For more than 60 years, trucks top shave provided respite and replenishment to weary travelers across America’s highways and interstates.
But the days of dingy fill-’er-ups,shady rural service stations and outdated HoJo-anchored oases are long gone. Today’s truck stops of choice are comfortable, contemporary one-stop shop travel centers, many of which feature plentiful food choices, convenient technologies and clean, contemporary facilities, their shelves stocked with handy items and keepsakes.
Staples such as pumps and restrooms have improved, with many locations offering a wide array of fuels and fueling positions. And new conveniences abound, including technologies such as truck stop electrification (TSE), diesel exhaust fluid (DEF) at the pump and radio frequency identification (RFID) tag payment capabilities, as well as sparkling, spacious and freshly styled lavatories adjacent to c-stores, lounges, restaurants, mini-arcades, souvenir shops, repair center sand laundry areas.
A Dwindling Cast
Travel centers may be getting bigger and better, but the number of owners is rapidly consolidating and competition is tightening. In the modern era of travel centers, three major chains dominate the landscape:
- Pilot Flying J is ranked by Forbes as the sixth-largest private U.S. firm, with $29.23 billion in revenues in 2012, 9 billion gallons of petroleum sold a year, and more than 650 retail locations across North America with 60,000 parking spaces for trucks and more than 4,000 diesel lanes.
- TravelCenters of America (TA) has 244 locations in 41 states and Canada branded as either TA or Petro. This Fortune500 publicly traded company earned $5 billion in fuel revenue and $1 billion in nonfuel revenue in the first nine months of 2012. Results of Overdrive magazine’s fall 2012 “voted best” survey show that, in the best overall truck stop category, drivers prefer TA and Petro 4-to-1 over the next closest truck stop brand
- Love’s Travel Stops and Country Stores is ranked ninth on Forbes’ list of largest private U.S. companies, with $22.04 billion in 2012 revenues. Love’s operates 290 locations in 39 states, with a growth rate of approximately 20 stores per year.
Industry consolidation continues to be a major trend, says Lisa Mullings, president and CEO of Alexandria, Va.-based NATSO, the national trade association representing truck stops and travel plazas, which has 1,300 members—approximately 70% of the industry.
“When I first started at NATSO 18 years ago, most truck stop locations were mom-and-pop-owned, with maybe only 200 locations being part of a chain,” she says. “Today, among 1,300 locations, only about 200 are independent.
“The landscape has changed dramatically,”Mullings continues. “It’s a more difficult environment for independent operators today.”
Tom L. Heinz, NATSO chairman and president of Heinz Inc., a Dakota Dunes,S.D.-based operator of eight Coffee CupFuel Stop travel centers in the Dakotas and Wyoming, says independent operators don’t enjoy the economies of scale that big chains do in negotiating costs with vendors such as third-party billing companies, fuel suppliers, beverage distributors and trucking fleets. Several trucking companies, for instance, have negotiated lower fuel prices and struck contracts with particular travel-center chains, giving some franchises a decided advantage over competitors, including independents.
Targeting the Right Drivers
Franchised travel centers today primarily aim for interstate and intrastate drivers; the former spends more time at a truckstop and stops at least twice daily, per Newport Communications Group research. Independents, on the other hand, frequently target local and regional customers who may value service overprice.
To keep pace, says Heinz, the small guys have to “provide niche offerings and a better atmosphere with a memorable local flavor.”
Also, many travel centers are targeting more four-wheelers vs. 18-wheelers as a way of competing better. This is in response to factors such as a trucker manpower shortage, fewer long-haul jobs due to more drivers wishing to be home at nights with families, and tighter hours of-service rules that require shorter shifts.
Non-truckers, Mullings says, value convenience, grab-and-go food, cheaper fuel and good customer service.
“To attract more non-truckers and local customers,” she says, “travel centers, especially the independent operators, are co-branding and adding more fast-food restaurants and shifting away from sit down full-service restaurants.”Heinz says he was told by a trucker in February at NATSO’s annual show that travel centers serve as their neighborhood communities on the road.“For those drivers who grew up in smaller communities, they’re consequently more likely to stop at a smaller, independent travel center,” he says.
Revealing Numbers
Travel-center ledgers remain dominated by fuel sales, particularly truck fill-ups. An estimated 60% to 80% of fuel sales are for diesel, which is pumped out at an average rate of 300,000 gallons and 800,000 gallons monthly, respectively, at an average independent travel center vs. a big chain location, according to NATSO.
While the profit margins on petroleum sales can be razor thin, nonfuel purchases can be cash cows. Consider that nonfuel sales made up 69% of TA’s $288 million gross margin for third-quarter 2012. And TA’s cost of nonfuel goods was $164 million, compared to its nonfuel revenue of $363 million—resulting in a 120% markup.(TA declined comment for this story.)
The top nonfuel purchase at travel centers continues to be cigarettes, representing 59% of total purchase dollars, per NATSO research collected through its partnership with McLane Co. Candy and cold dispensed beverages make up, respectively, 6% and 2% of nonfuel purchases. There were other sales spikes from 2011 to 2012:
- Snacks: Salty increased 7% and other snacks jumped 17%.
- Packaged beverages climbed 14%, buoyed by continued strength in energy drinks and bottled water.
- Hot dispensed beverages (coffee, cappuccino, lattes, etc.) grew 12%
- Cold-dispensed beverage sales rose 8%.
- Candy climbed only 3%, which maybe an indication of changing customer preferences toward healthier snack choices.
Data shows that the majority of customers go inside the travel center building and make nonfuel purchases. A 2008 study by Heavy Duty Trucking Magazine revealed the top reasons why patrons stopped at truck stops: c-store/general store, 68% (up 106% since NGA’s similar 1987 study); food, 73% (up 10%);full-service restaurant, 35% (down 47%);restroom, 87% (up 47%); fuel, 65% (up 41%); shower, 31% (up 11%); rest/relaxation, 47% (down 8%).
Norita Taylor, spokesperson for the Owner-Operator Independent Drivers Association in Grain Valley, Mo., says many truckers live on the road and rely on travel centers to provide the same everyday needs that other people enjoy in their homes.“They need a way to eat every meal on the road,” she says.
“Things like shopping are certainly nice, but overall, the priorities are reasonable prices for those necessities and the ability to earn points or bonuses for discounts.”
Perks Beyond the Pump
Like many c-store operators, the big three travel center chains, plus many independents, offer loyalty programs whereby customers can accumulate credits and points for purchases that can be redeemed for in-store items and other perks. Mullings says rewards cards are just one of the multiple ways in which modern travel centers are attracting and retaining patrons.
Among its amenities, TA offers a range of conveniences at its locations, some of which include c-stores, nearly 500 full-service (Country Pride or Fork in the Road) and quick-service (Starbucks, Subway and Popeye’s) restaurants, hotels, casinos, delis, UPS drop boxes, ATMs, repair/maintenance services and laundry facilities.
Love’s locations feature attached c-stores and, in some spots, often house chain restaurants such as Arby’s, Carl’s Jr. and Subway, along with showers, RV dump stations, trucking supplies and more.
Considering that truckers are spending more time parked at travel centers due to stricter hours-of-service rules, operators have expanded parking lot perks such as Shore power plug-ins, Idle Aire and Wi-Fi, which allow drivers to convert their cabs into mini mobile offices.
At Don Demko’s independent EcoTravel Plaza in Crossville, Tenn., truckers can shut down their engines and plug into onsite TSE (truck stop electrification)capabilities to draw power, heat, air-conditioning and Internet access for about $1 an hour.
To help his Shoemakers Travel Centerin Lincoln, Neb., stand out from the pack, David Shoemaker went the tourist-attraction route. He integrated museum-quality draws into his retail location, which showcases antique trucks, gas globes and signage, as well as a vast, colorful mural painted by a local artist that depicts the journey across historic U.S. Route 6.
“We get fantastic word-of-mouth business and many repeat customers who tell others, ‘You have to visit this place,’ ”Shoemaker says. “It also helps that we’re a family truck stop, not a cookie-cutter franchise location. Patrons today want better food choices and more variety, but they also want a unique experience—something that is different from any other [travel center].”
Offering DEF, TSE and RFID capabilities can give some truck stops a leg up over their rivals, as can rolling out natural-gas fueling positions. Pilot Flying J is partnering with a fuel company to implement more than 150 liquefied natural gas (LNG)-equipped fueling facilities that are expected to be operational by late 2013, which is also when TA and Shell expect to have approximately 30LNG-capable fueling stations ready. AndLove’s reportedly plans on integrating compressed natural gas (CNG) into its current diesel lanes.
Expanded Edible Options
Chains and independents alike realize that offering the right foodservice brands and edible items can significantly alter their fortunes.
“It’s important to give customers a wide range of food choices and also cater to women and children. Our foodservice offerings include gluten-free, diabetic, lowcal, low-fat and fresh foods like fruits,” says Demko, whose travel center also houses a Dairy Queen and Noble Romans Pizza.
“A lot of travel-center patrons are looking for something very quick, which underscores why there’s been a growth in sales of deli items and grab-and-go snacks lately,” says Mullings.
Shoemakers is compensating for a decreased lunch rush by expanding the grocery offerings in its c-store and adding a Subway restaurant on premises.“I was concerned about putting in a Subway, because I worried it would takeaway from internal sales,” says Shoemaker.“But the power of co-branding is unbelievable. Our gas line and interior sales jumped since [Subway] opened.”
Pilot Flying J recently announced plans to launch new dining options, “including breakfast and soup bars at locations across our network,” says Ken Parent, executive vice president of Pilot Flying J, Knoxville, Tenn. “Our team worked diligently to provide a range of choices—from low-fat, low-sodium oatmeal or low-fat chicken noodle soup for the health-conscious diner to a rich broccoli-cheese soup for when you’re craving a bowl of satisfying comfort food.”
Love’s has expanded its made-to-order food program to include burritos, pizza and sub sandwiches, and new frozen carbonated beverage and frozen yogurt stations are being added
.Demko says he’s aiming to roll out a foodservice program that includes unusual specialty items, including Cajun dishes such as boudin and a gourmet hamburger with special spices, that will be unique to his location.
Heinz is embracing co-branded offerings over proprietary to distinguish his business. “If we’re going to remain competitive and add value to the customer, we need to be able to provide quality products that are affordable,” he says. Toward that end, the truck stop has added Caribou Coffee House, Pizza Hut Express and Subway to his foodservice operations.
Cleaning House
Sometimes it’s the simplest and most taken-for-granted features that are valued most by truck stop visitors, which is why regularly cleaning, maintaining and renovating facilities—especially rest areas, bathrooms and showers—is crucial, says Rex Davis, an independent whose family owns two Davis Travel Centers in Virginia.
“Updating is important to keep customers coming back,” says Davis, whose travel centers each boast sparkling lavatories with touchless toilets, urinals, faucets and paper towel holders that visitors appreciate.
“In recent years, we demolished our older convenience stores and built new, modern facilities,” he says. “Last year, were modeled our Starbucks in our StonyCreek location while simultaneously converting the store to 24 hours. These steps provided a sales lift of approximately 20%.”
Not surprisingly, the big three have invested as well. Love’s is completing remodeling work on 20 stores; TA has spent millions in recent years to renovate existing sites; and Pilot Flying J last year announced that it will invest $49 million just to upgrade and remodel its more than 4,400 showers.
What is refreshing is that despite a soft economy stretching over four years, both independents and chains are investing significant dollars to upgrade the consumer experience. Heinz saw, for instance, a 19% increase in 2012 at his eight-unit Coffee Cup Fuel Stops travel centers thanks, in large part, to a recent remodeling effort.
“We’ve enhanced our facilities by adding on, expanding islands and parking and doing total remodels,” Heinz says.“It’s made a big difference.”
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