Foodservice Equipment & Supplies

MAR 2017

Foodservice Equipment & Supplies magazines is an industry resource connecting foodservice operators, equipment and supplies manufacturers and dealers, and facility design consultants.

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56 • FOODSERVICE EQUIPMENT & SUPPLIES • MARCH 2017 brought the Stehneys to their neighborhood gas station. The owner at the time ran a small fried chicken business on-site and agreed to let them have some cooler space. Eventually the Stehneys wanted to go into the restaurant business full time and ended up buying the gas station site. "There were some really practical reasons for starting their restaurant in a gas station space," explains Worgul. For starters, the couple knew they wouldn't be making a ton of money right off the bat and the gas station/convenience store offered consistent cash flow and instant potential customers. Since opening the first gas station location, Joe's Kansas City Bar-B-Que has expanded with a pair of traditional restaurant sites and added the 180 Room, a 120-seat private event space that offers a more upscale experience. The company expanded again in 2016 when it built a USDA-certified smokehouse facil- ity to cook and freeze barbeque for nationwide shipping. Worgul recognizes there may be more opportunities to meld the c-store and restaurant pieces together in the future. For example, adding refrigerated cases to sell vacuum-sealed take-home bulk items. Originally, the gas station property included a liquor store, but that shut down 10 years ago. Since then, the kitchen has expanded to include six smokers plus a sausage grinder and stuffer the staff use to provide homemade sau- sage to all sites. The standard equipment package at a Joe's Kansas City Bar-B-Que includes warming ovens, deep-fat fryers, a 10-burner gastop stove, a flattop grill, tilt skillets, a steam kettle and steam tables for to-go stations. Pulled pork rates as the house specialty, of course, but the Z-Man Sandwich is also "insanely popular," says Worgul. The Z-Man consists of slow-smoked beef brisket and smoked pro- volone cheese, topped with two crispy onion rings on a toasted Kaiser roll. Burnt ends are also very popular. Don't Fence Me In C-store locations like Joe's exist all over the country and continue to gain notoriety as the growing culture of foodies seek eclectic sites and off-the-beaten-path food experiences. Ethnic foods, in particular, keep drawing notice. NACS highlighted four such gas station restaurants in the Washington, D.C., area in its annual Ideas 2 Go program. The 2016 video highlights some amazing food in c-stores. For example, R&R Taqueria, which also earned acclaim for its lamb taco enchiladas on Guy Fieri's "Diners, Drive-ins and Dives" television show, and Seoul Food D.C., which launched with a food truck prior to opening a restaurant within a gas station. Do these food-forward operations represent the c-store norm? No. But they remain part of a growing group, and their success will continue to influence their peers to move in that direction. And those are just the chains creating their own food presence. It doesn't even begin to mention the far-more- common approach of oil giants partnering with QSR brands such as Subway or Pizza Hut. It's a big, melting pot of an industry, and food is increasingly the winning formula. Can Food Equal C-Store Salvation? While salvation might sound a bit strong, today's convenience store owners and operators clearly recognize the need to look beyond historically core profit centers, namely tobacco and gasoline. Once heralded as a thriving part of the business, tobacco profit margins have become tight, regulations tighter and every State of the Industry Report that NACS publishes points toward the industry's decreasing dependence on tobacco. Gasoline presents a slightly different story but certainly brings its own volatile profit margin structure. The stats tell the story: overall, 69.2 percent of total in- dustry sales in 2015 — the most recent yearend data avail- able from NACS — were motor fuels, but motor fuels only accounted for 39.5 percent of profit dollars. In contrast, foodservice — albeit a broad NACS definition that includes prepared food/commissary foods, as well as hot, cold and frozen dispensed beverages — had a mere 20.8 percent in- store sales contribution but accounted for 33.7 percent of profit dollars. So, while tobacco and fuel are long-proven traffic drivers for the c-store industry and will likely never disappear, food- service presents a much brighter beacon of hope for growth. In fact, 69 percent of convenience retailers report opti- mism about their business prospects for the first quarter of 2017, according to a January 2017 NACS survey of retail- ers. And enhanced food offerings were cited specifically as a primary reason. "Consumers want more food in different places," says Lenard. "Gas stations are now the cool kids." Foodservice in convenience stores is important right now and will continue to be so, adds Portalatin. "C-store foodservice is a bright spot," he adds. "C-stores are geared toward growth in the restaurant space." FE&S SMOKE SIGNALS: Signs of Foodservice Success in the C-Store Segment Profit margins. Numbers don't lie, and it's hard not to notice when the industry reports 33.7 percent gross profit dollars for foodservice, compared to the 16.8 percent gross profit dollars earned from cigarettes — the industry's No.1 in-store sales seller. Foodservice currently ranks at No.2 in the in-store sales category. Growing numbers. Store count has increased by 63 percent in the last three decades. The end of 2016 marked a 0.2 percent increase (340 stores). The official store count at the end of 2016 was 154,535. In comparison, the total U.S. restaurant count decreased by 1 percent, although the overall restaurant count wins on sheer numbers, hitting 624,301 total restaurants as of spring 2016. Source: 2017 NACS/Nielsen Convenience Industry Store Count, The NPD Group/ReCount Spring

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