been able to move fresh foods too much the last couple of years, even though the goal of 20 percent of sales by 2015 was declared back in 2012. Here we are in 2014 and we have grown the category 11 percent total from 2009 to 2013. We need faster progress towards attaining our goal.