In our last blog post, independent C-Store consultant Mark Walsh helped us shed some light on the Pros and Cons of adding a hot food program to your service offering.
As part of that conversation, he suggested the next key question an owner must ask after deciding to proceed with a hot food offering is whether or not is should be a branded (national franchise) or non-branded product.
Part II: Branded vs. non-branded food program.
Based on his years of experience, Walsh believes that most C-Stores will benefit from the strength and support of a branded food offering, which makes it a good place to start.
Option 1: Branded Food Program:
We live in a society that is captivated by the power and allure of big brands.
Illuminated road signs with names such as McDonalds, A&W, Burger King, Tim Hortons, Taco Bell, KFC and Subway are like the Sirens of ancient Greek lore – drawing us in with their irresistible spell. Clever, impossible-to-ignore advertising campaigns play on our psyche to create an insatiable demand for branded products.
In this day and age, brands are juggernauts that are nearly impossible to compete with. Which is why Mark Walsh feels branded food offerings are overwhelmingly the right choice for most C-Store operators.
“Brands represent familiarity, trust, credibility and confidence in the minds of consumers. People know these products intimately. There are no surprises. So in essence, you are buying a proven entity that has built-in brand-recognition and a war chest of marketing support.”
Brands also pour substantial resources into product testing and R&D... and are good at introducing new products or seasonal offers that will give consumers another reason to come in.
By partnering with a brand, the products, processes, supplies and equipment are already in place – and have been tested and refined over time. This makes it easy from an operations standpoint. As well, by working with a brand you will receive a preferred price on equipment, millwork and fixtures. Not to mention professional marketing and advertising support.
“You’re getting a turnkey solution. Plus, you are fully supported by an organization that is committed to growing their business.”
According to Walsh, the flip side of the coin is that you do pay a premium to associate yourself with a brand.
“In branded programs you typically pay both a royalty AND an advertising & marketing fee, which comes directly out of your gross sales. These fees can range between 5-10%.”
Additionally, as a franchisee you are subservient to the mother corporation in terms of pricing, product and operating decisions.
Walsh says that while it seems like you may be paying a steep price to be associated with a brand, the upside is far greater.
“Mark’s Donair will only attract about 5% of the business a Subway does,” Walsh smiles.
Option 2: Non-Branded Food Program:
The biggest upside to a non-branded product is that you have the autonomy to set your own prices based on what the market will bear. As well, how you sell, market and display a non-branded product is entirely up to you.
While this all sounds good, it means more work for you as an owner/operator.
There are only a few instances where Walsh feels a non-branded solution makes business sense.
“If you are lucky enough to have a captive market where there will be no competition in the foreseeable future, you may be able to get away with a non-branded food offering.”
In most markets, your C-Store will be going head to head with standalone branded fast food offerings or other C-Stores with a branded offering of their own. Competing with a brand is a Herculean challenge.
As mentioned earlier, people know what they are getting with a branded product, which meets uniform standards for taste and consistency. With unbranded products there is always a degree of uncertainty in the mind of the consumer. And how can you possibly compete with their marketing budgets?
Even if you have a spectacular original food offering, some of the equipment you assume might be readily available is expensive and hard to come by (such as drive thru menu screens and intercom systems).
The reality is that with a non-branded offering, you are at a distinct disadvantage. But don’t let that deter you. With the right offering and determination... you may be able to carve out your own niche. Whatever direction you choose, CTM can help serve up a comprehensive building design that will serve your needs.
Buying a Franchise? Here’s a HUGE tip:
Sign your franchise deal at an industry tradeshow. Why? Nearly all brands offer a significant discount on franchise fees as part of their tradeshow package. If you can’t wait for a tradeshow, or can’t find one in your area, be sure to ask if there is a special tradeshow discount on the franchise fee they can extend to you.
