Founding Farmers Co-Founder Provides Grocery-Conversion Playbook

Company averages about $125,000 a day in grocery sales from five units, helping it to rehire staff and keep up health coverage.

Faced with the implosion of his business, Simons gambled that customers would buy the groceries and prepared food items they couldn’t get delivered from supermarkets.

The day after Dan Simons had to lay off 1,100 employees, he decided to turn his Founding Farmers restaurants into grocery stores to help offset further losses from the coronavirus outbreak.

The move allowed Simons, co-owner of Farmers Restaurant Group, to hire back a number of those employees and potentially position the business to weather the economic storm.

The decision was a no-brainer. Simons had to come up with a solution to save the business, an upscale-casual-dining brand specializing in farm-to-table cuisine. Running a market was in his DNA; he started his career at Eatzi’s, the forerunner of gourmet restaurant/fresh-food marketplace concepts.

Faced with the implosion of his business, Simons and partner Michael Vucurevich gambled that their customers in Pennsylvania, and the metro Washington, D.C., area would buy the groceries and prepared food items they couldn’t get delivered from supermarkets.

“Initially, when this COVID insanity hit, we went through a moment of feeling like we’d gotten hit with a knockout punch,” he said. “Pretty quickly we realized that with the size of our restaurants and facilities, restaurant menu-to-go sales would not be a business model.

“We asked ourselves, ‘Are we going to get knocked out, or do what we were built to do?’ And that’s how Founding Farmers Market & Grocery was born.”

Simons’ experience reads like a playbook for any operator thinking about expanding into grocery sales.

Capitalize on your good supplier relations. “We are working with our supply chain more closely than ever before, and they are working hard to help us. You know, everyone sees the stories about restaurants and worry about us, but the farmers are hurting too. There’s been supply chain disruption, there’s been a massive drop-off in sales. Most of our vendors are here in D.C., and they’ve been amazing. I see them as partners. We have really good relationships with them. We also work with our farmers in North Dakota, and U.S. Foods is our broadliner. They’ve been incredible, loaning me refrigerated trucks when I needed more storage room. That helped me set up a kind of small, satellite warehouse.”

Pick the right e-commerce platform. “For us, everything is done through our online portal. We partnered with GoTab, and they’ve been amazing. They’ve given us a really fast, good, back-end interface, and enable online payment. We’ve asked their system to behave as a fully robust e-commerce platform and it’s working. Plus, they’re restaurant people so they know the business.”

Plan your storage space. “Our dining rooms look like pick-and-pack warehouses. We converted the coolers into refrigerator shelves like you’d see in the grocery store. Only my pickers [are permitted to] go through, and they keep it very well organized.”

Get your pricing and product line right. “The Market & Grocery’s pricing is more value oriented than the restaurants. Make sure you’re in line with other retail operators. I did lower the restaurant menu pricing and shrunk the menu a bit. For example, now a customer can get a single pack meal – sort of like a chef-crafted TV dinner – for $10.99. I’m also selling items from our bread and bakery line, along with flour, yeast, tons of produce and protein, disinfectant wipes, spray cleaners, hand sanitizer, toilet paper, beer, wine and our batch cocktails. We’re doing this at five of our seven stores and averaging a total of 250 sales per day at about $100 per order.”

Know the tax implications of selling groceries. “It’s not complex but it is detailed because of the different categories you sell. Some things, certain desserts or baked goods, are taxed differently in different jurisdictions if sold in a restaurant, versus to-go. And things like hand sanitizers are taxed at a different rate than prepared food. Create a chart for yourself, understand the categories of what you're selling, go to your local jurisdiction's tax department website to get the right information.”

Label your items correctly. “One important step happened when the FDA relaxed its nutrition labeling requirements during the crisis. There’s no way we could have spun this thing off so quickly without that. With everything we’re selling, we’ve got between 400 and 500 SKUs. The labeling requirements are clear: labels need to include the ingredients, weight, place of origin or production, and allergens. Our goal is to be fully compliant, with eyes wide open.”

Pay close attention to alcohol sales rules. “Some areas allow you to sell alcohol and others don’t. In D.C. and Maryland, they’re letting us sell batched cocktails, which is good, and Virginia is starting to, too. Next to labeling, alcohol rules were high on my radar. Pay close attention if you’re planning to sell those types of beverages.”

Sell products in set amounts. “You can’t sell variable weights; it gets too complicated. Here, there is no ‘pound-and-a-half of sliced turkey.’ We’re portioning and weighing everything. I don’t have retail customers, so there are no barcodes or scanners. We sell items in half-pound packs. And, if you want something like chicken salad, we sell it in 8-oz. containers.”

Be creative and design provision boxes. “I'm experimenting with this at one of my stores. For example, we’re doing one boxed offering that includes two rolls of toilet paper, a roll of paper towels, hand sanitizer, one whole roasted chicken, and a pound of green beans.”Everything is either curbside pickup or delivery, and payment is online. No one but employees are allowed inside.

Design a curbside pick-up/delivery model that works for you. “We’re handling grocery delivery ourselves rather than rely on a third party to do it for us (The company does partner with third-party delivery services, but for restaurant menu orders only).

With our grocery business, we saw an opportunity to figure out delivery ourselves and rehire some employees. Here’s how it works: first, no one — not the drivers or the customers — are allowed inside. Everything is either curbside pickup or delivery. Payment is online. One thing about delivery, though: because we did catering, we had a group auto insurance policy. You’ll want to make sure you have one if you’re handling your own delivery. Also, make sure you do driver’s license background checks. If they pass, you might add them to your insurance policy.”

Use social media and all available marketing opportunities. “We’re doing tons of social media. Also, I’m literally reaching out to everyone I know, asking — as a favor — for them to boost our market on their Facebook pages. We're pitching it to local media, trying to tell the story. We’re using social media the most and our email database to reach out to customers. Marketing has changed so much since the old days, but now in the COVID world, it’s even harder to get noticed. My pro-tips for social media: Use short content, quick little videos, and how-to information, like recipes and cooking tips.”

Keep your motives straight and employees safe. “This story is about conscious capitalism; it isn’t about profit. It’s about deciding to become part of the essential infrastructure to the community, hire back the people we lost, feed and provide them with income and health insurance. And, we’re doing it safely. We’ve got PPE as well as a fogging protocol that kills the virus. I’m doing that proactively at all of my stores. It’s so important.”

May 8, 2020
https://restaurant.org/articles/news/founding-farmers-offers-grocery-store-playbook