Franchised Restaurant Operations vs. Corporate-Owned Operations

By Vladik Rikhter


There’s a shift happening in the restaurant industry other than changing consumer preferences. It’s the rise of company-owned vs. franchised operations.

Previously, we’ve discussed the regional success of In-N-Out Burger. This is a restaurant chain that came of age with McDonald’s. When the two restaurant chains came to a fork in the road, they took separate paths. McDonald’s experienced explosive growth, while In-N-Out Burger grew slowly but steadily, eventually reaching cult-like status among foodies.

Today, In-N-Out Burger continues to grow while McDonald’s will have to close more restaurants than it opens for the first time in 40 years.

Other major chains are starting to get a clue. Chipotle, which McDonald’s has been criticized for trying to chase, has seen its revenue soar by 155% over the past five years. Panera’s saw five-year revenue growth of 77%. It should be noted that Chipotle is 100-percent company owned, while Panera is a mix of company-owned and franchised locations.

It should also be noted that during this time period, the proportion of company-owned locations has increased slightly at Panera. While this has slowed down total system sales, Panera’s revenue rose 7.2% on a 2.4% comparable-sales increase at company-owned locations. Chipotle is expanding its footprint at almost twice the right of Panera.

Then came the news that Buffalo Wild Wings spent $160 million buying out franchisees. Corporate-owned locations have been registering faster sales growth than franchisees have for seven straight quarters. The company is focused on rolling out changes that franchisees are slower at implementing, particularly “guest experience captains” and store redesigns.

Brand Experience Reigns Supreme

You may ask, what is a guest experience captain? This is a position Buffalo Wild Wings created at its 500 company-owned operations. The employee’s job is to help deliver the ultimate social experience for sports fans, from introducing new guests to product and promotional offers to managing audio/visual equipment.

Similarly, Panera has been rolling out Panera 2.0 at its corporate-owned locations. This concept is designed to help reduce customer friction at cafes through digital access and improved operational processes. It really works, too. I didn’t have to wait 20 minutes to stand on line for a tomato soup last week.

It all comes down to improving operations for a better customer experience. It’s about being the moment with your customers to respond to their needs in real time.

We’re certainly not saying that franchised operations don’t work. Many times, they work with great success.

Maybe you don’t have the resources to roll out an entirely new service system in your restaurants. Or maybe you are a franchisee wondering how you can better meet the high bar your brand has set. Considering using your existing technology to gain better insights into your business. To learn how, click here. (Customer service evaluation form?)

Topics: Franchise, Restaurants

CPG Industry: Do You Know The Status of Your $300B?

By Scott Hill


Did you know that each year the consumer packaged goods (CPG) industry spends $300 billion on trade promotions? According to a Data Informed article, that’s more than 17 percent of revenue at an average CPG company and nearly twice the marketing budget.

With the stakes that high, business must be booming at these companies, right? Think again: More than half of all promotions fail to deliver a positive return on invest, and many lose 50 cents on the dollar.

Let’s face it. Promotions can either be a gigantic success or a colossal failure for your bottom line. Or, maybe they fall somewhere in between, making the executive team wonder what could have been done differently. It’s time to take the guesswork out of promotions. And no, I’m not talking about running point-of-sale software after Week 1. I’m talking about finding out what’s going on in your stores at any time.

Think of CPG Promotions Like Social Media

The human race is connected to each other through social media in ways that have never existed before. At any given moment, you know if your best friend is dating someone, what she ate for dinner, or how annoying her commute was. It’s time the CPG industry starts treating promotions like a social media experiment. Spy on your promotions. Gossip about them with your team. Try to tweak them, like you would crop that terrible photo of yourself or edit that misspelled comment. It’s time we start looking at promotions through the lens of human behavior and all of our glorious imperfections.

Why wait to learn from mistakes when you can jump in and fix the issues that are affecting your bottom line? It just makes more sense to utilize real-time data, and it’s feasible with 21st century technology, including mobile devices.

Just like a digital company launches social media campaigns, test campaigns with your new products. See what works before rolling it out across your network, and use that valuable time to adjust the offering.

Even on your corporate social media account, you (hopefully) wouldn’t let a week go by without checking your messages. Don’t let the same interval of time pass before learning about your promotions from the field.

Topics: CPG

Supermarkets are Becoming QSRs

By Jennifer Hoffman


I enjoy political discourse, and this upcoming election season won’t disappoint. I especially enjoy politics when it intersects with the industries Zenput interacts with: retail and consumer packaged goods.

Whether it’s Hillary stopping in for a Chipotle burrito (as previously mentioned in our blog about store video surveillance) or Chris Christie spending the equivalent of a luxury vehicle at Wegman’s supermarkets, it’s fun when politics and consumer habits intersect.

Wait just a second—Gov. Christie’s administration spent how much at Wegman’s? To be exact, it was around $76,000 over 53 trips, The New Jersey Watchdog reported. This story, of course, set off a firestorm on social media. No matter how you feel about politicians’ grocery bills, some people seem to forget—or perhaps don’t realize—that the Governor hosts events at his official mansion in Princeton and the administration picks up the tab for catering.

That’s right—Wegman’s, the supermarket chain, does catering! It also offers seating like a quick-service restaurant. When you factor in these services, you begin to realize that Christie didn’t just spend an exorbitant amount of money on CPGs like Cocoa Puffs and tomato sauce.

Channel Blurring With QSRs

Wegman’s—and supermarket chains like it—are becoming QSRs. Whole Foods is similar to Wegman’s in that it offers freshly made food and also offers cafe-style eating in its stores.

Even when grocery stores don’t have the capacity for seating, they can draw QSR customers into their stores by offering competitively priced ready-to-eat or ready-to-heat meals. Supermarket chain Safeway takes a page right out of the QSR playbook, writes  Steven Johnson, a grocerant guru at Foodservice Solutions. The grocery chain offers lunch combos and family-sized value meals.

It’s not just the big players who stand to profit. Take for instance Green Zebra Grocery of Portland, Ore. This small business makes speciality paninis and sandwiches to order, as well as a prepared hot food and salad bar. Green Zebra also makes an effort to offer local and organic foods, and offer gluten-free options. I was recently impressed by a local Italian market. I was able to not only pick up a quart of milk, but pick up a ready-to-heat dinner—a very convenient option after a long day.

Addressing the Challenges of a Dual Business

Of course, any grocery store that expands into freshly prepared foods has to be ready to deal with the challenges of operating a QSR in addition to the challenges of operating a retail operation. The businesses must compliment each other, the food options must be strategically placed in the store and well promoted. Items have to be accurately priced accurately for the point-of-sale, in order not to cause a Whole Foods-like scandal. A part of your workforce will likely be dedicated to running the QSR side of the business to ensure  food quality and safety.

Basically, accountability and communication increase whenever freshly made food is involved.

Check out our other blogs on grocery and restaurant topics:

Topics: Grocery

Prevent C-store Robberies With Regular Security Audits/Inspections

By Scott Hill


There may be some people resigned to the fact their convenience store is bound to get robbed. That’s not a completely unfounded speculation when the FBI reported in 2010 that nearly 22,000 gas station and convenience store robberies, or roughly 1 in 10 c-stores, explains Terry Lambert of the CBC Learning Center.

It’s just the nature of a store that’s open 24 hours a day, seven days a week. While many c-stores do send the message of being totally accessible, the neon “Open” sign shouldn’t be thought of as a beacon for crooks. Convenience store managers definitely have the ability to help prevent robberies if they take appropriate security measures.

According to a study published in 2007, c-stores have certain characteristics that make them prone to robbery. They include:

Operating Hours
A store that’s open 24 hours a day tends to attract troublemakers at night and in the early morning hours.

Interior Store Layout
Visibility is key. Employees need to be able to see the store easily, and passersby, like the police, should be able to see into the store clearly. Brightly lit stores and registers that are visible to the street deter robbery.

Poorly lit forecourts and parking lots invite trouble. Poor landscaping or fencing can also help a robber get away more quickly. Install video surveillance and alarms, as well as panic buttons and signage warning that your store is monitoring for theft.

What can be done to help prevent c-store robberies?

Cash-control procedures – Determine the security of your money handling system. Lambert advises retailers to determine how much cash they need on site to conduct their daily business. Be discrete and random about removing cash from registers.

Vendor Schedule
Are you on the list? If yes, welcome. If not, please leave the store. Retailers must keep track of movement in their stores. Lambert tells the story of an innocent clerk who was duped by a fake repairman. The robber claimed to be taking the microwave in for service and walked right out the door never to return. If the store had a vendor schedule clearly indicating who should be there or not, the theft wouldn’t have happened.

Vendor Log
This can increase vendor accountability by keeping track of who visits your stores, when and for how long.

Lambert also advises a c-store robbery report to be on site at all times. That way all the details will be documented in one place immediately following the incident.

This is all sound advice, but it begs the question: What happens to these reports? Are they just kept on file as a “nice to have” or do retailers gain actionable insights from them?

In terms of employee accountability, who is in charge of documenting incidents of theft? It’s a disservice to a network when retailers merely keep this information in a binder on a counter without having a system for sharing and educating other managers.

Better Employee Training
Let’s not forget that retailers must regularly train their employees on how to deal with a robber without getting themselves injured or worse. Comply with the robbers demand so that they get the money or goods they want, and leave. Once the robber leaves, the key procedures are lights on, doors locked, and a push of the panic button or call to the police.

Topics: C-store

Optimizing Your Drive-Thru for Increased Sales

By Jennifer Hoffman


Amazon’s announcement that it plans to enter the drive-thru grocery space has sent a shiver down the spine of some grocery store chains. Of course, like anything in retail, it comes down to execution and planning. The tech giant has launched its Amazon Fresh service in New York, Philadelphia, the Pacific Northwest and parts of California. A drive-thru Amazon fulfillment center is an extension of this concept.

“Some research indicates that a good number of consumers prefer picking up their own orders, even when they order online,” Camille Schuster, Ph.D., president of Global Collaborations Inc. told Forbes in an article about Walmart testing its drive-thru concept.

A few years ago, I remember reading about an independent drive-thru grocery that popped up in an East Coast suburb. The idea flopped, as shoppers frequented any number of local stores in the area to pick up bread and milk. Looking back, the entrepreneur that started that business was ahead of his time.

Drive-Thrus Are In… If Executed Correctly

A drive-thru is like any other section of your store: it must be properly maintained and regularly audited to optimize profitability. If customers aren’t using the drive-thru you are wasting valuable time and resources to keep it open.

Essentially, there are three components of a drive-thru with various components that should be audited:

1. The Lane

  • Are arrows directing traffic clearly marked?
  • Are lanes properly lit at night?
  • Is the approach clear of debris and litter?
  • Do you provide and regularly empty trash containers?
  • Is landscaping neat and orderly? (Related topic: property inspections)

2. Signage

  • Are the signs and speaker clean of mildew and grime?
  • Are the menu boards well lit and the images clear?
  • Are the menu boards displaying the most recent promotions?

3. Employees & Service

  • Are employees in uniform?
  • Do they greet patrons politely and quickly via the speaker?
  • Do they give instructions and move the line along?
  • Are the items correct and is a receipt provided?
  • If it’s a food order, are napkins included?

Upselling the Drive-Thru

There is also an opportunity to upsell at each turn of the drive-thru.

The Lane

Keeping wait time shorter keeps customers happier and expands the number of customers that can be served. It’s why some chains with high-traffic stores are choosing to use double drive-thru lanes.

The Signs

Menu boards are curb appeal 101. Simplifying the board can increase ticket size. If you can’t afford top-of-the-line digital menu boards, use well-lit, quality images to emphasize high-profit offerings. For instance, in the quick-service restaurant world, displaying images of combo meals can improve profits. Similarly, convenience stores that wish to upsell can feature a new product or two, as well as an incentive to use loyalty rewards.

Employees & Service

“Would you like some fries with that?” It’s an age-old cliché that definitely works! Friendly employees who offer an upsell can boost the bottom line. Mention a limited-time offer or special promotion.

Quick Service Magazine reports on the psychology of the upsell and advises operators to train their employees to phrase upsells so that the driver is choosing between two menu items. Just be careful not to “trick” the customer into a bigger spend. It won’t be appreciated when he/she has a more expensive bill than anticipated.

Topics: Restaurants

Whole Foods’ Pricing Error Shouldn’t Have Been a Scandal

By Vladik Rikhter


It’s that awkward moment when a state agency has to point out that you’re ripping off your customers. That’s the embarrassing situation Whole Foods Market Inc. found itself in when the New York City Department of Consumer Affairs announced it was investigating Whole Foods after finding that the company’s local stores routinely overstate the weight of its pre-packaged products.

Examples of the overcharging included a vegetable platter that was overpriced by $6.15; an average overcharge of $4.85 on a bag of chicken tenders; and a package of berries that were overpriced by $1.84. The most egregious was a $14.84 overcharge for a package of coconut shrimp.

“Our inspectors tell me this is the worst case of mislabeling they have seen in their careers, which DCA and New Yorkers will not tolerate,” said DCA Commissioner Julie Menin. “As a large chain grocery store, Whole Foods has the money and resources to ensure greater accuracy and to correct what appears to be a widespread problem—the city’s shoppers deserve to be correctly charged.”

Ouch. This is no longer just a company error; it’s an issue of brand trust. The scandal immediately put Whole Foods on defense, prompting its co-CEOs to release a video apologizing and setting forth three initiatives to fix the problem:

  1. Increase employee training.
  2. Implementing third-party auditing system.
  3. Giving items for free if they are incorrectly labeled.

It’s a good-intentioned plan that’s a little too late, considering the damage has already been done. Whole Foods’ sales growth slowed sharply last month following the allegations.

Self-Auditing Would Have Prevented This Problem

Whole Foods’ leaders chalked up the mistakes to their hands-on approach to making the food. In fairness, some of these mislabeling mistakes benefited the customers, and they lost money on certain transactions. Still, it begs the questions: Why not take a hands-on approach to checking your work?

Had Whole Foods had an employee-led, self-auditing system in place, these errors would have been identified before the public shaming. Surely, responsible employees would have noticed that the overcharging was prevalent among packages that had been labeled with exactly the same weight, considering it’s practically impossible for all the packages to weigh the same amount, as the DCA pointed out.

If enough of these issues were reported internally, surely it would have gotten the attention of a senior executive and led to a proactive—rather than reactive—response.

Considering this is not the first time Whole Foods has faced this issue, it may be time for some more drastic internal self-auditing measures. Whole Foods has an opportunity to do that with the opening of its new 365 Market by Whole Foods concept.

The pricing scandal may have lost some customers for good, but it’s not too late for Whole Foods to gain and keep the trust of new customers in new markets.

Topics: Grocery

Restaurant Soft Openings for Improving Operations

By Brian Harris


If you’re like me, a Friday night is best spent with Guy Fieri and re-runs of “Diners, Drive-ins and Dives” on The Food Network. You can tell Guy is a genuinely nice dude. Even when he doesn’t like something, he’ll say, “Wow, that has a lot of lemon in it,” or “This lobster martini isn’t really my thing.” (And yes, that was an actual drink featured on the show.)

So, almost three years ago, my heart broke for Guy when The New York Times panned the opening of his Times Square restaurant. Other than destroying the taste of the food, critic Pete Wells questioned the execution of the menu by literally asking a series of questions for the entire review. “When you have a second, Mr. Fieri, would you see what happened to the black bean and roasted squash soup we ordered? … Oh, and we never got our Vegas fries; would you mind telling the kitchen that we don’t need them?” Clearly, something was going awry behind the scenes.

With five Johnny Garlic’s restaurants in California, Guy Fieri is not new to this rodeo. So, what happened? Guy later tried to distance himself from the debacle by saying it’s a licensing deal and he was removed from the day-to-day operations. His attitude was kind of an, “Oops and oh well. We learned a hard lesson.”

Guy can survive this because of his celebrity chef status; smaller restaurants can’t.

Slow and Steady Gets Repeat Customers

As Webstaurant Store puts it, a restaurant’s soft opening is its “dress rehearsal.” It seemed Guy went into a production of “Grease” as Danny Zuko who missed tech week. While he claimed to have a hand in all aspects of the operation, Business Insider reported that he took a redeye flight to be there for the grand opening.

So, what was happening in that crucial time leading up to the big debut? That’s the time to iron out the last-minute operational hangups.

From what we’ve researched, the key to a soft opening is a slow rollout: gradual introduction of menu items, limited guest list, and introducing yourself to the neighborhood.

Guy went into New York with guns blazing. Wells reported that the menu was overwhelming. The three-tiered restaurant has about 500 seats, and for Pete’s sake -- Times Square is New York’s tourist trap! If you want to connect with locals, your best bet is a smaller “hip” neighborhood, like the Upper West Side or Brooklyn.

Perhaps it was the fact that he has opened new restaurants multiple times. Perhaps he trusted a team of people who were in over their heads on the East Coast.

Success can breed a false sense of security. It can also lead to a breakdown of communication.

Whether you’re a chain restaurant or a single operator, prioritize the communication side of your restaurant operations. For instance, it wouldn’t have mattered if Guy himself was cooking the dishes at the back of the house if an incompetent waitstaff was forgetting to deliver the fries.

Above all, use that critical time during your soft opening to iron out last minute details. Remember: Pans belong in the kitchen—not in the newspaper!

Topics: Restaurants

The Case for No-Fee ATMs

By Jennifer Hoffman


If you’ve ever spent a night out on the town with Millennials, you’ll find that someone has to use the ATM. That’s the situation I found myself in a few months ago when I was driving two of my friends, and they both asked if I could stop at a specific convenience store that had a surcharge-free ATM.

My friends didn’t make a c-store purchase that day; hey were in and out in a flash. But interestingly, they both had the same idea. Given the route we were taking, they knew exactly what c-store they wanted to stop in because of its surcharge-free ATM. They knew the machine was going to be there when they needed it. They trusted it much like they’d trust their bank.

The decision to offer no fee ATMs at your convenience store really comes down to choosing three things over revenue:

  1. Building a relationship with your customer.
  2. Showing customer appreciation.
  3. Increasing foot traffic.

“Relationshipping” is a customer relations term used by Gus Olympidis, president and CEO of Family Express Corp., a 62-store chain based in Indiana.

“We want the customer to rely on us,” Olympidis told Convenience Store Decisions in a recent article. “Because of that, each store features two ATMs to ensure immediate access and some backup in the unlikely event of a breakdown.”

Weigel’s Stores of Tennessee is another c-store chain  that offers no-fee ATMs. Interestingly, the c-store chain is nearly the same size as Family Express, and shares a similar philosophy with an emphasis on customer appreciation. According to Chief Operating Officer Ken McMullen, the philosophy was simple: “Why should our customers have to pay to get their own money? We can give something back to them.”

Olympidis of Family Express advises retailers to be the first in their market to offer surcharge-free ATMs, if possible. McMullen advises retailers to spend money on marketing and getting the word out about the offering.

Ultimately, retailers have to be willing to forego revenue to receive the benefit of increased foot traffic… if the market demands it!

Understand Your Demographics

Really, what’s the sense in offering a free service if no one is going to use it? 

Some retailers interviewed by CSD revealed that their locations weren’t conducive to a surcharge-free ATM—for instance, in a high-rise office building with white collar employees who tend not to use financial services offered in a c-store.

Some retailers choose to pilot ATM programs to test the market response. It’s a wise decision before committing for a full-network rollout. Auditing the results of this test as well as your merchandise sales can also provide guests insights into your operations. Do sales increase when ATM usage is up? Does your product promotion sell better when it’s positioned near an ATM?

Obviously, store reports can help to answer some questions about sales. They may not answer questions about your retail planogram and the relation of your ATMs to the machines, however.

When testing a new service, don’t lose the opportunity to gain additional insights at the store level.

Topics: C-store

What Went Wrong With A&P?

By Brian Harris


It’s said that A&P’s slide began in the 1950s. Sixty-five years later, the grocer has declared bankruptcy for the second time in five years. Unlike the first time it left bankruptcy and emerged with 320 stores and $490 million, this bankruptcy filing may be the last for the 156-year-old company.

What happened? Dubbed “the Walmart of its day,” A&P was once a juggernaut with 16,000 grocery stores across the United States. Today, the network is comrpised of less than 300 stores that have struggled to survive.

Blame bad business moves, including an early exit from California’s rapidly growing markets, or blame other failed strategies like the the 2007 acquisition of Pathmark. Ultimately, blame a lack of responsiveness to changing consumer tastes.

“The big lesson from A&P is that businesses have to keep changing, and when a business stops changing, it’s sentencing itself to death,” wrote Marc Levinson, author of “The Great A&P and the Struggle for Small Business in America.” “By the late '50s, A&P was not the low-cost retailer. It was just another retailer.”

A&P got swallowed up by the competitors it helped to create. It will close 25 stores and reportedly plans to sell 120 of its 296 stores to Stop & Shop, Acme Markets and Key Food Stores.

Food for Thought: The Anti-A&P

Kroger is one major supermarket company that continues to thrive and capitalize on its rivals’ mismanagement. However, it knows when to stay out of markets and weak locations, said David Livingston, a supermarket analyst who runs DJL Research.

“One thing Kroger won’t do is buy fixer-upper, distressed stores,” Livingston told the Cincinnati Business Courier. “Kroger is probably one of the better operators. They’re an above-average grocer that’s very consistent. They didn’t buy up chains of distressed grocers for the sake of growing.” As a result, Livingston predicts Kroger will not buy A&P stores.

Take note of what Livingston said about Kroger’s ability to be consistent. Kroger must excel at communicating internally through its network and externally with customers to have this level of success in an evolving and challenging industry like the supermarket industry. Consistency leads to 46 consecutive quarters of same-store sales growth.

In contrast, A&P was criticized for years for being too slow to respond to market conditions, often focusing on vendor contracts rather than selling to its customers. “It failed in comparison to competitors on both price and customer experience,” wrote George Anderson of RetailWire.

Food for Thought: The retail landscape is changing. If you’re a supermarket retailer, what can you do to improve your response time and improve the customer experience?

Sample Supermarket Inspection Checklist

Topics: Grocery

Fight C-store Shrink With Your People

By Scott Hill


It’s my hope that convenience store shrink is one day a thing of the past. The unfortunate reality is that shrink—a shortage of cash or inventory—continues to eat away at convenience store profits.

According to the latest available data in the NACS’ 2014 SOI report, the c-store industry’s average shrink rate for 2013 was 1.05% of merchandise sales. The annual National Retail Federation/University of Florida National Retail Security Survey also helps the c-store industry, and other retail segments, understand shrink and its causes.

What Caused Retail Shrink in 2014:

  • Shoplifting - 38%
  • Employee/internal theft - 34.5%
  • Administrative and paperwork errors - 16.5%
  • Vendor fraud/error - 6.8%
  • Unknown loss - 6.1%

The good news is that there has been a reduction in overall shrinkage percentages since the 1990s. In addition, there has been a decrease in employee theft as a percentage of the whole, said Dr. Richard C. Hollinger, a criminologist who leads the NRF study. In fact, for the first time, shoplifting/organized crime yielded a larger proportion of loss than employee theft, which has always been the larger of the two percentages.

When asked about the most concerning aspect of this year’s survey, Dr. Hollinger said, “There is no single technology—including RFID—that is having a significant effect on shrinkage. Our search for the single ‘silver bullet’ has still not been successful. The fight against shrinkage is going to be won by people.”

3 Ways to Fight Shrinkage With Your People

C-store operators can best fight shrinkage with a combination of their people and technology, from inventory software to mobile forms and checklists. Here are three tips:

1. Create a positive company culture and engage your retail employees. At 34.5 percent, employee/internal theft continues to be a significant problem in the retail industry. Learn how to hire the right retail employees for your organization. Give employees who perform well more responsibility and recognize them. Employees who are engaged and value their organization are less likely to steal.

Use mobile technology to identify problems at the store level as they happen. Employees feel more engaged when their questions/concerns are being addressed in real-time.

2. Streamline processes from checking in merchandise, transferring merchandise, and ringing up merchandise. Train employees on how to properly perform these tasks. Create a vendor schedule to make sure that the right people are in your stores at the right time.

Use mobile technology to fill out merchandise reordering forms, verify promotional displays and check merchandise pricing.

3. Perform regular security audits. DVR technology is still the tried-and-true way to deter theft and catch mistakes during vendor transactions. Monitoring the point-of-sale is also tied to store layout and design. Form a checklist for all the elements of your safety audit, perform it regularly, and communicate the results from the corporate level to the store level.

Use mobile technology to not only remotely log into your stores DVR systems, but also to perform field audits. Is merchandise being accepted the correct way? Is the transfer of money following protocol? You’ll need a district manager to engage store managers and employees and to ensure best practices are being upheld in the field.

Topics: C-store