Convenience Store Decisions
Fresh, hot donuts just might be the perfect CONVENIENCE STORE food. The reason: donuts rarely cannibalize other food sales-but often stimulate sales of other convenience items.
Tim Matthews doesn't come from a convenience store background; actually, he's a CPA by trade. Three years ago, he and his brother/business partner, Burt, were on the outside looking in.
They had a vision for convenience retailing, based on their imagination, and they had a model to gauge their ideas against-other convenience stores. But they weren't holding their would-be competitors up on a pedestal. Rather, the c-stores they had seen were the epitome of what not to do.
"There's a buzzword in this industry: destination," says Tim Matthews. "In reality, it's just a buzzword with little meaning. Nobody knows how to go about doing it. We think we've got the right formula. Just look at our restrooms: We fold the toilet paper every hour, and we have fresh-cut flowers. And that's just in the restroom."
The Matthews brothers currently operate two Chevron-branded convenience stores in the greater Salt Lake City, UT area. Their first store opened in the town of Murray two-and-a-half years ago, but it is their newest store, Jordan's Landing Chevron in nearby West Jordan, that has put the brothers on the map.
The one-of-a-kind store has been open for less than a year-only three months, to be precise-but its incredible volumes-especially in donuts-make it seem like a storied landmark that has served customers in the surrounding community for much, much longer.
Ultimately the brothers quit their jobs and got into the c-store business. In the process of designing their second store in West Jordan-which measures 4,800 sq. ft.-they thought to themselves, "What would make it a destination location?" The answer they came up with: donuts. And that is how Tommie's Hot Donuts came to be.
"We have a concept that fits within a 1,200 sq. ft. kiosk," says Tim Matthews. "It comes with a viewing window so customers can watch the donuts being made. We can make 120 dozen donuts an hour. When you look at the volume we do in the space that we have, it's pretty amazing."
The Matthews' philosophy is that if you provide great service, hire the best people and make the customer's visit entertaining and memorable, then you'll get them as a loyal customer. "We developed our sites with the customer 100% in mind," says Matthews. "We thought that a great hot donut program would cause customers to drive across the valley to visit our stores."
And they have. Out of just one store, the concept is generating sales of 10,000 donuts a day. On a Saturday, Tommie's will do up to $3,000-not including incremental sales of other items, such as coffee and items from the cold vault.
While only one of the Matthews' stores sells donuts, both locations are high-volume. The Murray location-the store without the Tommie's program-is doing $180,000 per month in inside sales.
The Matthews brothers' West Jordan store sells more than 10,000 donuts a day out of 1,200 sq. ft. Currently, only one store sells Tommie's Hot Donuts, but the Matthews hope to have five stores selling them by June of next year.
"We sell 50 gallons of milk per week at the Murray store," says Matthews. "But at the West Jordan site, we do 400 gallons a week. Donuts tie in with a c-store perhaps better than any other QSR; it encourages coffee sales, fountain sales and dairy sales."
Taking it national
Donut sales have been so good that the Matthews brothers have been urged into talks with their attorneys in hopes of turning Tommie's Hot Donuts into a franchise. Tim Matthews says interest in the concept has been outstanding, and they hope to have their first franchisee within five months. They estimate the investment will not exceed $200,000, a nominal sum compared to some of the bigger-name players.
When the Matthews brothers do finally offer Tommie's franchises, they insist that territorial exclusivity will not be a huge factor. In fact, Tim Matthews is convinced that several Tommie's Hot Donuts programs can survive and compete in the same market-all selling an equally incredible volume of donuts.
The most important secret of the concept's success: Customers are able to see-and smell-the donuts being made.
"It's got that fresh bakery smell," he says. "They can walk in and get 'hot ones' from 5 a.m. to 10 p.m. They see the donuts being run through the trays and through the proofer (the proofer has a window). We're constantly running hot ones through, any time of day."
The secret to success: One of the reasons Tommie's Hot Donuts has been such a smash is that customers can see and smell "hot ones" as they are being made. A see-through window at the proofer gives customers a first-hand look. And the strategy is working; the average sell is two dozen donuts per customer."Hot ones" are available from before dawn to well after dusk, but fresh donuts are available any time of day-they just might not be hot. Donuts are both self-serve and full-serve. Most people don't buy single donuts; often they will leave the West Jordan store with donut boxes stacked under their arms. The average "sell" is two dozen per visit, but orders of 60 dozen to 100 dozen are not uncommon.
Keep it clean
There is no cash handling at the donut counter. In order to keep the operation fluid and clean, no associate that handles a donut will touch a dollar bill. All sales are run through the POS at the c-store, which is a departure from many QSR operations.
"We run all sales through the convenience store," he says. "Keeping it all running through one POS terminal reduces our labor. The sales are categorized as Tommie's Hot Donuts, but driving sales through the convenience store promotes the upsell. Most QSRs want to protect their territory, so to speak. What we want to do is exploit both offers: the donuts and the store."
Another principle of the donut program: maximum sales with minimum labor. The process is entirely automated. It takes some labor to oversee the donut making, but the Matthews had the forethought to design the system so that there is minimal human interaction.
"There is a real art to making donuts that are perfectly golden brown," says Tim Matthews. "We train our donut-making staff solely as bakers, and we have a really good retention rate. We do our best to train them well and provide them with the pay and the benefits they deserve."
The Matthews' whole concept is to make each customer's visit an experience. The warm and friendly feel is promoted throughout the store, which Tim Matthews says more closely resembles Willie Wonka's Chocolate Factory than a convenience store.
"Everything we do here is for the customer; we want the customer to remember the trip," he says. "A lot of convenience stores have 'stop signs': no shirt, no shoes, no service; not accepting checks; not letting customers use the bathroom unless they buy something. Even if the customer doesn't buy anything that trip, chances are they'll buy something next time they are in the store if you treat them well the first time.
"Same thing goes for Tommie's Hot Donuts," he says. "If a mother is driving through town to get gas, she's going to stop at our store because her children enjoy watching the donuts being made. Customers get into a rhythm. They come here because it's very thematic. Some people will drive here from as far as 100miles away."
Up & coming
By June 2001, the Matthews brothers hope to have five stores altogether, and all five will have a Tommie's Hot Donuts inside. The Murray store will be retrofitted with the concept, but the other three will be new builds. The chain's new facilities will be up and running-donuts in place-just in time to accommodate the influx of people from around the globe that will converge on nearby Salt Lake City in preparation for the 2002 Winter Olympics.
By that same time, Tim Matthews is confident that franchise operations will be well underway, with a mix of co-branded and free-standing Tommie's Hot Donuts operations. So far, they have received inquiries from operators across the United States and Canada.
Just recently a customer drove from Arizona-which is nearly 200 miles away-to see the West Jordan store, just because he had gotten wind of the store's sheer size and volume. Advertising the stores hasn't been a consideration; word-of-mouth has done a good enough job on its own. Even some of the Matthews' better-known competitors are stopping by the company's newest store-just to take a gander.
Donuts "encourage the upsell," with offers such as coffee, fountain and dairy getting a good boost. The Matthews sell more than 400 gallons of milk per week from the Jordan store.
Tim Matthews says that just last month a new Krispy Kreme franchisee flew in from Las Vegas to check out the donut operation.
Now that's what you call a c-store destination.