Why restaurants should be afraid. Very afraid.

At a staff meeting last summer, a Restaurant Business colleague suggested the editorial staff be institutionalized for running astory about the threat posed to restaurants by c-stores.  “Yeah, I’m really going to take my wife to a c-store instead of a restaurant,” he sniffed.

He’s since been eviscerated and pickled, after being forced to watch a “Love Boat” marathon until he cracked. But, sitting here at the National Association of Convenience Stores’ annual State of the Industry Summit, I’m wondering if we can kick drag him out for a few more kicks and insults.

 

There’s no doubt that c-stores are looking for a profit generator to compensate for the declining contribution from cigarette sales.  Foods that consumers might’ve otherwise purchased from a restaurant are looking pretty good as that substitute.

Already, foodservice is the second highest contributor to a c-store’s gross profits, at 27.5%, surpassed only by tobacco.  But it’s growth vector for ready-to-eat foods that should have restaurateurs visiting the beer and wine sections of their local c-stores. Foodservice sales on a per-c-store basis jumped 8.7% in 2012, to 15.8% of total intake, or just over $24,000 per week.

Glenn Plumby, vice president of operations for the Speedway c-store chain, put that growth in perspective by showing the 2012 same-store sales gains for the major quick-service restaurant chains. “No one in that category is up as much as we are,” he noted.

I, as presumably the lone representative of restaurants at the conference, tried to choke back the sobs when Plumby sketched out the near-term opportunity for retailers. If you divided the c-store business into 10 performance brackets, from leaders to laggards, the discrepancy in foodservice sales is a slap to the forehead. C-stores in the top decile take in an average of $46,142 in foodservice sales per month. That’s about four times the sales of the players at the bottom of the ranking.

Plumby’s message: Anyone outside the industry’s leadership has a great opportunity to raise their foodservice sales—presumably by just doing a better job.

If those players can convince cigarette or lottery-ticket buyers to pop for a hot dog or taco, “we have significant growth,” said Plumby. “We need to keep growing foodservice at a fast pace.”

That message was echoed by Kevin Smartt, CEO of Kwik Chek Food Stores: “If you sell pizza, benchmark against Pizza Hut. If you sell a burger, benchmark yourself against the best burger franchise out there. That’s how we’re going to raise foodservice revenues.”

Other State of the Industry tidbits that should interest restaurateurs:

--The heightened competition from c-stores may spread to supermarkets and other retailers you might not associate with ready-to-eat food. Todd Hale, SVP of consumer and shopper insights for Nielsen, warned that mainstream brick-and-mortar stores are going to lose a significantly share of sales to Amazon. To replace that lost business, they’ll likely turn to foodservice, Hale predicted.

--Quick-service restaurants grudgingly acknowledge c-stores’ leadership in selling cups of coffee. But NACS’ data showed that frozen and chilled fountain drinks are where c-stores are seeing their growth. You have to wonder, are QSRs being left behind in that emerging market?

--Sales of “alternative beverages” are galloping. Proceeds jumped nearly 30% in the last three years, according to the NACS figures.

--The turnover rate for non-managerial personnel in the fourth quartile of c-stores is 81.7%. Most QSR chains can only dream of having a turnover that low for hourly employees.

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