One of the foodservice industry’s largest pizza sellers is in the midst of a strategic redirection that should prompt restaurant chains of all types to pause and reconsider where they’re scurrying. The reroute lobs some doubt on at least three of the mega-trends reshaping the business, while illustrating just how bad the industry’s No. 1 problem is getting.
Yet few have noticed because the nonconformist isn’t named Domino’s, Pizza Hut or Little Caesars. Indeed, it’s technically not even a restaurant chain.
Casey’s is a convenience store, with all of the jerky, cigarettes and lottery options that are typical of places in that realm. But the 2,000-unit operation has the distinction of selling pizza. Lots and lots of pizza, and much of it delivered. The concept’s foodservice sales totaled $1 billion for the fiscal year ended April 30, which would place it in 49thplace on Technomic’s most recent sales ranking of restaurant chains, and make it the industry’s fifth-largest pizza specialist.
In restaurants’ handwringing about heightened competition from retailers, Casey’s could be the poster concept, the epitome of the lines blurring between retail and foodservice. Yet the retailer isn’t enthralled with that role, even though it enjoys a 61% margin on food and fountain sales. It's making the line a little darker.
Sizing down delivery
Nor is it convinced that delivery is the game-changer that restaurants are betting it will remain. Instead of charging more forcefully in that direction, Casey’s is trimming back its delivery operations by dropping the service altogether at some stores, cutting back the days when delivery will be offered at others, and trimming the hours the option will be available at still more. All told, changes were implemented at more than 100 of the its 790 stores that offered delivery.
Simultaneously, the retailer has decided to go against the restaurant trend of expanding a concept’s hours of operation. About 400 Casey’s stores reversed their policies of staying open 24 hours a day, seven days a week.
The rollbacks in delivery service and hours of operation “came after an extensive hour-by-hour profitability analysis in an effort to determine the optimal hours of operation and delivery offering,” said CEO Terry Handley. “Even though we did experience an adverse impact on same-store sales from these changes, we achieved a significant and measurable reduction in store level operating expenses.”
Specifically, Casey’s indicated, net income was bumped up by about $1.5 million from February through April, offsetting a 1.3% decline in same-store foodservice sales.
Not coincidentally, Casey’s labor costs for the quarter rose just 0.3% for stores open at least a year, a nudge compared to the upward pressure reported by most recent chains.
Shorter hours = less labor
Casey’s isn’t alone in trimming hours to hold operating costs in check. Full-fledged restaurants are starting to do the same, though often because they just can’t find bodies to man every shift.
“Sadly, I have been forced to close one day a week due to lack of workers,” Mark Lawrence, proprietor of the Polar Cave Ice Cream Parlour in Mashpee, Mass., told Technomic researchers. “No choice—I have to give the other employees at least one day off.”
Casey’s is either way ahead of the trends, or at least not sold on three big ones: Delivery, longer hours and the lines blurring between retail and foodservice. It may be a cautionary tale for restaurants that are mindlessly following the pack.