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Five Star automates company cafeteriasChattanooga vending food distributor grows to one of the nation's biggest players
Company at a glance
Company: Five Star Food ServiceAnnual sales: More than $100 millionFounded: 1993Major services: Vending machines, micro markets, office coffee and diningMajority owner: Navigation Capital Partners, an Atlanta equity firmNo. of customers: 5,700 in Tennessee, Georgia, Alabama and KentuckyStaff: More than 800 employeesAffiliation: Five Star is the largest franchisee of Canteen, a national franchisor or vending machines, office coffee servcie and dining services in 48 statesLocations: Headquarted in Chattanooga, Five Star Food Service prepares food at its culinary center in Lafayette, Ga., and operates 14 branchesCEO: Alan Recher, who was named Operator of the Year for 2015 by the National Automatic Merchandising Association
Since he took the helm of the Chattanooga-based Five Star Food Service in 2008, Alan Recher has nearly tripled company sales.
The CEO of the South's biggest independent food vending distributor says he's hungry to keep up that growth pace.
"We'd like to double again in the next five years," said Recher, who was recently recognized as the "Operator of the Year" for the industry's main trade association, the National Automatic Merchandising Association.
With more than 900 employees and 14 branch locations in Tennessee, Georgia, Alabama and Kentucky, Five Star Food Service provides the breakfasts, lunches and snacks that power tens of thousands of workers at about 5,700 employers across the South.
From its start in Dalton, Ga., in 1993, Five Star built its business on efficient operations of vending machines, supplying coffee at office work sites and operating company dining rooms. But most of the company's recent growth has come from a new type of vending sales, known as the micro market, and through the acquisition of rival firms.
The micro market was introduced five years ago as a convenience store within the work site, offering many more food and other items that workers can quickly pick up and purchase through an automated kiosk. Such markets offer more variety and allow workers to get and pay for their food much quicker than traditional coin-operated vending machines.
"Workers scan their items on the kiosk, just like shoppers have grown accustomed to doing at the grocery store, and pay for what they buy with cash or a credit card," said Greg McCall, senior vice president of sales and marketing for Five Star. "It's much faster; they don't lose any money, and there are a lot more choices of what to buy."
The typical micro market stocks more than 300 food items, compared with only about 75 in a typical bank of vending machines. The Five Star micro markets, which are now at 465 area work sites, typically cost more than $13,000 to install. But they can offer workers both food and non-food items, and employers can stock more healthy foods to help encourage better employee eating habits.
"Anything that has a bar-code we can sell," McCall said. "It's provided much more variety and convenience for workers, and employers recognize these markets as an important employee benefit."
Micro markets have proven to be a popular alternative to a company cafeteria or dining room, which usually takes more labor, space and money to operate for employers. Five Star operates 40 company dining facilities where it prepares food daily in the host companies' facilities.
But micro markets represent the fastest growth segment for the business and have proven especially appealing for workers who have shorter lunch times or want a snack during break periods. The micro markets also stay open around the clock, offering food and snacks to workers at any time compared with more limited hours for most company cafeterias.
Five Star typically handles all of the food operations, stocking the markets or its vending machines on a regular basis, in exchange for the employer providing the space for the food service.
Such service has been key to Five Star's success, Recher said. It also continues to drive the other major part of its growth strategy - buying smaller vending machine operators who often are not able to provide the regular route and food service that Five Star offers.
"Acquisition is really a fifth line of business for us," Recher said.
In the past four years, the company has purchased more than 20 other vending machine and coffee supply businesses to expand its food distribution across its four-state region. With more customers and more routes, food preparation and delivery gain the benefits of scale.
Over the summer, Five Star added parts of three more businesses to the company.
In June, Five Star acquired a portion of the Hiram, Ga.-based Elite Vending Co., outside of metro Atlanta. Recher said Five Star has expanded throughout Georgia but has opted to stay out of Atlanta where traffic congestion often slows delivery times.
In July, Five Star bought most of the operations of Rome, Ga.-based Complete Vending Co., which provided coffee and vending machines in a seven county area, with the exception of the school vending business in Rome. Also that month, Five Star acquired the vending operation of The Light Vending Co., in Brunswick, Ga. which expanded Five Star's footprint to the Atlantic coast.
In August, Five Star agreed to buy the vending and micro markets businesses of the Murfreesboro, Tenn.-based Webb's Refreshments. Webb will continue with its own coffee and water service divisions. Last month, Five Star also completed its purchase of the Cookeville, Tenn.-based Select Vending.
Five Star, which is the biggest franchisee of Canteen Vending, is able to regularly service its customers with its own prepared food and with more frequent routes than most of its competitors. At some businesses such as Convergys in Chattanooga, Five Star usually makes a couple of deliveries every day to ensure that the micro market is well stocked.
At the company's culinary center in Lafayette, Ga., some 50 employees process and package nearly 5 million food items a year. Five Star produces roughly 350,000 sausage biscuits a year at the Lafayette center. About 80 percent of the food Five Star sells to its customers is made fresh in Lafayette.
Every day, 80 cases of turkey are brought to the company's freezer and later processed into sandwiches that are distributed to Five Star markets and machines across the South on refrigerated trucks.
"We also make everything from sandwich wraps, hamburgers and hot dogs to salads, parfaits and desserts," McCall said.
The Lafayette food packaging complex is capable of making 10 million food items a year, so Five Star uses it to supply not only its own routes but those of other vending machine companies.
"A lot of people only have 30 minutes for lunch," Tina Esparza, the culinary director for Five Star Foods in Lafayette, said in a recent interview. "You can go to one to of our vending machines or micro markets and get a sandwich or a dessert and drink very quickly."
The commissary is HACCP (Hazardous Analysis Critical Care Point) certified, ensuring that its food is analyzed and controlled for biological, chemical and physical hazards. With its fresh content, Recher said about 10 percent of the food in its machines and micro markets has to be discarded because of its limited shelf life.
"We continually try to drive that down, but we want to make sure we keep enough fresh choices for consumers," he said. "We think we do about as well as anyone in the industry."
Upgraded machine scanners connected to the company's home office allow Five Star workers to track what is selling and restock machines and markets accordingly. Each kiosk generates a list of items that need to be restocked by delivery trucks the next day.
"We've made some major investments in machines and technology, but that continues to improve our efficiency and customer service," Recher said. "Food safety also is of the utmost importane here at Five Star. We think that helps distinguish us from some of our competitors and hopefully will keep us growing."
Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.