Lots to Consider
How to get the most out of a piece of land.
So you’ve done the research, scouted locations and finally secured an ideal piece of land for your new c-store. But the real value of the land has yet to be determined.
“The price you pay for dirt is relative to the profit you can make off that dirt,” says John Strickland, president of Wayne Oil, Goldsboro, N.C. “If you can generate multiple profit centers on the site, it ups the value of the land significantly.”
The big challenge is determining which features can become profit centers and which may actually drive business away. To help you sort out the options, we’ve sought out several retailers and industry consultants to break down the process of deciding just what to do with your newly purchased land.
SAME BUT DIFFERENT
Gerald Lewis, a veteran consultant who’s worked for a number of prominent petroleum and convenience chains, says challenges stem from this issue because it cannot be looked at in general terms. “Different companies have different business models,” he says.
Bob Stein, CEO of KSS Fuels, Florham Park, N.J., cites identifying your existing retail strategy as the first step in determining how to best use land. “Some things are dictated by who you are already,” he says. “If you’re an existing operator, you’ll want to replicate a lot of what you already do, so the consumer is keenly aware of your brand.” Retailers agree. Whether you own five stores or 500, if you offer fresh food at your existing sites you’ll probably want to include fresh food at the new location. It’s about expectations. For example, Strickland knows that when patrons see one of Wayne Oil’s Ballpark Stores, they’ll expect at least eight gas pumps, a traditional c-store of at least 3,500 square feet, an eatery with seating, and a car wash.
Of course, retailers must also look at each location on an individual basis. Even if a company’s business model is to always include a car wash, there may not be space at the new location to comfortably house this feature. Or perhaps the company might opt to go from an in-bay automatic to a more expensive yet higher throughput mid-sized tunnel wash.
What’s important is to not automatically stamp a template onto the new site, creating a carbon copy. Play to your strengths but also seize opportunities to augment your value proposition.
“In terms of addendums that can add value to the site, it’s really important to use some modeling to really understand the marketplace and quantify this stuff,” says Stein, whose company recently acquired the store-traffic research firm MPSI. “There are pretty sophisticated tools and models that can forecast the impact of any one of these extras on the site in relationship to the competitive marketplace.” These tools can include land-use studies and store-traffic surveys, both of which offer retailers a statistical opinion on what to consider when embarking on a new site build.
Compiling this data can be a complex process. “Rural, suburban, metro, highway can be too general,” Stein warns. “You really have to capture what the appropriate span of demographic and traffic will be in regard to trade at your site.”
As president and CEO of the Urbandale, Iowa-based J.D. Carpenter Cos. Inc., David Carpenter recognizes that there’s very specific information that needs to be gathered before launching into a new build. “Certain retailers, such as QuikTrip, have a model that’s the same no matter what; they’re not going to build something different every time,” he says. “But that’s not the majority of the industry. For a lot of us smaller and medium-sized guys, we have to look at the demographics of the neighborhood, what your competition’s like, how’s your traffic flow, what’s the property layout.”
The folks at Wayne Oil focus on population covering a 2-mile radius, looking at median income level, the number of cars per household, and even education levels of the area. The company uses a combination of both internal resources and third-party research firms to collect this crucial information.
Ultimately, Stein believes that data really is the key to success at a new site. “That way you’re not leaving it to subjectivity,” he says of these multimillion-dollar choices. “You want to have looked at the data and done forecasting so you can be confident on how the site’s going to do. Based on that, you decide the right configuration for your specific piece of dirt and have the confidence it will succeed.”
Once the data has been collected, it’s time to look at the features that might work best, as well as give greater consideration to the assets frequently taken for granted.
Perhaps there is no category more misfocused than the fuel island. The thinking is that gas is gas and fuel basically sells itself. All the operator must manage is price and supply. Wrong. When purchasing sites, many acquirers understandably shift their attention to the store, its profitability, challenges and opportunities. When it comes to the fuel island, such focus is frequently lost. Instead, it is akin to a Carfax report: annual gallons sold, age and size of underground tanks, dispensers, etc.
“Many smaller and mid-size retailers may not appreciate the value of load shifting and pricing volatility. They may not consider the capacity of the underground storage tanks or decide to save $10,000 or $20,000 for a smaller tank when a large-capacity tank would more than pay for itself,” says Ryan Mossman, vice president and general manager of FuelQuest’s fuel services. “Many operators do not manage the fuel side the way they do the store,” he continues. “They take the fuel side for granted instead of understanding all the economics and opportunities at play.”
Whether it’s investing in a groundup or acquiring existing sites, Mossman urges operators to understand the site’s true fueling potential, to determine whether larger tanks should be installed and ascertain the lot’s configuration; they should also be sure that proper tank-gauging equipment is in place to not only measure for potential leaching but also to assess peak fueling hours to better manage deliveries.
On a recent morning in northern New Jersey, for example, two of a station’s four MPDs were closed because one of the USTs had gone dry. What could have been a rush-hour boon for this dealer was instead a bust.
“You don’t know what kind of revenue this dealer lost,” Mossman says. “There’s a lot of money lost that retailers aren’t even aware of because of the timing of their deliveries or down time. There’s also great opportunity to make more profit by understanding complex pricing strategies.”
FIND YOUR DESTINATION
“Food is a destination,” says Strickland of Wayne Oil. “If we’re that destination, then we can pick up the ancillary sale on the inside of the store or sell them some gas.” Strickland’s Ballpark Stores offer a success story for retailers who might not want to launch their own foodservice brand, because they’ve had success teaming up with fast-food chains such as McDonald’s and Subway.
“We don’t believe we have the internal discipline to do food,” Strickland says. “It is a very unique dynamic.” Instead, the stores serve as a “landlord” to the fast-food chain and benefit from the additional traffic brought to the site.
Still, for all the possible upsides, there are issues that come with foodservice. Two major factors are seating and parking. A large food offering could mean seating, which means extra parking and a change in mindset from the traditional c-store model.
“If you want to get people in and out to buy a lot of cups of coffee or snacks in a day, you don’t want them hanging around in the store for a long time,” Lewis says. “What you really want is for people to get in, make their purchase, and get out—not a lot of people sitting around in the store, taking up parking spaces and keeping other people out.” Another issue is the cost of a failed venture. “It’s caused a lot of people to lose a lot of money because it wasn’t properly executed and shouldn’t have been done in the first place,” says Jim Fisher, CEO of IMST Corp., which focuses largely on the independent retailer. “A good convenience store does not necessarily make a good foodservice location. They’re very different.” Retailers need to look at whether or not they have the time, space and discipline to execute a properly run foodservice venue before allocating resources to do so in a new site.
Car washes are another feature that has those in the industry divided. Lewis references the effect a line of backed-up cars at an ill-placed wash can have when advising his clients. Stein prefers to look at this topic in terms of how it affects the business overall. “When you build a car wash, you don’t want to be looking at simply how many car washes you sell,” he says. “You want that car wash to bring traffic into the store.”
However, both Strickland and Carpenter are passionate about the upsides of washes. “We don’t put a car wash in just to put a car wash in: We’re passionate car-wash retailers,” says Carpenter. “For us, you make dollars on car washes, not pennies like you do on gasoline and many other items.”
Citing a car wash as a must for any new site, Strickland offers them at all 14 of his Ballpark Stores. He believes “a well-placed, well-operated, well-maintained car wash realistically takes a very small footprint, relative to the total size of the store.” If you do operate a wash, all agree, it’s essential to have the space to accommodate it. That means sufficient space for the wash itself as well as an exit that does not interfere with the rest of the store.
FILL A NICHE
Instead of playing a shell game, with washes and food among the key pieces, retailers should first and most importantly seize on what consumers want that their community may not necessarily offer.
Fisher has seen the most success from “companies who really get a grasp on the trade areas in the beginning to understand where there’s a need and whether or not they’re equipped to fulfill that need in their store.” Some examples:
Lewis describes c-stores with loading docks for deliveries, built so trucks don’t occupy parking or fueling space.
Strickland found himself amazed by the overwhelming customer response to small flat-screens broadcasting sitespecific weather at his fuel pumps.
Fisher cites one-hour photo developers, in-store pharmacies, dry cleaners, laundry services and full-service branches of local banks as successful traffic-driving addendums for different IMST clients. “They all have good possibilities within the right environment and the right physical assets to back them up,” Fisher says.
Coffee is another area where Carpenter sees room for innovation. Although an industry staple, coffee has become subject to a tug of war, with McDonald’s jackknifing into the coffee intersection.
To combat this, QuikTrip has included full-service coffee bars in its newest Tulsa stores and seen a huge success. Carpenter advises passionate coffee retailers to consider this when building a new store or upgrading existing sites.
“First you have McDonald’s, who’s done it; now all of a sudden you’ve got QuikTrip, and what are you going to do? Still offer coffee from the pot for 89 cents?” he says. “Innovation is needed for us to remain competitive.”