THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, June 12, 1995 TAG: 9506100362
SECTION: BUSINESS WEEKLY PAGE: 12 EDITION: FINAL
TYPE: Cover Story
SOURCE: BY ALLISON T. WILLIAMS, BUSINESS WEEKLY
DATELINE: ISLE OF WIGHT COUNTY LENGTH: Long : 154 lines
A portrait of Kentucky Fried Chicken founder Harland D. Sanders, smiling beneath his famous hat and beard, hangs inside the Smithfield KFC's front entrance and invites customers in for a taste of the Deep South.
You're ready for crispy fried chicken, mashed potatoes, hot biscuits . . .
And then you see the parrot.
It's actually a vibrant, rainbow-colored pinata, dangling cheerfully over the corner booth. And now your taste buds shift even farther south - south of the border to Taco Bell. Burritos. Enchiladas. Tacos.
So, where are you?
You're at Smithfield's KFC/Taco Bell, one of Hampton Roads' first joint-ventured businesses.
It's the newest trend in the fast-food and convenience store industries. Joint-venturing lets customers fill two needs in a single stop, said Tom Spencer, director of retail, restaurants and real estate for National Decision Systems, a business consulting firm based in San Diego. At its simplest, you could buy a Subway sandwich and a tank of gas at the same store.
Operating two unrelated but complimentary businesses under one roof saves both businesses money on overhead and start-up expenses, such as land purchase and site preparation, Spencer said.
Raleigh-based Luihn Food Systems Inc. married two fast-food franchise giants when it opened its KFC/Taco Bell at Smithfield Shopping Center in 1993, said KFC spokesman Jean Litterest. It is one of only a dozen joint-ventured restaurants within KFC.
The convenience of ordering from two different menus at one restaurant has made Larry Ratliff and his co-workers on the packing lines at Gwaltney of Smithfield loyal KFC/Taco Bell patrons.
``It's convenient having Taco Bell right here because some guys don't like to eat the fried chicken buffet,'' said Ratliff, 23, of Newport News, as he recently dug into a plate of fried chicken and mashed potatoes. ``Now they just need to add a Burger King in here!''
Roy Robertson Jr., 31, devoured a spicy taco, chased it with a long swig of iced tea and grinned before chomping into an extra-crispy drumstick. ``I usually don't mix,'' the Surry County man said.
Joint-venturing hasn't yet caught on in most large cities, Spencer said. But over the last five years, a growing number of joint-ventured businesses have sprouted in sprawling, rural localities - like Isle of Wight County - and small towns nationwide.
``Joint-venturing has become a real hot button in the last two years,'' Spencer said. ``And I think it's going to become more prevalent in urban areas across the country.''
That growth is starting to trickle into Hampton Roads, said Chas Berle, president of Chasmar Co., a Virginia Beach business that owns four Burger King franchises in western Hampton Roads, from Churchland in Portsmouth to Isle of Wight County.
In 1992, Berle made it possible for harried customers to fill their tanks with Exxon gasoline and grab a Whopper for the road when he opened one of the region's first joint-ventured businesses: a Burger King and Exxon Convenience Store on U.S. 460 in Windsor.
Since then, the small town in Isle of Wight County has gotten its second joint-ventured business and has a third on the way.
Last November, Angus I. Hines Inc., a Suffolk-based oil company, opened a Sentry Mart/Subway across the highway from the Exxon/Burger King in Windsor. The company already operates joint-ventured franchises in Williamsburg and Wytheville and plans to open seven more within the next year.
Just a couple of miles away on 460, Richard Ray, owner of Southern States in Windsor, said he is investing nearly $1 million in renovating his oil-distribution center. Part of his plan includes adding another business to draw in more passersby.
``Co-branding is easier in a rural area because of the size of available land parcels and because there's less competition for businesses,'' Berle said. ``But I think it's spreading to larger localities in Hampton Roads.''
Over the last 18 months, Norfolk-based Miller Oil Co. Inc. has begun serving up a fast-food smorgasbord in the region.
``We've gotten rather heavily involved in joint-venturing,'' said Colen Hodgson, vice president of the oil distributing company. ``Three years ago we did not have any joint ventures.''
Today, Hodgson counts these: a convenience store in Waverly with a Burger King, one in Hampton and another in Newport News with Subways, one in Newport News with a Baskin-Robbins ice cream store, and one in Portsmouth with both Hot Stuff Pizza and Smash Hit Sub sandwiches.
Also, Miller Oil has just opened two new Miller Marts/Arby's joint-ventures, one in Suffolk and the other near Newport News' Kiln Creek community, Hodgson said, and plans to build an Arby's in Chesapeake and a Miller Mart/Baskin-Robbins in Virginia Beach.
The number of convenience stores adding franchised fast food to their lines of soft drinks, beer, cigarettes, candy and gasoline has rapidly increased in recent years, said Stewart Small, spokesman for the National Association of Convenience Stores, based in Alexandria.
In 1993, the most recent year for which figures are available, 11 percent of the country's convenience stores - 15 percent more than in 1992 - had added franchises, Small said.
``This is a way for convenience stores to better serve today's time-starved customers,'' Small said. ``Now customers can make just one stop to fill up with gas and grab a bite of lunch.''
Fast-food and convenience store franchises are by far the most popular partners in joint-venture marriages, Small said. But other service-oriented businesses, like dry cleaning and oil-change shops, are also players in the joint-venturing game.
``Different businesses have been tried in different parts of the country,'' said Ray, who hasn't yet decided what business to add to his Southern States distributorship. ``I'm looking at something . . . with a recognizable name that would have road appeal for people coming down the highway.''
When Sentry decides to open a second business in any of its convenience stores, the company researches what services are needed in the community, said Bob Story, Sentry's retail vice president. For example, his company plans to open a dry-cleaning service in a Sentry Mart being built in restaurant-saturated Newport News.
``We try to get something different . . . that will draw customers into our stores,'' Story said. ``Diversification is good for convenience stores.''
Although most local companies do their own market research before opening joint-ventured businesses, larger companies often hire business consulting firms like National Decision Systems to do the work for them, Spencer said. These firms evaluate a company's business plan, local demographics, the demand for the goods and services offered and how far people are willing to travel for these services.
There are several ways to operate joint-ventured businesses, Spencer said. Sometimes, one business will rent space from another and operate independently. In other cases, they share the same owner, overhead and staff.
The key to joint-venturing's success is having the right businesses teamed up at the right place at the right time, Chasmar's Berle said.
``I believe each business should first be able to survive on its own before you try to synergize them,'' he said. ``Otherwise, you risk the danger of one business becoming an extension that is dependent on the other.''
Joint-venturing allows convenience stores to offer more products and services at a better value and gives fast-food chains the chance to expand into higher-traffic markets, said Small. ILLUSTRATION: Color staff photos by John H. Sheally II
[color cover photo, KFC]
Ray Robertson, left, and Patica Spratley frequent Luihn Food
Systems' KFC/Taco Bell at Smithfield Shopping Center.
Last November, Angus I. Hines Inc., a Suffolk-based oil company,
opened a Sentry Mart/Subway across from Exxon/Burger King in
Windsor. The company plans to open seven more within the next year.
Two new Miller Marts/Arby's joint ventures, one in Suffolk and the
other new Newport News' Kiln Creek community, are part of a growing
trend that hasn't caught on yet in most large cities.
Over the last 18 months, Norfolk-based Miller Oil Co. has begun
serving up a fast food smorgasbord in the region. "We've gotten
rather heavily involved in joint venturing," said Colenm Hodgson,
who counts among his ventures convenience stores joined with Burger
King, Arby's and a Subway, left.
by CNB