Improve NET OPERATING COST by increasing SALES

For truckstop and travel plaza operators, net operating cost provides insight into their locations’ profitability, efficiency and success, which explains why operators are constantly looking to improve their net operating cost.

Darren Schulte, vice president of membership at NATSO, said there are a number of ways locations can works well for one location may not be the solution for another. “You can reduce or improve the cost of your food or your retail items, your labor or your supplies while your sales remain the same, you can work to increase sales, or you can increase your sales and also reduce your costs,” Schulte said.

Regardless of which area operators focus on first, Roger Cole, editor of the NATSO Foundation’s Biz Brief and a former chairman of NATSO, suggested operators remove fixed or semi-fixed costs they can’t control, such as property tax and depreciation, when examining their net operating cost so they can focus on things the managers have control over.

For more tips and insight, NATSO sat down with operators to learn how they have improved their net operating cost. 

INCREASE SALES

 

Holding expenses constant while increasing sales, gross profits and centsper-gallon margins is the preferred method of improving net operating cost percentages, said Tom Heinz, president of Heinz Inc. and Coffee Cup Fuel Stops & Convenience Stores Inc. “Focusing on increasing average transaction amounts by simply selling more to each customer is going to be crucial,” he said. “With lower gasoline prices, a renewed focus on the gas customer and training all employees on how to upsell should pay future dividends as well.”

Schulte said, “If there is a magic bullet everyone would agree it is to increase your sales. Most people believe if you can drive your topline sales it has a double benefit. It increases the revenue, which leads to increased profits. It also improves your economy of scale. If you’re growing sales, you’re buying more, which comes with its own cost reductions.”

Heinz said simply maintaining a product mix with high double-digit margins while mitigating out of stocks can be helpful in increasing average customer transaction amounts.

To help increase sales, Herb Hargraves, director of fuel and retail sales at Cash Magic Truck Plazas and Casinos, has implemented a suggestive selling program, which he said is a key driver in stimulating additional sales. He launched his company’s suggestive selling program several years ago and has seen it grow year over year.

“The first year we made an additional $10,000, the next was $20,000 the next was $35,000. When I look at my year over year, it is a 1.5–3 percent increase,” Hargraves said. “Those incremental rings can add up to the bottom line. As companies, we want to increase our sales and profits.”

Butch Stucky, vice president of retail operations at Triplett Inc., said Triplett runs promotions to try and spur sales and will tie in a contest as a way for cashiers and store teams to win something. “That keeps the cashiers selling and incentivize them to ask for the sale,” he said.

Triplett works with vendors to find a way for them to participate, whether it is a cost reduction or rebates. “There are all different ways to slice the pie. Different vendors like to work in different ways,” Stucky said, adding that it is important to come up with a price point that will incentivize customers to take advantage of the special and make it easier for cashiers to pitch the deal. “The more the cashiers do it and have success doing it, the less resistance there is to do it.”

Hargraves agrees that finding the right item at the right price can make the program more successful. “It is all about the smart suggestions. If you make the item too expensive, it just doesn’t make sense,” he said.

To help boost sales, some operators are making the most of their parking lots, turning extra space into an innovative profit center. Schulte said adding revenue sources to a parking lot enables operators to improve their net operating cost by using parts of location that may not be producing any value to the operation.

An innovative kiosk or vending machine could also help a location change its customer demographic. “For example, if your current location demographic is 99 percent male, a drive-through popcorn kiosk may just change that up,” Schulte said. “What about a drive-through cupcake kiosk or cosmetic kiosk?”

Increasing sales is just one of several ways operators can boost their net operating cost. NATSO has created an online toolkit with a dozen additional ways operators can improve costs, including making smart marketing spends, minimizing shrink and reducing supply costs. Access the toolkit at www.natso.com/ NOCtoolkit. In addition, Schulte will delve deeper on the topic during

The NATSO Show 2017. 

AN INNOVATIVE KIOSK OR VENDING MACHINE COULD ALSO HELP A LOCATION CHANGE ITS CUSTOMER DEMOGRAPHIC.



via Business Feeds

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