Panelists included Des Hague, director, fresh foods, 7-Eleven Co., Bill Patterson, director, fast food, Easy Mart, Texarkana, TX, and Brian Donoghue, director of foodservice, Towne & Country Food Stores, San Angelo, TX.

• Towne & Country Food Stores operates in west Texas and eastern New Mexico, and runs seven Godfather’s operations, seven Taco Bells, 14 Subways among other franchises. The company has a proprietary sandwich program which it is building, and 80 proprietary foodservice operations that provide the bulk of its foodservice sales. Town & Country has been in foodservice business for about 15 years. It all began with a Fry-Daddy on the counter, and now boasts more than $24 million in foodservice sales this year.
• Easy Mart operates 424 stores, five Chester Fried Chickens, 14 Hotstuff Pizzas, two Picadelli Pizzas, one Subway, and about 15 proprietary "maverick" outfits. Since the foodservice system was put together by acquiring other chains, there is no common management team, so it has posed a challenge for Easy Mart.
• 7-Eleven operates in 20 international markets, with 5,800 stores in the United States and Canada. It’s the 13th largest foodservice operation in the U.S. However, fresh foods are under performing, according to Hague. He says the company’s mandate is to make 7-Eleven foodservice the icon that it is in the rest of the business. "We’ve got to create the next Slurpee, the next Big Gulp, the next whatever," Hague adds. "We are looking for ideas for this."

What are you seeking from convenience store distributors in the area of foodservice?

Hague: 7-Eleven is searching for its own signature foodservice brand, and distributors can play a major role in helping us bring higher quality products to our consumers. We believe in partnership pacts. We expect our partners to help us design more new recipes and we are willing to pay more for it. Of course, we won’t be happy during negotiations, but at the end of the day, we want to give the consumer a better, more insightful product to look at that tastes nice and doesn’t offend.

Patterson: In a perfect world you have a customer walking into an Easy Mart because the swoosh and graphics we spent all the money on last year attracted them to come in. They would be greeted in a friendly and not canned manner. The store would be so clean you wouldn’t hesitate to eat there. In a perfect world, Easy Eats would be almost as recognizable as McDonald’s or Subway. This is important to distributors, because if we choose to have a Subway, they will tell us who to buy from. They will set the prices and everything. If we can work together with our distributors and create those branded items, we will both win.

We want it to look like a franchise and not be a franchise. We want it to look as familiar, appealing and tempting as a franchise, but not have to pay the 10-12 percent royalties and jump through the hoops.

Donoghue: We would be looking for new ideas distributors could bring to the table. I’m just one guy in a company with 141 stores. I certainly don’t have the outreach in San Angelo, Texas as a guy in Dallas who sees over 100 different vendors each week. The knowledge of distributors is very helpful to us – it can help us market our product. If our distributor sees something working for someone else, communicating that with me helps sell their business and mine. They know not only what’s happening at the store level, but what is happening in the industry before we get that product. Often we end up selling the same things over and over again. We become dull, drab and institutional in our offerings.

Distributors can help by bringing that demand for specialty products to the customer.

Hague: You have to differentiate or you die. We could have a number of brands in our store today, but what value would that be for 7-Eleven if the guy at Mobil or Texaco down the street have the same product? We must have uniqueness. There is room for more than one provider…we want to become that foodservice destination.

How do you see the distributor in helping you with product innovation?

Donoghue: Fortunately we have a good relationship with our distributor, and when questions arise they are a good source of information because they have taken the time and the effort to learn the business and become experts in foodservice. They had to go out and invest the time to find buyers who know how to buy products for us. Frankly, buying a can of tomato soup is much different than buying a head of lettuce or tomato. How you handle it is much different. When we have an issue, we go to our distributor for answers. They help us find the person who can answer that question for us.

Patterson: I was on the phone yesterday with the foodservice representative from our distributor. He was in Farmington, New Mexico. I said what are you doing there? He said a certain chain had decided to get rid of all their Taco Bells and we are training them for our concept, which I’ll call XYZ. This was a huge business for that distributor, and it made the c-store chain happier because it didn’t have to deal with the franchise folks anymore, with high royalties and all the hoops. They had to be set up to do it. They needed knowledge and education so they could be the foodservice distributor instead of a c-store distributor.

Hague: The key thing about product innovation and how to add value is pretty simple…it’s about a partnership. A distributor needs to have the competencies to come to 7-Eleven and talk about not just its product, but how that product gets used within the sandwich or taco. It’s the total system. It’s like the traffic light system. Before you come to me, it’s red, amber, then green. Distributors must understand our business, the macro system, how it’s going to be valued, how it’s going to be tested in the marketplace.

What role does foodservice play in the total role of the operation?

Hague: The first measurement is the consumer buying your product. Shrink is obviously an issue—you have to keep your staff trained and make sure you have diligence. When people talk about write-off, it absolutely gets my blood boiling because write-off means the consumer is not buying the product. If you’re throwing away 20 sandwiches a day, it’s probably because your sandwiches aren’t good enough. Let’s fix the sandwich ingredients and how we market them. We have great product launches, but we haven’t gone out and told the consumer, so what do you expect?

My number one measurement is, does it drive top-line sales. Are we investing in a three-year program, not one year? And you have to stick-to-it. Colonel Sanders failed in 52 businesses before he got to KFC. McDonald’s failed in six before succeeding. You have to manage margins over time.

How can a distributor help you manage the SKUs?

Donoghue: For us, we are very control oriented. We want to monitor what’s in our stores and give direction. We now have a branded type of program with our 80 Country Cooking operations. When you go to one operation, you will get the same products as the others. Managing that has been a task. It’s basically a tiger and we had it by the tail, and we weren’t holding on very well.

We maintain better control by establishing our own set of order books, and the distributor can indicate to us when a store orders a product they are not authorized to have. Good communication between our stores and with our distributors has really helped us control what’s happening in this area. If you have control over what’s being made in your stores, you’re likely going to sell more. We are trying to put the best products we can out there.

Patterson: What we need from distributors is data, the best information we can get. Time and time again a manufacturer will come to me and say, "Sell this burrito." I’ll say it looks good, but give me a list of your top five products because they may be trying to sell us a dog. We want to know what other people are buying.

Donoghue: Data is important, but ultimately if I don’t get a good product in our stores, we failed somewhere along the way. Resolving that is as important as any data that can be provided. You have to have good teammates on both sides. We won’t survive without distributors, and it’s going to be more difficult for distributors to survive if we don’t do the right things in our stores. If we don’t grab onto foodservice, somebody is going to and that’s going to leave distributors out in the cold. We don’t believe that’s a win for us. We want our distributors to be successful, because their success is critical to our success.

When assessing a foodservice program, what are you looking for?

Patterson: We’ve got to have consumer confidence. When you have your own brand, that’s not an easy thing to do. It takes commitment from the top of the company. Distributors can help by providing a product that is perfect when it gets to us, and if we want to abuse it, that’s our business. We have to divide it into freezers, refrigerators, and dry goods compartments. We have even worked with drivers to unload it in the right order so our people can put away the frozen first. It’s a team effort.

In terms of food safety, all of us have to get HACCP programs. Temperature control on trucks is much better than it used to be…they even have recording devices now.

We’ve been approached by a couple foodservice companies whose growth is flattening, and they already know how to deliver food, so they are coming after our business. For them to go from foodservice and add on oil and cigarettes, it‘s a cake walk for them. Foodservice is the hardest part, and they already have a handle on that part of the business. That’ the challenge for convenience store distributors who want to capitalize on the foodservice market.


7-Eleven Goes the Extra Mile

"This year, we are going to raise the bench on quality," says Des Hague, director, fresh foods, for 7-Eleven Co. "That’s the only way we are going to differential our products from the rest. We don’t want a 28-day-old sandwich. Some animals live less than 28 days. We want value, quality and make sure we develop signature items."

7-Eleven is approaching its foodservice strategy with a strong focus on what the consumer wants.
"The consumer wants a more value-oriented proposition. So we are thinking about how we can fill the consumer’s need for great food and great price," Hague notes.

7-Eleven is carefully considering research that suggests consumers are willing to pay for better quality, and that signature brands will lead to profit and recognition.

Hague says that specialty brands can demand a specialty price. "If you are a signature brand, you have parity price. If you are a value brand, it’s a 28- day-old sandwich that costs 99 cents. How many of those are you going to have to sell to become profitable?" he continues.

Even 7-Eleven, a world-recognizable name, feels the need to stay on top of trends and continually make improvements to its product offerings. Hague says "we have some challenges…our sandwiches are not made on premises, but they are made in USDA facilities. We’ve got to start thinking about the flavor profile of our sandwiches. It’s not just about foodservice, it’s about the consumer and what he wants.

"What stands best? Ham and cheese, or ham and cheese with Jack Daniels mustard on rye bread?" he adds, emphasizing the need for more quality products to entice consumers to buy their products.
--TC