One to Grow On

As 50th anniversary approaches, Kum & Go eyes expansion beyond 12-state footprint

Samantha Oller, Senior Editor/Fuels, CSP

[Editor's Note: This is the first in a three-part series of stories featuring the strengths and strategies of CSP's 2008 Retail Leader of the Year, W.A. "Bill" Krause.]WEST DES MOINES, IOWA -- The last person who expected Kum & Go LC to expand to 430 stores within less than 50 years is co-founder W.A. "Bill" Krause. "I would be less than an honest with you if I ever dreamed I would have more than 400 stores," said Krause, CSP's 2008 Retail Leader of the Year, in an exclusive interview with CSP Daily News.

"I kept score by the number of stores that we had," [image-nocss] said Krause. "And when we had one, I was proud, like it was another child being born in the family. I actually did that religiously, and it always set the tone, because each one meant that we had to go out and take either someone else's mediocre store and make it great, or a closed one and remodel it and make it appealing."

Luckily for Krause, he had an innate ability to size up long-term potential, whether an employee, business partner or acquisition.

"He is quick to recognize what is in his business wheelhouse and what isn't," said Bob Bowlsby, a former Kum & Go board member and today athletic director for Stanford University.

"Some acquisitions made a lot of sense because of geography," Bowlsby explained. "He could quickly go in and evaluate whether a store was performing within expectations, was overperforming, or was underperforming, and he was very good at determining that if they were underperforming, why, and what you have to do to fix it."

Dick Meyer, president of Meyer & Associates, New Berlin, Wis., and a former Kum & Go board member, represented the bond holders of 7-Eleven franchisee Contemporary Industries when it was preparing to sell its 113 locations to Kum & Go in 1998. He visited Kum & Go headquarters and showed Krause and management the stores' profit and loss forms (P&L), and the decision to buy was made that same day.

"They had toured all of the stores in a weekend--they were in 11 states!" said Meyer. "So that shows the passion, the sense of urgency, and 'We're not going to lose while someone else makes a schedule'."

He continued, "If I had to describe Krause to a military person, he'd be General Patton. He's got his troops and they go in line. The CFO knows they have to get the numbers right, [have] banking support and that it has to be ready as soon as operations are. Facilities people better damn well have signs up in that weekend or that week. The wholesaler knows by now they'd better be ready to supply stores and reset them within the next days. So they have a mechanism for takeover. Nothing is missed."

Recently, however, the chain's focus has shifted from acquisitions to new builds, with plans to construct 20 to 30 new stores each year within the current 12-state footprint, as well as redevelop existing sites. Kum & Go is also currently evaluating opportunities in Illinois.

As COO Dennis Folden explained, it is partly a response to the past few years of sellers' markets. "The multiples got higher than what we thought were proper for the properties we were buying, and so with that, in order to grow, we move and shifted more of our resources to ground-ups. Acquisitions will be an important part of our strategy in the future. We want to buy quality assets. We need to define where we're going to get a good return as well as the seller gets a return. And we think that that will come back around and in the future, be a more viable market than it has been perhaps the last couple years."

For his part, Kum & Go CEO and president Kyle Krause also sees room for acquisitions, but said in this environment, the opportunities are unpredictable. "The acquisitions can come one at a time or 100 at a time, and so that's the one that's always harder to measure and harder to quantify," he said. "We're constantly looking for acquisitions in our marketplace, and we can buy a 60-store chain or a 6-store chain."

Meanwhile, in its established markets, growth is also Kum & Go's goal, but a greater challenge. "We're in a lot of small towns that may not be having a lot of growth, but to be honest, we have similar expectations in those towns," said Kyle Krause. "We have to continue to grow our share in that marketplace and grow as an organization. So what we have to do there is no different than in a high-growth suburban environment.... In those towns, you're not necessarily getting just old competition, but you go a high-growth area, and new people start popping up. So both of them have their challenges, but we have to have growth in all of those types of marketplaces."

To read more about Kum & Go, Bill Krause and the Retail Leader of the Year award ceremony, see the November issue of CSP magazine.