Article

A kiosk future tied to a purchase

The public access kiosk company FREEosk Inc. is part of a New England convenience store acquisition that could determine the future viability of the project.

March 31, 2002

Convenience store executive Bob Gordon is a firm believer in the power of kiosks to attract and retain customers in a C-store setting. His belief stems from one simple, yet overriding, belief.

"People like the machine," Gordon said, without a hint of uncertainty in his voice.

But Gordon, who launched a pilot program for FREEosk Inc.'s public access kiosks in his Store 24 Inc. convenience stores in New England late last year, is preparing for his greatest challenge with the kiosks. He must convince other C-store executives that the concept is valid.

On March 28, Tedeschi Food Shops Inc. announced that it would purchase the 80-chain, Waltham, Mass.-based Store 24. Terms of the agreement were not disclosed; the deal is expected to close in April.

If the sale goes through, Gordon, currently president of both Store 24 and FREEosk, will devote his business efforts to FREEosk and a Tedeschi-owned startup, Estate Coffee Marketing LLC. Bob Tedeschi, executive vice president and treasurer of Tedeschi Food Shops, said Gordon's passion for FREEosk convinced him to include the project in the purchase. But the kiosks will have to produce in order to keep FREEosk viable.

"We made him a promise to keep them for a year and we'll see (about FREEosk's future) at that time," Tedeschi said.

Dawn of a new kiosk

For Gordon, the deal buys FREEosk time, which is needed for the company's growth and development.

Currently, FREEosk kiosks are available in nine Store 24 locations in Massachusetts. Built with Kiosk Information Systems Inc. enclosures and powered by Netkey Inc. and Scala software, the kiosks provide Internet and e-mail access, along with voice-over IP protocol. Customers have access to a limited number of sites for free, including MSNBC and Yahoo!, and pay 20 cents per minute to access the rest of the Internet.

At its launch, Gordon said advertising revenue was the planned primary revenue source for the kiosks. Tropicana, Lance, and Snapple were among the advertisers signed up for the company's launch.

Public access deployments with advertising-based revenue streams have not been easy sells for the kiosk industry. Gordon knows he must produce a string of interested customers to get advertisers aboard. Nearly six months into the company's launch, the kiosks are showing numbers that are encouraging, if not spectacular.

"It's biggest usage is the free access to e-mail," Gordon said. "We get overall about 200 usages per week at four minutes per use. Getting all the glitches out of the way will increase customer traffic. We'd like to see them used 400 times a week.

"It's too early to know how successful the project will be," he added. "The voice-over IP only came in two weeks ago. And the advertising has been a challenge."

What will help, Gordon believes, is expansion. The Tedeschi deal will allow the company to expand its holdings within Store 24 locations. The plan is to eventually take the concept beyond Store 24 into other convenience stores.

"Part of the deal is we'll expand the initial deployment to 20 from the nine at present," Gordon said. "I wanted a stronger base of 20 locations in the Boston area to attract advertisers."

Making friends at a new place

If FREEosk works and the program expands beyond 20 units, the Tedeschi-Store 24 purchase could make the kiosk program a major player on the New England scene at the very least.

Tedeschi, a Massachusetts-based food retailer for more than 75 years, currently operates or franchises 134 stores under the Tedeschi and Li'l Peach names. The Store 24 acquisition would make the company the second-largest chain in Massachusetts and the third in the region, according to Tedeschi officials. Gordon plans to take the kiosks beyond the chain as well.

Before the champagne corks are popped at FREEosk, however, two things have to happen. The deal has to be consummated and the program has to prove itself. The acquisition is almost certain to take place, but the future of the kiosks is less certain.

Bob Tedeschi speaks of Gordon in warm, respectful terms, noting the fact the two have known each other a long time. Gordon, a respected member of the C-store industry, was chairman of the National Association of Convenience Stores for 1997-`98. But Tedeschi admits he will need time to become familiar with the FREEosk program, noting he could not talk specifics concerning the kiosks until he had seen them in action for six months or so.

"He just asked us not to throw this out for a year, and we said, `Of course,' " Tedeschi said of Gordon. "We'd love to see it work, but it's a hard one to gauge and Bob doesn't fully know which way it's going to go. I hope there'll be some profit out of the machines and I hope we can go forward."