Expanding into new services: Nuts and bolts

Service companies in just about all industries got an exercise in "pivoting" during the pandemic, and the convenience services industry was certainly no exception.

The nuts and bolts of pivoting was the subject of a panel session during the recent?Self-Service Innovation Summit ?in Hollywood, Florida, titled, "Expanding Into New Services to Improve Profitability."

(The Summit is one of several industry events organized by Networld Media Group, the parent company of Kiosk Marketplace and Vending Times. The media company's next event is the?Restaurant Franchising & Innovation Summit ?being held March 20-23, 2023, in Coral Gables, Florida.)

Moderator Wayne Vandekraak, chief revenue officer at?OptConnect , a wireless connectivity provider, the session sponsor, began the session by noting that business expansion plans often do not succeed in creating a viable business model.

COVID tests operators

Panelist Todd Madlener, president and COO at Coolgreens Market, a fast casual restaurant chain that expanded into vending in 2019, agreed that the market does not always respond according to plan.

After offering the company's refrigerated food kiosk to locations during COVID, many indicated they wanted the food but not the kiosk. This forced the company to adopt more of a food wholesale business model.

"It doubled revenue in 2022 over 2021," Madlener said.

Executive Refreshments, a convenience services operation in Dallas, Texas, found that many employers wanted pantry service during COVID, seeing it as a way to encourage employees to return to the office, said panelist Louis Baresh, sales manager for the company.

Being that pantry service was a new service for his company, Baresh had to rethink his business model. Working with wholesale product suppliers, including janitorial suppliers, was important. Sourcing different suppliers ensured competitive pricing on these items.

"It allows us to act like a larger operator when we're doing that," he said.

New market needs emerge

Sheehan Brothers Vending, a Springfield, Ohio-based convenience services operation, had a similar experience with pantry service, noted Patrick Sheehan, president. Where the company traditionally served blue collar accounts, a big demand emerged among white collar locations during COVID that weren't being sufficiently served by their existing convenience services operators.

"We got several calls from customers telling us this and we jumped at the opportunity," he said.

Pre-COVID, pantry service was not well-established in his particular market.

"COVID really changed that," he said. "Companies were trying to get people back to the office."

Sheehan, like Baresh, learned the importance of relying on his suppliers for support. He created an online product catalog with help from?Tech2Success , a technology solutions provider, and it was a big success. They are still reaping the benefits.

To make sure a business model will work, Sheehan said it makes sense to try first with a customer with whom you work closely. If it works, then you can roll it out to the whole customer base.

In the ATM space, independent ATM operators had to adjust to a surge in transactions during COVID as people were receiving government payments, for both traditional ATMs and crypto ATMs, said Ayman Rida, founder and CEO of Detroit-based Cash2Bitcoin.

The average 500 transactions per month became 1,000 transactions. "The demand for cash was much much, much higher," Rida said. "Consumers were afraid to go to the bank, so they decided to go to the ATM machines."

On the crypto side, the same thing occurred. More cash went into the crypto ATMs, and Rida had to add regular ATMs to the crypto ATM locations to provide the cash.

Rida had to figure out how to secure the extra capital needed to service his machines.

How to identify new products, services

Vanderkraak then asked the panelists to describe their process for finding new products and services to offer.

Madlener answered with a simple formula: "Demand, can we do it, and can we get a return."

Getting down to specifics, Madlener said the company takes the position that they can offer what the customer wants, then explores how they can provide it, instead of starting by looking at obstacles.

"We literally look at anyone we meet and the answer is 'yes,'" he said. "Start with 'yes,' then have open honest dialog with whomever the client may be, as well as our entire internal team, soup to nuts.

"It may not be a fit today, but it may be a fit down the road," he said, adding that any potential client that comes to you with a need has a need.

Madlener said when he had to choose a kiosk vendor he learned what to use through trial and error. He began with a big machine, then switched to one that provided a faster guest transaction time.

"We balance it against: Is this new piece of tech going to make our team members' lives easier in some fashion?" Madlener said. "If it gets over that hurdle, then we look at: Will it make the guest's life easier, or will it enhance their experience with us?"

Rida said when expanding from regular ATMs to bitcoin ATMs he first did a three- to five-month trial with his top customers before offering it to other customers.

When choosing software for bitcoin ATMs he chose software that makes the machine easy for customers to use. He also uses software for his route pickups and drop-offs.

Baresh described his process for buying software. He sent inquiries to six or seven companies. "Then they harass you," he said. "But it's a great way for you to hear what they have and then start comparing it."

He has three meetings with his staff and narrows it down to two choices, then looks at the cost. The accounting people look at the numbers to make sure it makes sense.

Sheehan said every decision for new products or services revolves around the customer experience and how a new innovation will improve it. It could be more interactive, more user-friendly or more cost-effective.

He said he is presently tracking how much it costs to pick in the warehouse and commissary using LightSpeed Automation, an automated warehouse solution.

Sheehan has also partnered with Panoptic, a hardware/software solution that uses artificial intelligence to recognize theft and alert micro market operators of suspicious behavior.

Proving the theft occurred is 25% of the battle, Sheehan said. The rest is getting cooperation from the client to take action. They may need to charge for theft, which he acknowledges is a tough conversation with customers.

He also uses technology to add services that sets the company apart from competition. They got into sparkling water with the Bevi machine. They also have their own commissary and make their own fresh bread for sandwiches.

"It's really just getting little efficiencies wherever you can in our operation to be able to grow and scale," he said.

New services ahead

Asked about what new services are on the way, Madlener said client customization is the focus for 2023. The company has developed a product line for a clinic with special nutrition needs.

Sheehan said he is looking at a hot food solution they can manage without having to outsource the foodservice. He said his dad got rid of the company's previous hot food program due to lack of profitability, but with some of the new technology, he thinks there are ways to make money with it

Baresh is looking at smart coolers to fight theft.

Does outside research help?

The panelists held different views on using outside market research.

Sheehan said instead of buying market research, he speaks to people already using a product, then tests it with a customer.

Rida said he looks at data about the demographics of his more profitable locations.

"We did a study on them on how they became profitable," he said. "We try to match our new locations with those."

For those locations that are not working well, the team tries to learn why. Is it the population? Is it close to the highway? The data helps.

"The more information you have, the more intelligent you can be about those dollars that you're going to invest," Vanderkraak said.

Cover photo provided by Willie Lawless. Head photos provided by speakers.