In our post yesterday, we talked about how important it is to have buy-in from senior management. Today, we need to talk about how vital it is that management understand the difference between running a restaurant chain and creating products for sale in grocery stores.
2.) Licensing your brand to retail is not like sourcing menu items for your restaurants: Many restaurant execs think they can task their Head of Supply Chain guy or gal with the job of getting retail products on the shelves.
In theory, it sounds good: your restaurant is known for a signature product like SPAM-covered broccoli in a taco. How hard can it be to get that product sourced, maybe from the company that supplies it to your restaurant?
First of all, many foodservice suppliers are just that: dedicated B2B vendors with no retail sales staff, no grocery accounts, and no money for paying the slotting fees at traditional grocery store chains.
What about Walmart and Club Stores like Sam’s Club, BJ’s or Costco, you ask? They don’t charge slots.
No, but they have “preferred vendors,” companies they like working with, companies who have their proprietary inventory management systems in-place, and who know what kind of margins these mega-retailers expect. Most of all, they have the scale to handle hundreds of stores.
Even companies who have both foodservice and retail divisions run them separately. Just because your SPAM/broccoli taco guy or gal loves you doesn’t mean he or she can get traction with his or her opposite in the retail division. Foodservice is safe: you make products and know pretty much how many of them you’ll sell quarter-in, quarter-out.
Retail is scary: competition is fierce. It has been said there are enough frozen products on the market to fill 2x the freezer cases in your average supermarket, and the trend over the past 5 years has been smaller-footprint stores with fewer SKUs.
OK, so your CEO understands the difference between foodservice sourcing and retail licensing. What other mistakes can you make? Come back tomorrow for Part 3 (of 5).
Plan on stopping by our panel at the National Restaurant Show at Chicago’s McCormick Place Sunday, May 17th entitled “The Rise of Nontraditional Foodservice: Don’t Panic, Adapt!” Joining BSLG’s Bill Cross will be retail guru, Jimmy Matorin, whose restaurant industry breakfast on Saturday, May 16th is celebrating its 20th anniversary. Rounding out the panel will be Abbie Westra, Editor in Chief of Convenience Store Products.