Hitting Critical Mass

U-Gas shows the possibilities of a small-scale foodservice commissary.

By  Samantha Oller, Senior Editor/Special Projects Coordinator

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As legend has it, the commissary at U-Gas Inc. was born six years ago with a challenge from company founder Paul Taylor: Let’s open a commissary and make a good sandwich.

The company had been supplied with sandwiches from a third party. But unhappy with the product quality, U-Gas hired two deli managers from a local grocery chain to develop a sandwich program from scratch. “We started off with two ladies doing it themselves, making and delivering it, going to stores and ordering what they needed,” says Curtis Springer, director of foodservice for the St. Louis-based chain. 

The commissary initially filled 1,000 square feet of a strip mall in Arnold, Mo. As foodservice sales grew, so did the facility, absorbing an 800-square-foot space next door. Around this time, U-Gas opened the restaurant GiGi’s Fresh Café at one of its sites, and from there a foodservice program—GiGi’s Café Express, featuring sandwiches, wraps and salads—was born.

Its point of differentiation? Freshness. “We’re all fresh product,” Springer says. “We make everything from scratch, we crack our eggs every morning, cook turkeys, beef and chicken fresh, and cook everything each day. Everything’s made from fresh ingredients and never frozen.”

This past February, U-Gas went big time, expanding into an 11,000-square-foot commissary staffed by 35 production workers, four managers, three sanitation workers, a quality-control technician and three drivers. The venue cranks out sandwiches, fried foods, ravioli, potato chips, fruit cups, yogurt, salads, car snacks … “You name it, we make it,” Springer says.

The dissatisfied retailer that takes control of its own destiny and product is a common foodservice narrative. What’s different here is U-Gas’ size: 19 sites. This immediately begs the question: Can a chain of this rank truly realize a return on its investment?

“At the threshold of 10 to 15 stores, you’re really dancing around it to make it work,” says Deborah Holand, president of Food Sense Inc. and a consulting partner in b2b Solutions LLC, Lake Forest, Ill. As store count increases, a commissary becomes more doable, she says, but it requires several factors: short distances between sites, an established distribution chain and robust foodservice sales.

“Fifty stores makes more sense to have their own commissary than if there are only 20 stores, because you can spread the costs out,” concurs Tim Powell, principal at Technomic Inc., Chicago. “And not every c-store [justifies it]. You will have different consumers and different stores that may not want turkey sandwiches; they might just want roller grill. It’s not one size fits all.”

For U-Gas, the commissary has not been a home run—yet. “The ROI has been very challenging,” Springer admits, declining to share the exact investment but saying it was in the “high six figures.” “It has taken us a while to get there.”

While U-Gas is turning a profit in its foodservice program, the commissary has taken longer because it guarantees product to the stores. To hasten the math, the chain recently consolidated from multiple food suppliers to only one—St. Louis-based Kuna Foodservice—which trimmed food costs by 20%.

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