WEST DES MOINES, Iowa -- The Des Moines Register has published a Q&A with Kum & Go's Kyle Krause.
Two years ago, said the report, he slipped into the top job at the West Des Moines-based Kum & Go convenience store chain. No fanfare. No big announcements.
Krause grew up in the gas station business. At 10 he was pumping gasoline and running the cash register at his family's station in Hampton, Iowa. After graduating from the University of Iowa, he returned to the business, which moved to West Des Moines in 1988.
Kum & Go operates 430 c-stores in 13 states: Arkansas, Colorado, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, Oklahoma, South Dakota, Wisconsin and Wyoming. Krause hopes to add stores in those states as well as expand into Illinois, the report said.
Selected questions and answers from the Des Moines Register interview include:
Q. When did you take over as chief executive of the company?
A. The transition was official about two years ago. It was developing over time. It was a continuity of the company for employees. Not new leadership, only younger version of it moving forward.
Q. Do you have the same style as your father?
A. We have similarities but different styles. Fairly easy transition internally, as you transition. We have several companies in the building, all growing rapidly. My father is still very active in what is happening in the company. He's here full-time. He spends time on the bank side and he's in the stores a lot. He didn't retire. He's 71 and a long way from retiring.
Q. Does he counsel you?
A. He doesn't often say, 'This is what I would do differently.' He'll offer help in pieces. He helps develop key pieces of the business.
Q. When you took over did you have a set of goals or an agenda for what you wanted to do with the company?
A. It's obviously a job I've aspired to for a long time. Then, all of a sudden, it's yours. We created a five-year growth plan to double the size of the company in those five years from 350 stores to 700. Today have 430. We'll build about 40 stores this year and on the acquisition buy about 100 stores this year. We look at the Interstate and at the areas with the most growth and the best demographics for us. Then we decide which of those we could get a one, two or three share of the market in.
Q. Why increase through construction instead of expanding through acquisition?
A. From a strategic standpoint it allows us to grow in the areas where we want to go in a more fixed fashion rather than waiting for an acquisition to occur in a market. It also gives us more control on what the [store] looks like. We are in 13 states and there are a lot of little chains in those 13 states that we can acquire. Today, I don't see a problem finding stores that are quality assets to buy. I think you tend to get pickier as you look at acquisitions and you want those stores to be that much better.
Q. What factors affect the convenience store business?
A. One of the biggest ones we saw in 2005 was volatility of gas pricing. The gas part of the business has gone kind of crazy and the problem behind this is the lack of refineries in the United States. They haven't built a refinery here in 25 years. Also affecting us are the number of hyper marts that are selling gas today that didn't use to, such as the Sams, the Wal-Marts, the Costcos as well as grocery stores such as Hy-Vee and other retailers.
Q. How do you deal with the competition?
A. Every day we do that by trying to have the best people possible in our stores. It used to be 25 years ago that the toughest competition we'd have was the owner-operator, the person in there running their own convenience store. During time that person has gone away. Now have new competition and in different ways. So you have to be that much better. We constantly look at what customers want, to figure out how we can make life more convenient for that customer. You try to provide as many things as you can that still allows it to be convenient. People stop back in a Kum & Go an average of 130 times a year, so it's very competitive and we have to make sure we take care of that customer. We went with a wide-area network [WAN] so that all of our stores are connected and come through the office. So when you process a credit card at the gas pump, that card transaction occurs much quicker than almost anyplace else. Those are seconds we save that customer while he's standing outside in the cold at the gasoline pump.
Q. Tell me about the company's new coffee shop concept.
A. It's called Amici Espresso. The first one opens in a couple of months. It will be a coffee shop like a Starbucks or a Caribou coffee. We'll have locations downtown, Grimes, West Des Moines, Sioux Falls. We created a separate brand of coffee, which is a specific mix of beans.
Q. Won't you be competing with yourself? Don't you sell a lot of coffee at Kum & Go?
A. We have great coffee at Kum & Go called Hiland coffee, which is 100% Columbian, very quality coffee, and we're very proud of that. But that is different coffee than what the person in the coffeehouse is typically buying. The coffeehouse customer is buying a custom-made latte or cappuccino as opposed to the Hiland coffee.
Q. Has the average size of your stores changed?
A. We continue to build larger stores. We're building about a 3,500 square foot store today where the industry standard for decades was 2,400 square feet. The footprint keeps getting bigger. I am a little concerned about getting too big from a convenience standpoint. We still want to be that in-and-out place for the customer.
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