The critical contributors to big-time profits at commercial convenience stores are hardly a secret: cigarettes, beer and gasoline. So how do c-store operators make money if those three products are excluded from the mix? Noncommercial operators at colleges, universities and hospitals have figured it out.

The single most important factor in assuring profitability in the noncommercial c-store model is the proportion of prepared products to prepackaged. It is of such overriding impact, in fact, that operators insist not only that you can't make it without prepared products but that your profits will rise as your percentage of prepared products increases.

The math is a no-brainer. Prepare products in-house onsite in your central bakery or commissary, price them competitively with other retailers, and your profit margin is likely to be in the 60 to 70 percent range. A deli sandwich, for example, that costs you $2 in ingredients can be priced at $5.95 to $6.25. Even with labor factored in, you've added 30 to 40 percent of value in producing the item yourself.

You've got a lot less leeway in pricing canned sodas and packaged chips and bars, some of which even have the manufacturer's suggested retail price stamped on them. You can't hike that price because you haven't contributed anything of value to those products beyond floor space.

Orlynn Rosaasen, director of dining services at the University of North Dakota (UND), in Grand Forks, says two of his four campus c-stores, both located in residence halls, offer no prepared foods and “they're struggling.” When UND opened a 1,000-sq.ft. c-store adjacent to a new apartment-style residence hall in the fall of 2007, Rosaasen knew the apartments had full-size kitchens and he would need to stock grocery items for students to use in preparing their own meals.

But he also rolled out a whole menu of prepared foods for the facility: freshly made soups, fresh fruit smoothies, made-to-order sandwiches with a choice of four freshly baked breads and fresh pastries produced at the campus bakery.

The cost of those goods is 30 to 40 percent of the selling price. On prepackaged grocery items, on the other hand, the price is very competitive and Rosaasen says “we run about a 35 percent profit margin.”

“You have to have prepared food and you have to keep coming up with creative new products,” says Rick Barber, associate director of San Diego State University (SDSU) Dining Services in California. “We introduced single-serve parfaits and fruit cups that we produce ourselves and we sell hundreds a day. In terms of sales volume, prepared items are number three. But in terms of contribution to profits, they're number one.”

At Pennsylvania College of Technology (PCT), Foodservice Manager Vicki Killian says her grab-and-go salads, wraps, bakery items and parfaits packaged in a centrally located campus kitchen give her 35 to 38 percent profit. Two from-scratch soups daily and items from an onsite roller grill also are highly profitable.

But building in prepared foods is only the beginning. Read on.

A Custom Fit
When the University of Alabama was planning to remodel its busiest campus c-store to make it more customer-friendly, dining services administrators also saw the project as an opportunity to totally overhaul the product mix. Julia's Market, unveiled in August in Julia Tutwiler Hall, a 900-bed women's dormitory, is an upscale, inviting, 2,000-sq.ft. space designed down to the details to appeal to female students. There are wood floors, soft, track lighting and warm colors accented with splashes of University of Alabama crimson. A separate coffee area with high-topped tables sells extensive coffee offerings, since coffee drinks are the biggest contributor to profits. Bakery items from the central campus bakery are unique to the market.

Dining services conducted extensive surveys and hosted numerous tastings in designing and refining the market's menu.

“What we heard from everyone was that it is all about fresh and healthy so you won't see frozen meal replacements at Julia's,” says Dining Services Director Kristina Hopton-Jones. The product mix emphasizes fresh fruit, freshly prepared single-serve entrees, portable dessert and snack items and lots and lots of sushi.

“I campaigned for a long time to get sushi on campus — it finally was introduced in 2005 — and I think we serve some of the best sushi in Tuscaloosa,” says Hopton-Jones.

A Japanese husband and wife team employed full-time by dining services makes sushi for sale in the retail food court and at three campus c-stores. The menu for the extremely popular — and profitable — line was expanded this past summer to include rainbow, shrimp, tempura and eel rolls to complement the California, spicy and veggie rolls already available. The sushi comes in six- and nine-piece packages.

After extensive taste testing, Julia's Market is also rolling out a branded Boar's Head deli concept, a campus first, as well as ovens to bake fresh bread for the deli line and baguettes, subs, rolls and sliced loaves for retail sale.

Other additions include sorbet and soft-serve yogurt machines and a hot air screen merchandiser for freshly prepared dinners with vegetables, hot dips, grilled vegetarian options, rotisserie chicken, pasta dishes and single-serve hot sandwiches.

An extensive line of single-serve, grab-and-go snack and dessert cups includes banana pudding, strawberry shortcake and carrot cake. At an association conference, Hopton-Jones was delighted to find mini brownies that come in domed containers that act as warming boxes.

Hopton-Jones projects a product mix of 46% c-store items, 32% coffee and 23% Boar's Head products. Food costs for the deli concept are projected at 35%, coffee at 30.5% and c-store items at 68%. She expects a 32% increase in sales and a 7.5% hike in check averages.