Five Star Food Service, Inc. is a rarity in the business world. It is a company that does it all and does it well. In just over twenty years the Canteen franchise has grown as a leader in vending, micro markets, office coffee service and dining. Five Star operates each segment under its founding principles of integrity, quality and customer focus, and it shows through its continuous expansion. Today Five Star Food Service employs more than 800 people and operates 11 branches, a culinary center, 200 vending routes and 36 cafeterias.
The consumer is at the front of every decision Five Star makes and that means the company is not afraid to invest in ideas or business solutions that will benefit its clients. Five Star has grown through a series of 53 acquisitions and more recently has focused its attention on the growth of its micro market segment. In a little over three and a half years, Five Star Food Service has opened 327 markets and expects to reach 400 by the end of its current fiscal year.
Acquisition and retention
Formed in 1993, Five Star has grown to be a full service operator that offers customers vending, micro markets, office coffee and dining programs in Georgia, Tennessee, Alabama and Kentucky. Today, the company is privately held by Navigation Capital Partners and senior management, including Alan Recher, president and chief executive officer. Recher joined the company in 2005 as chief operating officer and advanced to his current position in 2008. Since then, the company has experienced significant growth, driven by an intense focus on new business acquisition and client retention. “Our growth has been fostered by the creation of a sales culture at all levels within Five Star,” said Recher. The company has invested heavily in the expansion of a professional sales and marketing department to support its many growth initiatives, all with the principle of keeping the customer first. “Five Star has distinguished itself in the markets we compete by always thinking of the customer first,” continued Recher. “We pride ourselves on outstanding customer service. Our high customer satisfaction scores are being driven by our culture’s sense of urgency.” Three years ago, Five Star invested in an idea that would not only conform to consumer demand, but would also help the company solidify future growth: micro markets.
In January 2011, Five Star began experimenting in micro markets. Recher had seen a micro market concept at a tradeshow and was intrigued with its potential. After six months of testing the concept, Five Star management determined that micro markets could be a sustainable growth engine for the company. “The primary reason we believed in the concept was due to the overwhelmingly positive reaction we were getting from our customers,” said Greg McCall, vice president of sales and marketing. “Over and over, we were told that employees loved the convenience and variety of the market concept.”
The company found that micro markets offered consumers a much wider product selection and gave the company a platform on which to expand. Initially Five Star began integrating the micro market concept within the sales force and witnessed significant growth, so within the first year it became its own line of business within the company.
Five Star immediately saw micro markets as a retail concept. “We began to design a retail company within our vending company,” said McCall. The company created micro market-specific warehouses within its vending warehouses, in order to keep the businesses separate. Vending routes were separated from micro market routes and the company began looking for retail-oriented micro market drivers who could merchandise.
“From the beginning, we believed that it would be necessary to build a dedicated operational infrastructure to support the Micro Market business,” said McCall. And so a new level of management was created. Micro market managers and area micro market managers were hired. Mark Staphanos, who had been with the company since 2003, was chosen to lead the entire team of micro market-dedicated staff as vice president of micro markets and two directors of operations were put in place. “We have around 65 employees who are completely dedicated to the micro market business,” said McCall.
In order to act as a retail segment, the company began offering retail-like promotions as well. “We are dedicated to providing frequent and high quality promotions within our markets,” said McCall. “We are realizing how to operate a retail business, and promotions play a large role in that mission.” Typical company promotions include a price discount or the chance to win valuable giveaways. The most recent promotion gave customers the opportunity to win a Caribbean cruise for two.
Manufacturers also began partnering with Five Star to provide giveaways and promotions, including a current promotion sponsored by Mars. When users purchase a Twix Bar using their account IDs, they are entered to win a pair of tickets to an NFL football game and a $50 Visa Gift Card.
Creating the breakroom experience
As the largest Canteen franchise, Five Star began using Canteen’s Avenue C micro market concept in most locations after 2012 and is currently transitioning all non-Avenue C markets to that concept. “Five Star made a strategic decision to transition to the Avenue C concept. We believed that the Avenue C brand and 365 Retail Market’s technology platform was the best in class solution for our business,” said McCall. The concept includes all equipment and cabinetry and requires no investment on behalf of the customers. The company does require, however, that all locations be furnished with the appropriate electrical source, Internet connection, and water line, when needed. “We do find that many companies decide to remodel their break rooms prior to the installation of a new market,” said McCall.
New brands of fresh food
Five Star works to create the ultimate break room experience for customers when they install a micro market, and that includes adding the foods that customers wants, especially the fresh food. “We have seen a significant increase in sales as we have converted companies from traditional vending to micro markets,” said McCall. “We believe that the concept increases the participation rate within companies. People prefer to touch and feel the product before purchasing.” This is most evident in the sale of fresh food products.
The company realized early on that no two locations were the same, meaning that no two locations wanted the same product. Therefore, each micro market is now planogrammed specifically with the location’s food and beverage desires, determined by close monitoring of data collected. The company will begin each new micro market with products from different fresh food lines and watch the purchasing data to determine which lines sell the best based upon location type.
Five Star’s commissary, which was purchased through an acquisition in 2013, produces up to 6 million pieces of food annually. The company supplies its vending and micro markets with fresh food from its commissary and also sells to other Canteen franchises. Having a commissary allowed Five Star to create a brand to meet the wellness trend. The Choice Plus Fare brand is marketed as a wellness solution to micro market and vending locations.
Micro markets grow, so does OCS
Micro markets are the driving segment when it comes to growth percentage. In the last three years, however, the company has also witnessed a significant percentage growth in coffee service. The company has not only invested in a sales force dedicated to coffee service, but it has also reached into private label. Five Star has its own ground coffee, liquid coffee, liquid tea and pod coffee lines, including its house blends Masterperk, Columbian, Classic and Columbian Decaf. It also has recently developed two dark roast line extensions, Donut Blend and City Roast.
The company that does it all
Some companies would not be able to handle four different segments of vending, coffee service, micro markets and dining, however, Five Star Food Service thrives off of the combination of these businesses. The company began and is rooted in vending, however, investments in micro markets and office coffee service have grown the company to be a powerhouse in the South. By focusing on changing consumer eating habits, trends and expectations, Five Star has been able to grow to become one of the largest industry operators in the U.S., with no signs of slowing.