How Local Markets are Using Foodservice to Build Community and Brand Loyalty

The line between retail and restaurants continues to blur. Across the industry, innovative operators are deliberately crossing, erasing, and redrawing these boundaries as they view food service through a wider lens. With over half of food and beverage retailers now offering some form of foodservice, we're witnessing a fundamental shift in how Americans shop for and consume their meals—and how businesses create lasting relationships with their customers.

Take Mar Vista's Fatty Mart, where Chef David Kuo redefines the convenience store model. It's a place where restaurant-quality food meets grocery store pricing, offering everything from artisanal pizzas to rice bowls alongside daily essentials. Drawing on his success with Little Fatty restaurant, Kuo has created a culinary incubator disguised as a neighborhood market, where multicultural specialties meet sustainable practices.

And at Kelly's Market, owner Sean Crotty has channeled his grandfather's 1963 Culver City spirit into a modern gathering spot. It's a place where staff know the regulars by name (and their dogs too), combining everyday essentials with carefully curated specialty items. Here, daily grocery shoppers mingle with neighbors sharing craft beers and sandwiches, showing how these spaces can naturally become the heart of community life.

Their stories – and the lessons learned along the way – illuminate how neighborhood markets are using foodservice to strengthen community bonds and build unshakeable brand loyalty.

Attracting customers by community 

The evolution of specialty food retail has grown from a hot bar or deli counter into crafting experiences that transform everyday shopping into something worth savoring. When local markets offer foodservice alongside retail, they can create multiple touchpoints that transform occasional shoppers into loyal community members.

Kelly's Market, for example, has combined the practicality of a corner store and the luxury of a specialty market. As they put it, they're "undefinable" – a bougie bodega where your late-night Snickers run might end with you discovering a fancy cheese or small-batch natural wine you never knew you needed. This kind of culinary cross-pollination has proved particularly successful for established restaurants venturing into retail territory. 

“Offering both foodservice and grocery can be a tie-breaker in the decision process,” said Crotty. “A customer is looking for a lunch spot and also needs to pick up a few items for dinner later.”

At Fatty Mart, Kuo has discovered that their market operations contribute a healthy 40% to their revenue stream, complementing their core restaurant business in ways that go beyond the bottom line. 

“We sell 30-40 pre-packaged hard goods, which have high margins and give us the best bang for our buck,” said Kuo. “The market opened a new revenue stream and gave our guests another way to connect with our brand.” 

The retail space has become a brand extension that keeps customers returning to explore local products and house-made specialties, with high-margin packaged goods providing the sweet spot between profitability and guest engagement. 

“Retail has expanded our horizon. The market increases our restaurant’s impact and makes us more attractive in the neighborhood – people love coming and discovering new and local goods,” Kuo explained. “It builds our brand.” 

Perhaps most crucially, this hybrid model has proven to be a masterclass in business resilience – when dining room traffic ebbs, retail sales flow, and vice versa. By diversifying their revenue streams, these establishments have created a safety net that not only protects against market fluctuations but opens up fresh avenues for growth, whether that's launching house-made product lines or expanding into new neighborhoods.

Transforming errands into experiences

Some of the most successful businesses are crafting businesses that transform everyday shopping into memorable experiences. 

Kelly's Market did just that – morphing from a simple storefront into a vibrant neighborhood hub where commerce meets culture. 

Picture this: a former barista station reimagined as an intimate wine bar, where locals can uncork a bottle from the retail shelves or settle in with a glass while local musicians set the evening's soundtrack. The space doubles as a rotating gallery, with local artists' works adorning the walls – turning routine shopping trips into potential discoveries of both new wines and new talents. 

Over at Fatty Mart, Chef David Kuo has tapped into the ability to transform dining into cultural exploration, then extend that journey into customers' homes through their market offerings. 

“Our superpower is our food,” he said. “Our restaurant is where you experience great food and new cultures in person. The market is where you bring them home – and meet your neighbors who like the same things.” 

Both businesses work together in conjunction. Diners experience the vibrant flavors and traditions of different cuisines at the restaurant, and at the market, those same customers can recreate these culinary adventures in their own kitchens, all while bumping into neighbors who share their passion for discovery. This creates a feedback loop of taste and community, where every visit strengthens the bonds between food, culture, and neighborhood.

Using technology as an enabler

These successful operators rely on integrated technology stacks that seamlessly bridge the retail-restaurant divide. 

The most effective platforms serve as a single source of truth for hybrid operations, enabling businesses to run retail and foodservice from one unified system. This eliminates the complexity of managing sales and inventory data across multiple platforms, creating seamless operations where customers can grab a sandwich, toothpaste, or both, and pay in one convenient location.

“Toast Retail helps us dramatically reduce waste and maximize revenue by hitting the sweet spot on inventory,” said Kuo. “We used to eyeball what was in stock, but with Toast’s automatic tracking of PAR levels and daily sales analytics revealed that we were running out of our top five items.” 

Modern inventory management has been revolutionized by tools like SmartScan, which allows operators to conduct inventory quickly and efficiently.

By scanning items from a phone, the system automatically populates details like names, descriptions, and images, streamlining what was once a labor-intensive process. This technology enables operators to make better stocking decisions by providing detailed reporting on spoilage, theft, and item popularity – insights that directly impact profit margins.

For businesses managing hundreds or thousands of SKUs across multiple categories, this technological foundation is essential. A single provider handling purchase orders, inventory, and payment processing simplifies operations dramatically. Without unified systems, tracking items from wine bottles to sandwich ingredients across separate platforms becomes nearly impossible to manage effectively.

Kelly's Market experienced firsthand how multiple POS systems can create operational challenges. When point-of-sale systems communicate with inventory, online ordering, and customer management tools in real time, businesses unlock efficiencies that make unique hybrid models truly work.

And, these insights can make real impacts on sales. “We tripled sales of one of our most popular take-home items because of the insights we were able to leverage in Toast Retail,” said Kuo. 

The result is a synchronized operation where every transaction, whether retail or restaurant, feeds into a comprehensive view of business success. With integrated delivery options that update inventory in real time and flexible hardware solutions ranging from guest-facing terminals to kiosks and handhelds, operators can create speedy checkout experiences tailored to their unique spaces and service models.

Lessons and outlooks

As the lines between retail and restaurants continue to blur, opportunities in this space are rapidly expanding. 43% of restaurants** see retail rising in importance over the next year, and over a quarter of restaurants** are increasing the ways they serve and generate revenue from guests in the next year. When asking these restaurants what service models they plan to add in the next year, over 17% point to retail.**

Made-to-order food has emerged as a critical growth driver, with customizable options that transform traditional retail spaces into destinations for fresh, personalized meals. But the real magic happens after that – when that made-to-order sandwich leads to a drink purchase, when that coffee run ends with a basket full of specialty items, when the customer who came in for lunch discovers their new favorite local product.

The lessons from pioneers like Kelly's Market and Fatty Mart point to a future where technology plays an increasingly central role. Success in this space needs good food and sophisticated systems that can handle everything from real-time inventory updates to easy online ordering.

Building community through food

Fatty Mart and Kelly’s Market have shown that when you combine the convenience of retail with the experience of dining, backed by the right technology and a deep understanding of your community, you create a business model that's both more resilient and more relevant to today's consumers.

The integration of foodservice into retail creates natural gathering spaces where neighbors meet, relationships form, and brand loyalty deepens through shared experiences. When customers can grab their morning coffee, discover a new specialty item, and run into a neighbor all in the same visit, they're participating in community life while strengthening their connection to the business.

*Food Service defined as a convenience store, bottle shop, or grocery store that offers one or more of the following: “Made-to-Order Meals”, “Deli Counter”, “Catering”, “Salad and/or Hot Bar”. Based on blind, incentivized, survey of 445 CBG decision-makers operating 16 or fewer US locations from 5/17/24 - 6/2/24. Using a standard margin of error calculation, at a confidence interval of 95%, the margin of error on average is +/- 5%. ** To help better understand the restaurant industry, Toast conducted a blind survey of 755 restaurant decision-makers operating  16 or fewer locations in the United States including both Toast and non-Toast customers from May 17, 2024 to June 2, 2024. Respondents include a mix of both full-service and quick-service restaurants. Respondents were not made aware that Toast was fielding the study. Panel providers granted incentives to restaurant respondents for participation. Using a standard margin of error calculation, at a confidence interval of 95%, the margin of error on average is +/- 4%.