Dive Brief:

• Parkland Corp. is testing a new foodservice establishment at its newest fuel-less On the Run c-store, located in Montreal, the company noted in its second-quarter earnings call on Friday. 
• The menu at Bites On the Run includes 30 restaurant-quality items and was created in conjunction with M&M Food Mart, a frozen-food retailer Parkland bought in 2021. The concept took about a year to develop, CEO Bob Espey said during the call. 
• Parkland is looking to this new foodservice option to join other initiatives across the company as a major source of organic growth, Espey noted

Dive Insight:

Espey noted in the call that “to win in the convenience space, you must have a strong food offer.”

Bites On the Run debuted as part of Parkland’s second standalone store, which opened in the entertainment district in Montreal, Quebec in mid-July. The first is in Vancouver. Parkland expects to eventually build 50 fuel-free locations in the U.S. and Canada.

While there are only two so far, and one’s only been open for a few weeks, signs are positive so far for this concept.

“First, it’s tracking well above our initial business plan, but the mix is a little different than we would have anticipated,” said Espey. 

He noted that higher-margin center store items have proven more popular with shoppers at the “standalone” stores so far. These shops also have a broader array of frozen M&M items, which are getting “good uptake,” he said. 

The one category that seems to be suffering in these new store designs may surprise some people.

“Tobacco is tracking at about a quarter to a third of sales, and typically we would see that in the 50% [range],” said Espey. 

Parkland expects to open three more standalone On the Run stores in 2023.

While all these tests have been taking place in Canada, the U.S. division has been gaining momentum. That division simplified its structure and eliminated about 250 positions. Combined with other savings, it’s expected to reduce spending by a run rate of about CA$100 million. 

The company also earned record adjusted earnings before interest, taxes, depreciation and amortization of CA$470 million for the quarter, up 4% year over year. Same-store sales, excluding tobacco, were up almost 5%.

“This disciplined focus on customer service and consistent execution have been incredible,” said Espey. “You can see the impact of their hard work and dedication in our Q2 results.

Finally, the company gave an update on the planned divestment of CA$500 million in assets. The company is actively marketing more than CA$300 million in assets, Espey said, adding that it has made agreements on about CA$100 million worth of those assets.

“We talked about high value sites that, as real estate, are more valuable than to continue to run them as retail sites,” CFO Marcel Teunissen said during the call. “But in most cases, we have been able to kind of lease the sites back for a period of time while land developers think about what they do.”

With 1,860 stores in its Canadian network, Calgary, Alberta-based Parkland is the largest independent fuel retailer and second-largest c-store operator in Canada. In the U.S., Parkland supplies fuel to independently owned gas stations and operates 212 c-stores under a variety of banners, including On the Run, Hart’s, Superpumper and KB Express.