These operators continue to leverage small yet efficient footprints to serve multiple dayparts. Most people would associate a menu containing gourmet deli sandwiches, grilled items and from-scratch pizza with a family-style restaurant or quick-service operation.
While many of these restaurants still feature menus like the one above, the fact remains that a growing number of convenience stores now offer freshly prepared menu items, too.
Foodservice sales in the convenience store segment totaled $10.3 billion in 2010, according to Technomic, a foodservice market research company based in Chicago. While approximately 53 percent of these sales constituted hot, cold and frozen dispensed beverages, prepared food made up the remaining 47 percent. This segment's nominal growth is expected to outpace the foodservice industry by 0.4 percent over the next four years.
"Foodservice in convenience stores has evolved quite a bit," says David Bishop, managing partner of Balvor, LLC, in Barrington, Ill., a convenience store consultancy. "There has been an increased focus, from a strategic standpoint, because this is where the channel's greatest potential and opportunities lie."
Because convenience stores carry a limited amount of grocery, snack and beauty items due to smaller footprints, prepared foods offer a way to differentiate these operations and create a destination. Speed of service, quality and portability represent the hallmarks of successful foodservice programs in this channel.
Convenience stores are executing prepared food programs in a number of ways. Stores that heavily invest in foodservice programs build on-site kitchens with cooking equipment, prep areas and cold storage. Larger chains are more likely to utilize off-site central commissaries or third-party contract feeders, which supply fresh meals to stores on a daily basis. This removes the cost of labor and equipment from the store level. More recently, convenience store retailers have begun to embrace prepared food programs provided by their wholesale distributors.
Trends in this retail segment include focusing on freshly prepared morning items, value offerings and customization, according to Technomic. A resurgence of roller-grill items and increasing equipment needs for hot sandwiches are expected in the years ahead.
"There also is a growing selection of healthier items in convenience stores, such as fresh-cut fruit, salads and wraps," Bishop says. "In addition, pizza offers a profitable opportunity for these retailers."
While cold sandwiches made up 43 percent of convenience store sales, hot dogs and sausages comprised 29 percent, and hot sandwiches totaled 20 percent, according to Technomic. Sandwich and wrap sales alone totaled $2.1 billion last year.
"What's interesting is the grill trend, which is the second-largest segment of food prepared on site and where there's been a lot of growth lately," Bishop says. "This phenomenon has helped retailers expand their range of products."
Because convenience stores rely on foods with extended holding capabilities, more retailers are also increasing their investments in refrigerated display cases to help support fresh food programs. "Convenience store distributors are negotiating favorable terms on display cases with equipment suppliers for convenience stores that opt in on prepared food programs," Bishop says. With these programs, retailers can test the waters of prepared foods without making a big cost commitment.
Mobile merchandising carts have also become more common fixtures in convenience stores that have invested in foodservice. "These carts enable operators to position products in various locations throughout the store at different dayparts," Bishop says. "This provides the added flexibility to relocate items based on shopping patterns."
In addition, convenience store operators seek multifunctional equipment they can use for different purposes. "For example, operators can use a mobile merchandising hot case for breakfast sandwiches in the morning and burgers in the afternoon, updating or rotating point of purchase signage," Bishop says. "This way, they can test traffic flow at different times of the day."
As convenience retailers focus on foodservice execution and expanding menus, the opportunities will lie with those that are delivering fresh, quality products with the value consumers are seeking.