HOW TO GROW YOUR CONVENIENCE FOODSERVICE BUSINESS WITH STRATEGIC MENU MODELING

Tom Cook, King-Casey & Mark Kuperman
02/04/2019
Revenue Management Solutions
Most convenience stores have made huge strides in foodservice but are uncertain of the “next step.”
Quick-service restaurants (QSRs) and fast-casual brands have spent more than 50 years examining every aspect of customer behavior, so their experiences can offer c-stores a shortcut to foodservice success.
QSR and fast-casual brands start by linking a well-documented menu strategy to specific business objectives. The strategy prioritizes the menu products and states how they will help the brand meet its objectives. It guides all foodservice merchandising and communications (posters, banners, window clings and, particularly, menuboards) and helps identify new menu items and those that should be eliminated.
DO YOU HAVE A MENU STRATEGY?
Be careful how you answer this question. Many QSR brands (even some of the really smart ones) will quickly say, “Sure, we have a menu strategy.” But, in fact, they don’t.
Digging deeper, we find that what they think is a strategy really isn’t. You don’t have a menu strategy unless you score 100 percent on this simple test:
· Has each menu item been prioritized based on its importance to the brand?
· Do you have a specific action plan for how each key menu item and/or category will contribute to the brand’s business performance?
· Do you have the details in place to actually execute the plan?
· Do you have specific goals and measures in place to evaluate results?
· Has the menu strategy been shared and understood throughout the organization?
· Have all significant stakeholders bought into it?

CREATING A MENU STRATEGY
Creating a menu strategy begins with doing your homework. A team approach is helpful here. First, review your current menu strategy and results, if you have one. This is your starting point. Then, determine market needs. What’s trending in foodservice overall and c-stores specifically?
Understand the competition. That includes QSRs, fast-casual and casual-dining restaurants and supermarkets/grocerants, as well as other c-stores.
Identify economic factors. What is the current economic climate? What’s the outlook for the next two to three years? Develop a pricing strategy accordingly.
Understand regulations. What legislation will impact your brand? For example, new U.S. menu-labeling requirements may create a need to develop lower calorie menu options.
Review technology. What technology do you need to positively impact quality, cost, speed and customer convenience?
Consider operations. Operations are a key but often overlooked factor. Staff? Delivery? Drive-thru? Do you know how to set up a production line?
Conduct consumer research. Consumer research can help determine your brand’s “elasticity” with respect to its menu. For example, a TURF (Total Unduplicated Reach and Frequency) analysis can identify the relative interest and purchase intent consumers would place on various menu concepts and/or specific menu items.
Creating a menu strategy is not about price; it’s about value. You create your pricing and menu strategy based on your value equation (i.e., atmosphere, service, quality, etc.).
Here’s a framework to follow:
Understand how customers view your brand
· Value is determined by your customers. With that said, it’s important to take deeper dives into customer data to understand what customers value.
· Understanding how customers feel and what they are thinking when entering your stores will determine your pricing and menu opportunities.
· Understand changes in your operational scores — such as cleanliness, order accuracy, wait time, staff friendliness, menu quality and variety, and overall impression of the restaurant. See how those changes link to higher or lower performance. Lower scores may indicate an out-of-balance equation with prices not reflecting the amount of service or the quality customers receive in exchange.
· Keep track of changes in your customers’ purchasing behaviors to inform you of opportunities and threats. Use changes in average dollar check and items per check as metrics against the changes in your operational scores.
· Customers are not interested in how much the cost of chicken rose this month. If the value remains the same, so should the item’s price (unless the item is showing signs of pricing opportunities based on elasticity to price and margin).
Understand how customers use your brand
· What customers say or think they prefer is not always reflected in their purchasing behaviors. Since customers ultimately vote with their dollars, it is important for the brand to keep track of purchasing behaviors and their evolution through menu changes.
· Is your brand geared toward all-day snacking and coffee drinkers or is it more geared toward a specific meal period or type of purchase (combo vs. a la carte vs. make-your-own, etc.)?
· Regardless of the menu offering and strategy, customers — through their purchasing decisions — let us know how they intend to use your brand.
It’s important to recognize that not all stores are created equal. To maximize profits and minimize traffic erosion simultaneously, you need to determine brand usage on a store-by-store basis. Customers may use and view your brand in different ways throughout your system. The differentiation may be urban vs. suburban or West Coast vs. East Coast.
We suggest you divide your stores into groups based on similar usage to help increase operational efficiency and enhance each store’s customer experiences. In return, this will generate greater customer spend and frequency. Also, update the offering and menu strategy based on what your customers perceive as best practices in each store group.
KEY ELEMENTS OF A MENU STRATEGY
Once you’ve done your homework, you’re ready to create your c-store’s menu strategy by following these six steps:
1. Establish business objectives. Examples might include: increase beverage incidence to grow profitability, or increase sales between the lunch and dinner daypart. Prioritize your objectives in order of greatest potential positive impact. Establish specific targets and metrics for each.
2. Identify/prioritize your food platforms. Are beverage sales more important than sandwiches? Are sides more important than desserts?
3. Identify/prioritize “key opportunities.” Provide a specific tactical example of how you will accomplish a stated business objective. Examples might include: establish a new range of beverage sizes to increase beverage sales; develop a snack menu to increase afternoon sales; or develop a “large-combo” offering to grow average check.
4. Leverage critical success factors. This includes the menu strengths, characteristics and signature products that differentiate your brand from the competition.
5. Understand critical weaknesses. Your menu strategy helps you circumvent or correct them.
6. Identify threats and risks. An example might be a competitor with similar or better products and menu offerings. A sound menu strategy recognizes and deals with threats.
It’s not uncommon in an organization to have individuals with their own ideas about what importance should be given to different menu items. With a published strategy in place, these conflicting priorities can be intense and counterproductive. A menu strategy shared and understood across the organization trumps any individual’s opinion and dissolves cultural resistance to change. All significant stakeholders buy into it.
Tom Cook is principal of King-Casey, a retail branding and design firm. Mark Kuperman is chief operating officer of Revenue Management Solutions, a consulting firm that helps guide clients along the path of growth optimization.