Marriott takes the driver's seat on toll roads

Nation's Restaurant News, March 2, 1987 by Rick Van Warner

Marriott takes the driver's seat on toll roads

Gobbling up roadside sites and converting them to well-known fast-food concepts, Marriott Corp.'s highway division has seized control of the exploding toll road market with about 100 locations throughout 12 states.

Gripping the fast lane's captive audiences with Roy Rogers, Burger Kings, Popeyes, and other concepts, the division has blossomed from a $17 million operation in 1983 into a lucrative business projected to gross more than $200 million this year.

McDonald's holds a smaller share of the turnpike market, with 19 units in four states, including four units leased from Marriott along the Ohio Turnpike.

The burger giant also operates 10 free-standing units at rest areas along the Connecticut Turnpike. But since tolls were removed from that highway last year, it's unclear whether these particular units will enjoy the huge volumes that seemed to be sparked by customer's "captive' perception of pay highways.

Other players include Hardee's, with 15 stores in four states; Wendy's, with two units along Illinois pay-highways; and Sky Chefs, operator of 10 New York State Thruway sites.

By the mid-1970s, following several years of success on the part of Howard Johnson and others in turnpike operations, restaurants on toll roads had come to be characterized by high prices, slow service, and poor food.

Double-digit rent percentages charged by state turnpike authorities coupled with chronic gas shortages hindered operators' ability to compete with flourishing fast-food chains.

"Probably the single-largest problem collectively plaguing all turnpike operators was the public's poor perception of turnpike restaurants in general,' said Steven Leipsner, Marriott executive vice president and head of the highway division.

"The difference that people held in their minds between "turnpike food' and the consistent quality and fast service of off-road, national chains was a barrier that was hard to tear down.'

By replacing antiquated traditional service area restaurants with popular fast-food concepts or multi-concept combinations, Marriott was able to reverse the trend.

"That "something missing' turned out to be the use of branded, nationally recognized concepts,' Leipsner said.

"Sales in almost every unit doubled and in some cases tripled,' he continued. "Customer counts soared. And our image problems practically disappeared.'

Expansion-minded Marriott purchased Gladieux Corp., an early turnpike operator, in 1985. It had acquired Gladieux's rights to six units along New Jersey's Garden State Parkway about one year earlier.

Later, in 1985, Marriott acquired Howard Johnson Co. along with its exclusive toll road licensing contract with Burger King.

Confronting challenges

While its timing was right, Marriott still faced obstacles.

Originally, the state turnpike authority would contribute to capital improvements, and the operator would pay double-digit percentages of sales as rent.

The challenge was to convince state landlords that greatly increased volumes would offset lower rents.

By 1983, Marriott had renegotiated new, long-term leases for its existing 14 toll road locations.

Now the authority receives a smaller percentage of sales, as much as 40 percent less than previously, Leipsner said, declining to disclose specific terms. The average lease runs from 15 to 20 years, he added.

It is not surprising that multi-concept locations have shown especially high volumes.

A combination Roy Rogers-Big Boy unit on the Delaware Turnpike, which soon will also include Sbarro, the newest concept in Marriott's fold, grossed $7 million last year.

Other multi-concept locations with such teams as Howard Johnson and Burger King, Popeyes and Burger King, Roy Rogers and Big Boy, Burger King and Dairy Queen, and Popeyes and Dunkin' Donuts have performed nearly as well.

"The sales at our multi-concept units are staggering,' Leipsner said, nothing that volume alleviates any problems associated with operating different major brands under one roof.

"Where the volume will support them, multi-concept locations are clearly the future of the turnpike business and a likely possibility for future off-road sites,' he added. "There's no end in site.'

All of the units are open 24 hours per day, 365 days per year, Leipsner said, noting "We throw the keys away.'

Since the state-owned turnpike buildings are significantly larger than typical fast-food units, conversion costs were relatively high, ranging from $1.5 to $3 million, he reported.

Layouts of the units may vary, since they're placed in existing structures.

Because highway units receive a wide range of customers, often varying by season or daypart, they potentially make good test sites.

Tough operations

Unique factors also are involved in operating units geared to such high volumes.

Maintaining efficient line flow is one problem faced. Different menu board setups are employed to aid customers in making order choices before they reach the counter. Some units utilize cafeteria-style, self-serve lines. Others have winding line barriers similar to those in banks. Often employees with take orders ahead of time from people in line to greatly speed the transaction at the counter.