While many c-store operators view foodservice a a panacea for their business, experts warn that rising costs of ingredients and financially strapped consumers are impacting foodservice operators both in and outside the convenience store industry.

Seattle-based foodservice consultant and special guest at CSNews'2008 Foodservices Best Practices Rountable, Dean Dirks, told attendees consumers are trading down in their choice of restaurants, and some quick-service restaurants (QSRs) are showing sales gains because of this, including McDonald's and Arby's, both of which saw a 5 percent increase in sales for the first quarter of 2008. Dirks also noted that mid-priced restaurants are poorly positioned in this environments.

To prevent a sales slump, QSRs are offering special promotions that are enticing customers to buy, including Subway's recently extended $5 Footlong sub promotion and Dominos' $4 pizza deal. However, such promotions are also reducing margins for franchisees. Dirks cited Subway, which was experiencing a 7 percent decline in sales before the promotion. While the deals caused sales to jump, it also created pushback from franchisees who said profits were down due to the additional food and labor costs to accommodate for the increased sales volume.

one roundtable attendee with Subway franchises in his stores, Chad Prast, foodservice director for Village Pantry, put the sales increase into scale. "There's been at least a 50 percent sales increase" at those franchises in Village Pantry stores, he said.

Dirks also detailed some efficient operational strategies used by QSRs that c-store foodservice operators should take note of, including:

• Build smaller footprints and kitchens to cut energy use and increase efficiency.
• Keep separate profit and loss statements for labor allocations in foodservice vs. other store employees.
• Strive to get $8,000 a week in foodservice sales per store, and keep labor costs at 25 percent of that, even though with minimum wage increases, the number may be closer to 28 percent.

1. DUE DILLIGENCE
   DOING YOUR HOME WORK
2. HOMEWORK
   Financial analysis
   Physical issues
   Day part customer count
   Choosing the correct format
   Core competency for food service
   Upper management commitment
3. FINANCIAL ANALYSIS
   PROJECTING DAILY SALES
   Inside customer counts 478
   Capture Rate 20%
   Expected F.S customers 96
   Average transaction $7
   Projected daily sales $669
   Monthly sales $20,076
4. PROJECTING FOOD COST
   Food costs=COGS / Sales
   Projecting food costs are complicated
   An item w/ $2 cost w/ $7 retail = 28%
   An item w/ $2 cost w/ $6 retail = 33%
   Sales mix skews food cost
   TB #1- 34% bean burrito mix =22%fc
   TB #2- 24% bean burrito mix=24%fc
5. LABOR
   Don’t listen to general labor cost %
   Write a manning table w local labor rates.
   Washington state min wage is 8.25
   Labor in Washington vs. Mississippi, how can you discuss labor % ?
   Include incremental supervisor labor
   Include taxes, bonus, and benefits
6. EXPENSES
   INCLUDE ALL EXPENSES
   Rent 
   Linen/Laundry 
   Telephone 
   Credit Card Service Charges 
   Other Taxes/ B&0 
   QSR Royalties- 
   Depreciation 
7. Required rate of return (Hurdle Rate)
   INVESTMENT -$181,148
   Cash flows 
   YEAR 1-$29,106
   YEAR 2-$25,406
   YEAR 3- $22,176
   YEAR 4-$19,357
   YEAR 5- $16,897
   END OF YEAR 5 YEARS- $112,942
   $68,206 Left on the investment at the end of 5 yrs
8. ANALYZING CUSTOMER COUNTS
   Customer counts per day part
   This information will dictate the format
   Heavy lunch-deli
   Heavy dinner- hamburger, chicken
   Heavy breakfast- donut, breakfast sand
9. PHYSICAL REVIEW
   Drive thru-critical hamburger formats
   Parking- limited can be offset by high carry out, Subway for example
   Store layout to share labor, donut formats need to be by the registers for impulse
   Signage restrictions
10. THE HUMAN FACTOR
    Is the owner committed to food service?
    Does the owner understand that it may take time to show a profit?
    Skill set for managing food service
    Research market rate for FS managers
    Are you willing to take on another staffing problem.
11. THE REWARD
    Food service can be very profitable. Do your homework, select the correct concept and know how to manage food service

My father is a man of few words and even fewer jokes - but he capitalizes on the few jokes that he does know by repeating them as often as possible to whoever will listen. His favorites are the observational classics (e.g. why do we park on a driveway and drive on a parkway?) and as such, he can often be heard musing, "why do 24-hour convenience stores have locks on them?" The first few times I laughed. "That's a good question," I chuckled. But as the years went on and I continued hearing the "joke" on a weekly basis, I began to tire of feigning excitement. As such I have decided to document the answer here in the first ever edition of "Economics Explains..." so that my father can have the answer in writing and he no longer needs to ask the question rhetorically at gatherings, get-togethers, and funerals.

The answer lies in a basic economic idea known as the "cost-benefit" principle, which says that you should take an action if and only if the extra benefit from taking it is greater than the extra cost. Most industrial doors go to stores that are not open 24-hours a day, so these doors would obviously need to have locks on them. Because the majority of doors would need locks, it is cheaper for the manufacturer to make all doors with locks - whether they will end up going to a 24-hour convenience store or a bank. The alternative would be for the manufacturer to hold two separate inventories of doors and then they would also have to track their shipments to make sure the right doors are going to the right locations. Doing this would create a greater cost to the manufacturer and to the buyer because they would be buying an item that is manufactured specially without locks, rather than a mass-produced industrial door. Because the cost would be significantly higher and the benefit would not really change, the "cost-benefit" principle shows that it would be inefficient for 24-hour convenience stores to get doors without locks.

For the record, this is the same principle behind having braille on drive-thru ATMs. It's cheaper to just make all keypads with braille and numbers rather than keeping track of separate inventories and tracking shipments and locations.

Look for more "Economics Explains..." in the future right here, and look for (god willing) far less references to locks on 24-hour conevenient stores in conversations with my father from now on.

Pasco, Itochu Corporation, and Wei Chuan Corp., a subsidiary of Ting Hsin International Group, will jointly invest JPY1.1 billion to establish a joint venture in September 2008. Of the total investment, Wei Chuan, Pasco, and Itochu will contribute 60%, 24%, and 16%, respectively.
The factory of the joint venture, which is expected to be put into production in February 2010, is planned to be in Shanghai. The factory will manufacture Wei Chuan-Pasco bread brands, including sliced bread and Pasco bread snacks. These products will be sold in convenience stores and supermarkets.

A representative from Pasco said that the Chinese bread market has a great potential and the company is pleased to offer safe and high-quality bread products. This cooperation between Chinese and Japanese companies will form one of the biggest bread manufacturers in China and the goal of the joint venture is to become the leader in China's bread industry.

When you are given the 200 page Franchise Offering Circular (The rule book), it can be very difficult to understand all of the "fine print". 

So here is some of that fine print in laymen terms:

1. 7-Eleven will take AT LEAST 52% of your profits.

The company advertises that they take 50% of your profits, but read closely … depending on your sales and profits around 2% of your profits will go towards advertising! (Have you seen a lot of commercials on TV? Neither have any of the 7-eleven franchisees )

BUT WAIT there’s more, depending on your store profitability you will have an even worse profit split. That’s right, the more you make, the more they charge. It is possible for a high sales volume store to end up only keeping 43% of their Gross Profit … So think hard before you buy that “great” store.

 2. 7-Eleven Franchise Agreement can change at any time

Just because your contract says it’s good for 15 years, when the next agreement comes, it will be pushed on you hard, sign it or go on the shit list (kind of thing). Also, even if you don’t sign it, when you sell your store, the incoming franchisee has to sign it which could easily decrease the value of your store. As an example, in the most recent franchise agreement upgrade, (as I mentioned before) the high gross profit making stores GP split has been changed from 50, 50 to 43, 57 - in favor of 7-Eleven.

3. Buying a 7-Eleven = Buying yourself a job

Don’t have any misconceptions, you’re not going to be a business owner, you’re going to be a manager who is told how to run his store, what he can and can not do and like I said in point #2, the rules of the game can change at any time.

4. 7-Eleven’s are almost impossible to run hands off

For those of you who think they can buy a store, hire a manager and forget it … those days are long gone. The company has put in place strict requirements for you to be present at your store. They do this through a combination of twice weekly meetings with you field consultant, and by having a technologically cumbersome ordering system. Though it’s “state of the art” it requires roughly 15 man-hours a week for the experience order writer. You can trust a store manager only so far, as many franchisees in the past have learned that it is possible to come back to an empty store . Roughly once a year owners hear a story of a store manager, printing up 100 money orders and taking off to another country. So aside from having a large family who are not qualified to do anything better, you are stuck verifying store operations on your own.

5. 7-Elevens have an income CEILING

This is not a business you want to go into if you are dreaming of making MILLIONS. It is very possible to estimate your exact income from a 7-eleven, as a rough guide you can use 5% of sales. This however is not a perfect measure because as sales go up so do expenses, and as sales go down, so do expenses… It is very possible that a Franchisee owning a $1.3 mil store to make the same as a $1.7 mil store. (–They don’t tell you this during your interview–)

By now you’re probably thinking, who the hell would want a 7-eleven? Well I’m here to give you a completely impartial story, so stay tuned for the next post on reasons to buy.

——–

If you are considering purchasing a 7-Eleven and would like unbiased answers to all of your questions as well as advice on specific store locations:

You can reach me at: c-store-expert@greatconsult.com

The Real Cost of Foodservice

Invest in growing your foodservice sales -- but do so with your eyes
wide open to all the potential costsmoreBy Don Longo, Editor-in-Chief I hope
you come away from reading this special foodservice issue of Convenience
Store News with a feeling for the excitement this category offers c-store
operators, while at the same time a solemn appreciation for the depth of
commitment and study needed to be successful selling fresh, prepared food to
consumers. CSNews reported in its 2008 Industry Report ( May 2008 ) that
foodservice was the fastest-growing in-store category last year, increasing
a whopping 10.1 percent on a per-store basis. It was also the highest profit
category in the store, accounting for 21.63 percent of gross margin dollars.
This issue is full of examples of c-stores that are capitalizing on
foodservice as a growth driver for their business.

However, foodservice is not for the faint of heart. Just last month, the
National Restaurant Association said its monthly survey of restaurants
showed operators were greatly worried about increasing wholesale food and
commodity prices, with 21 percent of respondents identifying food costs as
their top challenge. C-store retailers are facing the same huge increases in
ingredient costs. Senior writer Linda Lisanti reported earlier this year
("Rising Costs Take Bite Out of Profits," CSNews, May 5) skyrocketing
commodity prices, as well as increased packaging and transportation costs,
were eating up retailer profits in foodservice. Lisanti reported on how
retailers all over the country -- from large chains like Kwik Trip and
Village Pantry to single-store owners -- were scrambling in the wake of the
highest annual food price increase since 1990. And food prices aren't likely
to go down this year. With farmers unable to plant as much corn due to the
heavy flooding in the Midwest, corn prices are soaring to record levels.
According to the U.S. Department of Agriculture, September-dated corn
contracts zoomed to more than $7 per bushel, up from about $6 in June.
Federal policies encouraging the diversion of a large share of the corn
market from food to fuel production just exacerbates the problem. There is
no question the current short-sighted policy of giving massive subsidies for
ethanol production needs to be re-evaluated as part of an overall energy
policy that balances environmental concerns with the real food, fuel and
economic needs of American consumers. Cripes! China is bidding on rights off
the coast of Florida, where U.S. oil companies are forbidden to drill.
Unfortunately, neither of the current presidential candidates have
articulated an intelligent strategy that deals with both the immediate fuel
price problem and the long-term energy needs of the nation. But I digress.
Let's return to the store. After cost of goods sold, labor is the next
highest expense in the foodservice arena. In fact, foodservice labor as a
percentage of foodservice sales increased from 22.4 percent in 2006 to 25.6
percent in 2007, according to CSNews' exclusive 2008 Foodservice Study (see
page 37). CSNews' foodservice expert columnist Dean Dirks wonders why
c-stores don't have a category manager for labor. "We have category managers
for everything from cigarettes to candy," Dirks said. "But the money blown
in labor far offsets rebates in candy." Restaurants may be suffering more
than c-stores from the impact of rising food costs, but they also tend to
watch below the line more closely, according to Dirks. "They have people
managing all expense categories, from labor to electricity," he pointed out.
So, by all means, invest in growing your foodservice sales -- but do so with
your eyes wide open to all the potential costs. Newstex ID:
VNU-0059-27153044

By Alexander Lawrie

A YOUNG shopkeeper fought off a vicious knifeman on his very first day in the job.

Ikky Arishad, 17, had only been working in his uncle’s convenience store for a couple of hours when the knife-wielding thug stormed in demanding money.

But the brave teenager ignored the large weapon and got rid of the robber by bashing him over the head with a metal bar.

The robber then stumbled back crashing into an ATM machine before fleeing the scene on Thursday evening in Pumpherston, West Lothian.

The attempted robbery happened just days after Ikky – from the Midlands – arrived in Scotland for a family visit.

Ikky said: “I was really keen to help out in my uncle’s shop for a few hours and they agreed not thinking anything like this could happen. It all happened as we were closing at about 9.30pm.

"The guy came in and shouted ‘Give me all the money’ but I called his bluff and said no way. I wasn’t going to give it up without a fight, no matter how big the knife was.

“I then spotted a metal bar under the counter and grabbed it. When the robber lunged at me with the knife I whacked him over the head with the bar.

“Looking back on it, I’m not sure if it was a brave or a stupid thing to do, but it certainly did the trick.”

Ikky’s uncle Ali Arashad, 34, who owns the Shop and Save store, added: “We can’t believe this has happened on Ikky’s very first day. We have never had problems like this before.

"The family are all so proud of him, it takes a certain type of person to do what he did. There wasn’t much cash in the shop at the time and we are really thankful Ikky is unharmed.”

Brave Ikky said the robber was aged between 15 and 18, was left handed and had piercing blue eyes.

He was described as wearing a grey/black camouflaged jacket with a hood and attached sand mask with dark coloured goggles, black tracksuit bottoms.

Despite being shaken after the attack, Ikky insists it won’t put him off coming back to Scotland for visits.

He said: “I love coming to Scotland and this won’t put me off. Most people are really friendly towards me and this type of thing can happen anywhere.”

A Lothian and Borders police spokesman said: “We can confirm an attempted robbery took place at a shop in Pumpherston,  West Lothian at around 9.30pm on Thursday evening.

“The clothing of the attacker is very distinctive and hopefully someone will recognise the description.

“Anyone who witnessed this incident or has any information is requested to contact Livingston Police Station.”

I used to buy some snacks during work at a convenience store beside the gasoline station. Chips, biscuits, and candies. I also buy some sports drinks whenever I finish running at Ministop or 7-11. Later, I compared the prices when I did my groceries and I can't believe how much I was paying these convenience stores compared to buying them at the grocery.

For the common things I buy, the difference in the price was as low as 5 pesos. It was as high as 30 pesos on imported cookies. Started calculating how much more I have been spending all this time at these convenience stores.

Now, I don't visit the convenience store near our office. I also started to include snack items in my grocery list and bring them to work instead. I also buy sports drinks in the grocery and drink them once I arrive at home after running. It saves me a lot every month and I get have more options in what to buy.

Convenience is an expensive commodity these days.

Le réseau a débuté ses opérations à Boston, Los Angeles et New York sur une centaines de sites.

Il devrait couvrir plus de 12 marchés d´ici la fin de l´année, pour 8-10 millions de visualisations par mois.

Les écrans (LG Electronics LCD 32-37") diffusent actuellement la même programmation que Gas Station TV mais devraient décliner leurs propres contenus prochainement.

Are there other services that might be popular in a fixed-price convenient retail setting?

How about "instant handy-man" services at the hardware store? The handy-man could have a small workshop for repairing or assembling stuff that people bring in. Or the handy-man could follow you home to install a ceiling fan or wire a new outlet "while you wait". Garden centers could offer the same for tree-planting. Computer repair clinics would be great too, but computers are designed to be disposable these days and a small part is often too expensive to justify repair. Apple could set itself apart by designing its computers for ease of repair and then offer the services while-you-wait in the Apple brand stores.

Similar services have always been a part of other businesses. Jewelry stores offer repairs and ear-piercing. Photo development kiosks were a big deal before the coming of digital cameras (it's interesting that they were located in drug stores and discount retailers, just like the new clinics). Home centers offer kitchen planning and installation services.

Repair and design services could be added to many retail businesses. You might offer the services already -- to make it a bigger part of your business you'll have to increase awareness. Set aside an area of your store for the service and give it prominent signage. Then include it in your advertising and watch your traffic grow.