Adding a foodservice program to your store provides more ways to gain control over your profitability. Generally, foodservice programs offer a higher margin than most departments in both grocery and convenience stores, unless prices are purposefully set lower for one reason or another.
Unlike many other departments though, where prices are set by the manufacturer and your offering is limited to the stock on shelves, foodservice programs offer customizability and many ways to control your profitability.
Creating an Effective Product Mix
Finding the right product mix for your store is one of the most effective ways to control the profitability of your foodservice program. This doesn’t involve filling your hot case exclusively with the highest profit margin foods, rather it’s about creating a desirable menu for your local market and taking a variety of factors into account, from seasonality to daily foot traffic and the capabilities of your equipment.
When creating a product mix, you may even choose to lower your profit margins by including specific foods; maybe it’s because your staff can’t get enough of a particular product, or it fits your geographical area and their local tastes. Building the best product mix is a give and take.
If you are in a branded program with a franchise agreement, there will be some requirements that you have to include. For example, if you have a Champs Chicken program then you will have more required items on the menu per your franchise agreement.
As a real-world example, we designed a product mix for the daily volume of customers we expected to walk through the door. We were blown away by the daily sales the first couple of weeks. The amount far exceeded our expectations, the equipment was strained, and the staff couldn't create enough food in a single day. We started mixing up what days the store offered some of their special products, like setting fried shrimp to Monday, Wednesday, Friday. This meant the equipment was no longer strained and brought some variety to the regulars.
A diverse mix will drive profitability and it’s something you can directly control as part of your program.
Setting the Right Prices
Setting the right prices depends on what program you have, what you are offering, and the local market and competition. Some programs give you some flexibility on pricing. When setting price, it’s important to think not just about food costs as there’s a lot more involved.
Labor costs, equipment costs, prep time, training costs and many other factors should be considered before you settle on a final pricing structure. It’s important to consider how much your local market will pay, and a good way to learn that is to look at your local competition. If you are surrounded by QSRs that price around $8 for their meals, you know it’ll likely be tough to raise your meals higher than theirs. But if you have no local competition, you might be able to do a premium $10 meal with an extra side.
You might even decide to lower your prices to be a value leader and draw in customers. One thing to keep in mind though — it’s far easier to lower prices than it is to raise them.
Building an Amazing Team
A great team can mean the difference between a profitable program or not. Part of developing a successful program is dedicating the correct amount of staff so your customers aren’t waiting for someone to rush over to help them. Beyond that, it’s important to line everyone up behind your foodservice brand and that they know the food.
One of the biggest mistakes a program can make is a staff that hasn't even tried the food. Your staff should be provided with meals as part of their training, they don’t have to like everything in the hot case, but they need to understand what it is. If you have a staff member that really doesn’t like something such as shrimp, their coworkers can help to explain what it tastes like and how to talk to customers about it.
It’s hard to teach someone to be excited, but by involving them with the product and including hands-on training, you’ll build faith in the program and by extension, the brand.
Another way to keep staff motivated and moving product is having a set of goals. You can build this based on traffic or previous sales from either last year or last month. Find a way to create fair goals the team is excited to pursue. Plan some rewards if your team meets their goals for extended periods of time or has a particularly amazing day.
If you want to push your staff, you can create stretch goals that are sometimes a bit lofty. Though if they are truly lofty, you can celebrate the achievement if they are met or congratulate your team for doing their best and acknowledge the challenges they faced.
A Note on Reducing Waste
Keeping your waste numbers down is one of the most effective ways to increase the profitability of any foodservice program. If your program is suffering slightly, then it’s important to look at how much waste you are producing.
One tip you’ll hear over and over from us is the idea of producing less more often. Create smaller batches more frequently throughout the day so that if you have a slow period unexpectedly, less food goes to waste by not being purchased.
There are a lot of ways to reduce waste in your program; keep an eye on it and always strive for less than 5% waste.
Sometimes it’s not about trying to maximize foodservice profits, and sometimes it is. The beauty of a good foodservice program is its ability to adapt and adjust to the needs of your store and customers.
If you are considering a foodservice program, it’s important to think about what you need that program to do.