Retailer Energy Alliance Supplier Summit Webinar—Boston Market Presentation (Text Version)

Below is the text version of the Boston Market presentation from the Retailer Energy Alliance (REA) Supplier Summit Webinar, presented on June 5, 2008. Greg Tomsick from Boston Market was the presenter. You can also view the slides for this presentation (PDF 665 KB). Download Adobe Reader.

Doug Brookman:

(Slide 1)

We're going to have one more presenter and — should we just gather this up here? Then after our next presenter speaks, we're going to take a short break and then there's going to be an opportunity for question and answer and a panel discussion. So our next presenter, please, is Greg Tomsick. Greg is the senior director of Supply Chain for Boston Market.

Greg Tomsick:

Smallest company here. Came from all the way across the street to present. Was going to say three down, two to go, but I can't do any of those things. I am going to talk about not only the restaurant industry, which is a small box, but small box in general, so you can include convenience stores, banks, like neighborhood banks you find on the corner. A lot of the things that work in small box, that we can afford to do in small box are very different than what we have in large box. But then, when you take a look at the number of buildings there are, the benefits and opportunities and aggregation, it's huge. Not just because there's a lot of energy intensity in the way we operate, but because we have so many buildings. Even though it's 5,000 square foot or under, which would be my definition of small box, per location, tons of locations across the country.

(Slide 2)
All right. There's the contact information if you want to get a hold of me afterwards, you can do that. One of the things — I want to make a point here. A lot of times, especially in smaller companies, a lot of the work that's being done in energy — sometimes the energy person wears multiple hats. That's the case with me. I've got distribution responsibilities on all the food and paper products that go to the stores. I've got transportation responsibilities and then I'm the focal point for what we do as a company in energy. We're going to talk again just about the stores. We use third parties for all of our warehousing and distribution, so I don't have any distribution centers that we have to manage in that vein.

(Slide 3)
We're an affiliate of Sun Capital partners. They bought us last fall. A lot of the organizational stuff that some of the other guys have talked about, I really don't have because we're kind of in the middle of reorganizing they way we do business. One of the things that Sun is going to do is we're going to grow as a company, so it's a great time for an opportunity to see us about things that can make us more efficient because we're kind of deciding what that prototype is going to look like. How are we going to grow? And when we do grow, they'll be company-owned stores and franchise stores. We're going to do a lot of remodel work. We're going to most likely go back in, update and change a lot of the stores we have.

Today, we're over 550 stores. We have the restaurant business. We consider ourselves fast/casual, which means it's kind of a low-service environment, but high quality food. We're very value-priced. We do a lot of catering. The catering work is done out of the restaurants, but that's a continuing area of growth for our stores. We've got a group called convenient meal solutions, or CMS. What CMS is, is basically, chilled, refrigerated, finished goods product that we sell through grocery stores. And then we've got frozen entrees that are really marketed by H.J. Heinz and that is a royalty program where they have our brand out there in their stable of brands.

(Slide 4)
Here's where we're at; 28 states, all in the continental U.S., today. You can see we've got pretty good coverage, except for the Northwest and the deep South.

(Slide 5)
This is kind of what one of our stores look like. Some of the older stores had a lot more glass. You're going to see a newer store later on, but even here, some of them are pure glass walls in front. See, the awnings here have lights underneath them and a lot of outdoor lighting.

(Slide 6)
This is a recently remodeled dining room. It kind of shows some of the changes. This isn't necessarily the direction that we're going, but this is one that we've done recently.

(Slide 7)
Here's what we have for food offerings. Up on the top left there, that's our restaurant food in a catered environment. On the top right, that's the frozen stuff you'll find in the grocery stores, and underneath is the product that we have in the chilled deli categories in a lot of grocery stores.

(Slide 8)
With just 500 to 600 stores, we have to deal with a lot of utility companies. I just wanted to put this slide up here for a point I'm going to make later, so that as we're doing things around — tapping into energy efficiency dollars, there's a lot of places we have to work and we have to go after. If you're in a given state, you can't even do it the same in one state. You've got to go to each utility and do things the way the utilities decided to do it.

(Slide 9)
For a small company, we have still a fairly big energy spend. It's a lot of money at my house. One of the things that's a little different is that we do more with natural gas. We're not just a heat-load kind of a set-up. If you look at our profile, that bell curve is much flatter than a traditional retailer would be. Even in the restaurant industry, sometimes that mix is 90/10 instead of 65/35, so you know it's not just electric things we're interested, it's actually also gas.

(Slide 10)
That's our consumption data from last year. Our average peak demand is 50-60 kW, which if fairly small. So one of the things we're really interested in as a company is anytime anybody has technology they can bring to us, that can help us shave peak demand, that's a good thing. We can't do things the way bigger buildings can do, like maybe diminish lights if there is a problem, or change when we have production, the way a manufacturing company can, because we're basically a two-day part company. We serve lunch and dinner. People want to eat lunch at noon and they want to eat dinner at 6:00. So we can't shift that at all. We've got to have the equipment running to do that. And also, especially in the summertime, that's when you're looking at that peak cooling load and if we don't have a comfortable dining room, folks aren't going to eat with you. We still do more business dine-out than dine-in, but it's still a big piece of what we do and so anything there would be things we're interested in.

(Slide 11)
In terms of what our usage is, this is a store we looked at not too long ago and you can see where we actually spend our dollars, in terms of electricity and natural gas. The areas we've spent — we've looked at almost all the areas. We've looked at cooking equipment. We've looked at HVAC, what we have, the controls. We've done some things with lighting. I'll address all of those later.

(Slide 12)
This is some information from the EPA that's kind of industry standard information, but one of the things that it tells you is that if we're able to reduce consumption, which means we spend less money on energy, that's the things that can be effective to a limited service, which is kind of fast/casual QSR, kind of scenario. They got information like this for full-service restaurants as well and the numbers are a little bit different there, but the key things to take a look at, again, is you've got to have a viable program that really drives things to the bottom line if you want broad and wide acceptance, especially in a franchise environment versus a company-owned environment.

(Slide 13)
Design and construction. There wasn't a lot I could talk about because we're actually, like I said, in a mode of changing what we do. Today we've got a chief development officer. He's new to the company. He's working on what it's going to look like as we go forward and then in operations, almost all of our senior management team is new, since we've had the change in ownership. We've got a Senior VP of ops, and all the regional and area guys and GMs report up to them. The other guys that really work and focus on what's done in the store and then we've got a VP of ops systems, which is another new position. This is a position that's actually going to take a look at how efficient, how effective is the equipment that we buy to put in the store. Does it do what it's supposed to do? Does it do it in a manner it's supposed to do? What's the cost that's supposed to go with that?

(Slide 14)
On our procurement process, we've got a chief concept officer and a lot of what we do on the equipment side of things, is that the chefs and the culinary group will take a look at equipment. They'll see what it does. They'll see how it performs and then we take a look at it from a supply chain perspective; start to talk about price and what we pay for it. Eve Uhing, who is here with us today, as well, she's really the purchasing manager for equipment and that's Eve's contact information there. So if it's got to do with equipment issues or lighting issues, Eve's kind of the key person to talk to. If it has to do with anything that's energy efficient in terms of controls or any of those things that would help us use less on the HVAC side or the monitoring side, I'd be the person to talk to in the organization.

(Slide 15)
I want to talk a little bit about what's going on in the demand side and this came out of some work we did when we were putting together our Sarbanes-Oxley documentation. Our goal, really, on the demand side is to reduce total consumption. We're looking at peak shaving. We're talking about two years return or less on ROI and we've had enough opportunities there to make that work. And the key thing is that we want equipment when we put it in or the things we do to — if it's a capital investment, we want to have that equipment function and give us a return without a lot of participation by store-level management. We want the folks that are in the store to focus on food quality, food preparation and hospitality, not focusing on issues that the capital investment should control and manage.

(Slide 16)
Talking about where we're going or an ideal location would be, this is a store we opened last year. It's one of the more energy-efficient stores in our company. You can see where we did some things with building envelope there. There are fewer windows. On the outside of the building, we did use LED lighting.

One of the things we took a look at from a consumption basis is kind of the old rule in marketing; what's the square footage of signage that's allowed in a city? You use all the square footage you can. Some of the buildings we got are named twice on each side of the building and do you need that? So we cut that down some. We took a look at some of the entry and egress signs instead of having them lit, unless it was required by code, looking at reflective signs. If you've got good parking lot lighting, why do you need to light up that sign as well? So that has helped.

(Slide 17)
Here's a picture of that same building at night. You can see, especially in those channel letters, the LED lighting really shows up well at night.

(Slide 18)
That's an interior look at this store. Chicken is our primary protein. We cook the product in a rotisserie oven. One of the things that we look for in the restaurant industry is that if you can bring us equipment that is functional and helps us operationally, and it help us from a standpoint of not only reducing energy, but maybe from a labor standpoint. If we've got something that helps us, because turnover is a huge issue for all of our stores, and if you have a piece of equipment, sometimes you might even pay a little bit more for the equipment when you take a look at the tradeoffs. Is it energy efficient? Does it have repair and maintenance costs that are line? Does it do things that allow you to accomplish what you want to accomplish with less labor?

One of the things that we did a few years ago, our ovens used to be tall, thin, brick-lined ovens, when we put the rotisserie in there, you'd put each spit in and you'd cook it for so long. Then in the middle of the cook process, you'd have to take all the spits out, while they're hot, and then change them in the oven so that you've got an even cook for all of the product across the entire oven. So what we did, and what you can see in these ovens, now we have a planetary oven. What it does it you put the spits in — it's on a carousel that rotates around. It's a shorter cook time. It's the same or better quality. It helps in the labor process because you don't have to go in and have injuries because people playing with hot spits burn themselves sometimes. That's a kind of thing that you can bring to the restaurant energy from an efficiency basis that can really give you a leg up on some of the things you take a look at.

(Slide 19)
Here are some of the other things we've done on the demand side, mostly in this store. We've done some other things at other places; white roofs, we're going with high-efficiency rooftop units. That's new construction where we've had it, as we do replacement. Make up air management, we want to — small building, again, if you're running a lot of air through that building, you have to recondition that air and that adds to your energy costs. We've done some things with EMS controls. We take a look, in a good number of our stores, at managing HVAC exterior lighting and we monitor inside the walk-in coolers and freezers for temperature monitors. Those are things that are all set up on an internet basis. There's a website. I can pull it up on my laptop at any hotel room while I'm traveling. We can see what's going on. It's monitored 24/7. There are alarms that will come in when they're looked at to where we can take a look at it.

One of the opportunities that we have, again, that we'd like to be able to seize, we'd like to be able to do the same kind of continuous remote monitoring in a hot environment, for the steam tables up front or maybe for the holding cabinets that we have. In our restaurants, none of our food is served after it's two hours old. That's all the shelf life is on prepared food, but while it's in there, you've got food quality and food safety issues. So our GMs have a red book and with that red book — it's kind of their daily bible. They've got to go out and they're taking temps of food all the time while it's out there. They record that. We've got to have that. It's part of HASAP procedures that we do, but we'd be very interested if we could have the same kind of monitoring put in place on the hot side that we have on the cold side now. So that would be another opportunity to take a look at things.

Hood controls. If you take a look at the hoods like that were in that last picture, in the last three ovens, kind of a standard hood. It's either on or off and that makes it the least expensive option when you're buying it, but then it also makes it the most expensive over time. So some of the things that have been out there on hood controls and some of the things that have been looked at is you either have infrared, if you've got an open griddle and you've got smoke coming up and there's no smoke, it steps it down, there is smoke, then it goes back to full speed, or you can have a heat sensor and the flue. And same thing, if it's a certain temperature because you're cooking underneath there, you know it's full speed; and if it's not, it steps it down. So there's opportunities for things there.

We've done lighting retrofits in all of our stores. We have indoors and outdoors. We don't always do parking lot lights. Some of the things like Best Buy sometimes does or an end cap, we don't control those, but we do have quite a few stores that are on out pads and when they're on an out pad, then we do have to have the responsibility for the energy and the repair and maintenance on those things. We do that.

We've put occupancy sensors only in bathrooms. When we're open, we're pretty active and it doesn't seem to make sense any other place, but, we've done a little bit of that there.

As we move forward, sometimes water — it's not that it's not a big deal to us because we do use a lot of water, but in our environment where we don't ware wash, it's not the same as a full-service restaurant where you've got dishes that you're working with all the time. So we've actually been able to go back in a lot of cases and instead of having water heaters, we've gone to a tankless to where it's instantaneous.

This particular store I just showed you the picture of doesn't have a water heater in the entire store. Everything's done that way. And as we've replaced it in some of the stores, sometimes we have a mix, so the heater goes down, we put a replace, maybe you've got one water heater in one part of the store and we're going with tankless in another part. Some places still there's code issues where you can't do that, but that's things we take a look at.

Cooking equipment has to be functional. We don't use fryers in our operations, but a lot of places do, and there's always that question of should I go electric, should I go gas, from the cost and then also from the performance.

Any piece of equipment that has to be in a ready mode that's consuming energy while it's not being used, one of the things we can be taking a look at is anything that can come back up to ready mode quicker or that maybe doesn't even have to be in an energy consuming off mode but is still fast enough to serve the customer are things that would be of interest there.

Grills are that way, deep fat fryers are that way. There's some things around icemakers and things where, again, it's peak-shaving opportunity or maybe if you have enough capacity, you make all your ice at night so you're off peak and then you have enough ice for drinks during the day.

We've done some things on a test basis with thermal storage, where we've taken a look at cooling. We've got a fire-up schedule. The fire-up schedule is the only thing that we've done that requires something by the general manager of the store. And in this case, we have a schedule set up to where they have to invest about four hours up front, they have to take an inventory of all the equipment they have in their store, and then they have to go back and say, When do I turn this equipment on every day and when do I turn it off? And then they say now, take a look at when you really need it on and when you really need it off.

And we give them an energy-savings calculator that allows them to go in, and we give them for their specific area of the country, their cost per therm and their cost per kWh. And then they can put in there how many hours a day they can save in usage per piece of equipment, and in 15-minute increments it'll tell them, Here's what you should be able to expect to save.

And when we do that, it only takes one full billing cycle after they have done that for the general manager to actually see, hey, look, this has actually worked, I've actually got a reduction. But if they don't invest that time, it doesn't happen, it doesn't work. So that's where like the earlier statement to say if we're going to make a capital investment, we really want it to be a situation where it doesn't require store-level participation.

On lighting and things too, when you get the repair and maintenance issues. One of the things we've done — a lot of folks when they're busy running stores, they don't maybe pay so much attention to energy consumption kind of issues, and when it comes time to re-lamp or we've got a problem, they may think, I'm going to save money by running down to the local hardware store and buying a lamp instead of going on the program. And those are costs that they pay at store level. It can affect the bonuses that they have.

So one of the things we've done to encourage the proper re-lamping to be done is that we've got a limited program where we've got a supplier that they're supposed to order from. If they order the right lamp and they order it from the given supplier, it's probably more expensive than if they went to the hardware store, but we'll pay for that in the support center rather than paying for it at the store. So it's an incentive for them to do the right thing because it's going to help their bottom line by buying it where it's supposed to be bought at the store level, and it helps our bottom line at company level because we've got the right lamp in place.

(Slide 20)
Inhibitors. And this is kind of my soapbox issue of the day. You know, there's all these energy efficiency dollars out there, and I just think the process to get to those dollars is too cumbersome. I think there needs to be more prescriptive opportunities or the protocols for custom has to be improved. And the thing there is, is that virtually every state now has energy efficiency funds that have been created. Whether we're doing it at home or whether we're doing it in our businesses, we're paying to have that fund created every month.

And there are times and there are parts of this country with some utilities where those funds aren't even being used completely in a given year, and it's not because folks don't want to get to those funds. It's because the process is difficult. And so, what I would like to be able to talk about here is a couple of things that make accessing those funds easier.

(Slide 21)
Before that, though, we had things about new equipment, and I talked a lot about this, they've got to perform. It doesn't matter if they're energy efficient if they don't perform. They've got to exhibit the enhanced energy efficiency and then they need to provide the operational value that we talked about earlier. In other words, they need to do what they're supposed to do and if they can do even more like cook food in a shorter time period, but give you the same quality food or not allow much labor to be used, those are benies.

And then the other considerations, especially if you get into the franchised environment, everybody looks at first cost and everybody's worried about money that's coming out of hand right now, so you've got to compare first costs to life-cycle costs. And those things have to do not only with repair and maintenance, but also energy and also the amount of labor it requires to use that equipment.

(Slide 22)
And then supplier opportunities. Some of the things here I think that we can take a look at, you know, all the demand side issues, whether it's equipment or whether it's control things, that I've had the greatest success with I've always found a supplier that I thought in the bidding process was going to be able to accomplish what I needed to be accomplished, but they were willing to step up and actually fund a test for me. And when we fund a test, we bring it in, we do the whole test, we show that the product works. If it doesn't work, we take it out and we say thanks, but no thanks. If it does work, I pay them for the work that was done in that store and then we take a look at what can we do as we go forward.

Another area, in today's world and, again, with franchised operations, sometimes people just don't have the money to make the investment. That first cost gets to be an inhibitor in putting new things in. So one of the things that can be done is maybe financing packages that allow people to make those kind of monthly payments on it an at the end of whatever their agreed time is, then they own the product or they — for a buck or whatever it ends up being, but they don't have to come up with that money up front.

It really means you're financing it, I know the finance costs are going to be built into it, but a lot of cases as a big company, rather than dealing with smaller companies, that's going to be a better opportunity to move forward.

And then the last thing, and this is the one I'm most passionate about, is that if you can take your product and you can package not only the energy efficiency incentives and the operational efficiencies that you're bringing forward, but put that together with net pricing from the energy efficiency incentives.

So we've had some programs, we go back, again, they differ by retailer — I mean, by utility in every state. And, again, I've got 500-some-odd stores and I'm dealing with a couple hundred utility companies. It's just very difficult to manage. And if you can bring a program in, in some cases, you can actually have the net investment overall be lower up front, which makes it more likely and viable to happen.

And we've done this very successfully in a couple of different cases. We had some stuff with some energy management system programs I put in recently where it took us 15 months to make the program happen and it — it needs to be much smaller than that. I got about 40% of the installation paid for by putting it up, up front. And if you also take a look at the dollars, if it's actually — if it's not financed, if you're actually going to have a capital investment by a company and they've got a given amount of dollars that they're going to spend this year, whether it's for new installation or replacement and recovery kind of things, that's the amount of dollars you can spend as a company.

And if you've got X dollars, but then you can get rebate efficiency dollars in addition to that, well, you don't stop at that original number. You spend your original number plus the X dollars. And we all — you guys get more sales, the utilities and the states that are looking to reduce — to take a look at not having to build new generation because consumption's been reduced, it's just a win for everybody and it's one way to make it happen.

And so one of the things I've tried to do is, we've got suppliers here today, we make the pitch, we made the pitch to the utilities at the Edison Electric Institute here at our meeting — in our last meeting. And, we've got DOE taking a look at some things, so they might be able to be involved as a player here too, but it's a way to make programs more efficient, and I think it's just good for everybody in the process.

(Slide 23)
And then the last thing here, opportunities from a DOE perspective. And this is something that they've already committed to is to provide this independent central repository that catalogs effective technology. So it isn't maybe so much to say, Brand X does this, but this technology accomplishes a given effort. And what you have then when you're doing the installations, you don't have to have the utility go in and do all the work that they have to do now because now they come in and they — you've got to have that pre-audit that says you don't have this kind of equipment in the store and here's what you're really using now on a consumption basis. Then you have to go through the installation, then you have to prove that there's been an installation, show an invoice, and then on the back side of it you've got to have a post-audit then to go in and say okay, the things worked or did not work and you get the money on down the road.

Well, one of the things here then if we can make things — if technology works, maybe and if it's not prescriptive, you can at least narrow down the gap in terms of how long it takes to do the custom programs, and I think that would be a big benefit.

(Slide 24)
And then kind of lastly to end things up, just to show how long I've been committed to helping DOE and the Department of Energy and — this first picture's in 1992, and this is at NREL just down the street. It's when that first building was put up. That's my daughter. She was, I don't know, first grade or something at that point in time.

She'd just won a Department of Energy poster contest, and she was asked to help the secretary turn the first shovel of dirt when they were building the silly — the SERI facility there at NREL. And the other picture she's just graduated from college last month with a Bachelor of Fine Arts degree, so she's taken that skill and moving forward. Thanks much.

[End of Audio]