Chet Cadieux pauses. The executive’s easy smile, infectious and at the ready, turns pensive. A full minute passes as he ponders what he was just asked.
“That’s a really good question,” says the 46-year-old Cadieux, who’s dressed in the company’s red QT polo shirt, consistent with QuikTrip casual persona.
The question: Is there a retailer out there that excites him?
For a chain recognized as arguably the best in the c-store business, there are few surprises at QuikTrip and few answers the company doesn’t dispatch with a finger’s snap.
A visit to a QT store is a snapshot of its culture, its soul. At a new site just blocks from QT’s Tulsa, Okla., headquarters, the scene whirs with activity. Blake is mopping floors, wiping down the coffee bar, then assisting a customer. Erica is preparing a fresh pretzel, greeting a couple of regulars, then hopping over to the register to ring up a customer.
“These folks never stop moving,” a barrel-chested customer says with envy.“No wonder they stay so skinny.”
One of QT’s longstanding secrets is its effervescent, clockwork chemistry. Its team of store associates routinely cover for each other, much like a veteran basketball team, whose members implicitly know where the other will be with nary a nod or gesture.
Blake and Erica are among the nearly 13,000 employees stocking, spiffing up, circulating through the 645 stores bearing the QT logo on a backdrop of red. From August through December, Cadieux will meet them all and make it a point to remember as many names as he can. It’s a side of Cadieux few in the public will see—but it doesn’t faze him.
Frequently praised but protectively private, QuikTrip is one of the industry’s great stories, yet one without an easy script. Its roots are well told, that of a singlestore in Tulsa opened by Chester CadieuxII and Burt Holmes, of their expansion and embrace of fuel and later foodservice.
Over the past 20-some years, as QThas grown, a young man bearing the owner’s family name is working his way up to the stage, from the store to the district to headquarters, and the transition from Chester to Chet is done quietly, transparently and without controversy—the QuikTrip way.
Yet, for all its seamlessness, QT is a company that abstains from notoriety. It participates in few industry events, disdains coverage in the trade press and is perfectly fine letting other retail chains garner the glory.
As QT manager Mike Thornbrughm uses, “We don’t write a press release every time we open up a new store or rollout a new menu item.”
They don’t have to. Their customer base bears out QT’s success. Store visits in its hometown of Tulsa and one of its newer markets, Phoenix, demonstrate a fierce customer loyalty rarely seen in the convenience channel.
“I like going there because their sandwiches are always fresh,” says Carrie, a 30-year-old Oklahoman visiting a site in the Phoenix market. “They don’t taste like typical convenience-store food.”
“QT is the best for gas,” says another patron, a cab driver who fills up four to five times a week. “You never have to wait, and they have the best prices.”
Another, a longtime Arizona native, cannot help but compare QT to a more established competitor. “I didn’t know what to expect when QuikTrip arrived,” he says, alluding to an expansion that began shortly after the millennium. “Now they’re my store—for gas, for sandwiches, for drinks, for everything.”
Finding negatives is a challenge, and even then they’re often the flipside of a positive.“Hmm, what don’t I like about QT?” one customer wonders. “The new stores are great, but because of all the entrances, you don’t always get greeted by the store workers when you walk in. It depends if you come in through the side or the main entrance.” Yet the entrances shorten the walk and take patrons to their preferred destination.
Another customer laments that the coffee and fountain bars are separated in the newest stores, known internally as Gen 3. But it is that very division that creates clear destinations and diverts in-store traffic, which is often intense.
Pump You Up
As busy as traffic can be inside a QT, the forecourt often mimics early rush hour in a modest city. Trucks, SUVs and sedans negotiate off a thoroughfare, jockeying for an MPD. Most stations feature 12 fueling slots; the newest sites boast 16.
Like RaceTrac or Pilot travel centers, QuikTrip is a super pumper extraordinaire, driving high throughput off prime locations. There are no gimmicks at the pump—no TVs, coupon dispensers or assorted loyalty programs. It’s just gas. And, for that matter, cheap gas.
In virtually all 11 core markets in which QT operates, the company either drives the market or ranks among the lowest-priced operators with its proprietary brand. As a private company, QT declines to reveal its gallon sales, but industry experts say there may be no other in the channel that rivals QuikTrip’sper-site fuel sales.
“They do a booming business on fuel volumes,” one petroleum expert says on condition of anonymity. “They move a lot of their own product on the pipeline so they can be very competitive with those who have to buy from suppliers.
“They also buy a lot on contract.
Again, when you can commit to good monthly volume with a supplier, you can get much better than average pricing.”The upshot, says the petro expert, is highly profitable forecourt: “All contributes to stronger margins even with lower street prices.
“Some chains of size don’t ‘put as much’ into their fuel buying or lock in the majority of their volume with one supplier. In my opinion, putting all your eggs in one basket doesn’t give you as much flexibility to move with the market. QT seems to do a nice job of balancing.”
That balance is borne out in a recent report by OPIS. The fuels wholesaling/retailing specialist tracks what it calls an efficiency rating, which is defined by market share—the amount of fuel volume—divided by outlet share. So if a company had 1% of all stores and 2% of all fuel sales, its efficiency grade would be 2.0%
According to OPIS, by fuel performance, few perform better than QT. In 2012, QuikTrip controlled 2.63% market share with an outlet share of 0.57%. That gives QT a remarkable 4.58 efficiency rating, trailing only Wawa among U.S. operators. (See sidebar on p. 42.)
“They have a lot of sites … doing 300,000 gallons a month and $300,000 a month in inside sales,” says OPIS chief oil analyst Tom Kloza.
“What makes them interesting is they have a trading operation. They trade for-profit,” he continues. “QT ships on the pipelines, and they have clearly become some of the best traders. They do spot; they do hedging. They are very active in the spot market and they know how to take advantage in [times of] volatility.”
Put another way, despite ranking among the lowest-priced operators in its markets, QuikTrip is not skimping on margins. “I’d put them up there with Pilot in terms of sophisticated buying, risk management and buying on dips,” Kloza says. “They are strong enough that over time they can buy below the rack average and really take advantage of that.”
Not surprisingly, fuel plays an essential role in QT’s growth strategy. Talking about the company’s expansion into the Carolinas, launched two years ago, Cadieux shares the importance of drive time not only in a city or county but also the broader market when considering new growth opportunities.
“Charlotte, Greenville, Spartanburg: The bigger the city, the more fuel they’re going to burn,” Cadieux says, “because theoretically the drive time is longer and our site selection model knows on average… how far somebody drives everyday commuting. We know in Atlanta, we know in Dallas, we know in Chicago, even though we’re not there.
“Miles driven per day equates to how much gas you burn.”
Growth Strategy
QT’s soaring success in the Phoenix-Tucson market and new ventures into North and South Carolina are no small feats. Several factors stand out:
Distribution: QT has invested hundreds of millions of dollars into opening five commissaries in Tulsa, Kansas City, Atlanta, Dallas and Phoenix. Each has been designed to double in capacity if/when necessary.
Pipelines: Either through serendipity or brilliant planning, much of QT’s growth is situated nicely near fuel pipelines, thereby saving shipping and overall transportation costs. For instance, the current ramp-up in the Carolinas aligns with the Colonial pipeline in eastern North Carolina.
Culture: For QT, it’s all about exporting a culture of fast, friendly customer engagement—with a notable nod to speed.
“We’re fast, we’re just really fast,”Cadieux says with certitude. “I don’t know if anybody really measures that: customer count per man hour. If that’s a key customer service measurement for us… then you can’t destroy that.”
Toward that end, QT is known for relocating district managers and store employees from successful stores to fresh markets. Culture and career growth, Cadieux says, are key drivers behind QT’s expansion, and without store growth, good employees will exit.“It’s not so much a draft—more of a volunteer army that’s going,” he says.“
And they’re excited about going and sticking a flag in the ground in a new geography and being part of the team to build that market.“It’s not like we take them at gunpoint and say, ‘Move.’ It’s employees who are excited about the opportunities,” he says. And there is another layer to this equation. “In markets where we are saturated… if there’s no store growth and there’s no turnover, you basically have to wait for somebody to die, quit or get fired to get promoted.”
Employees: In conjunction with culture, consider this remarkable statistic. In a channel in which turn overruns more than 100%, QT lists turnover of full-time employees at just 10%, and 30% to 40% for part-timers. Some attribute it to QT’s compensation plan, which includes a base salary in excess of $40,000 per year for a full-time store associate, plus profit sharing.
Regardless of the reason, its employees are recognized for sharing responsibilities, engaging customers and multitasking as if it were routine. “In those new markets where we are growing fast, you don’t want to open with inexperienced staff. Those people aren’t ready to run the store,” says Cadieux. “God help them! Have you been in a QuikTrip? You knowhow many transactions they’re running? We’d be setting them up to fail.”
Company Support: When QT penetrates new markets, typically with five to 10 stores, it’s a companywide story.
“As we say, store growth somewhere creates promotion opportunities,” Cadieux says. “Every other geography we’re in wants the new market to do well. It’s critical because, in the meantime, they’re subsidizing that new market. As long as that new market loses money, the rest [of the company] is subsidizing. Not to mention they’re all shareholders. In every store we’re building, we’re investing every employee’s money.
“The first five years we’re in a new market, our employees are asking about them: ‘How are we doing in the Carolinas?’They’re shareholders. They get it. They understand QT is taking their money as shareholders and building these stores as an investment in QT’s future—their future.”
Format: Defying conventional wisdom, QT does not endorse differentiated store sets. So whether a market is predominantly Hispanic, elderly, more affluent or working class, those stores will adhere closely to their QT peers.
“We just believe that in a given market, people are cross-shopping our stores regardless of what the demographic is around the store,” says Cadieux, who nonetheless politely acknowledges the validity of his industry counterparts ‘strategies. “Just because that’s where the store is located doesn’t mean that’s who’s walking through the door.”
Its fixed store set, in fact, is a slice of the company’s site selection process.“We’re looking for markets that fit our model. We aren’t planning on doing a different store set to fit a market; we ‘relooking for a market to fit our product offering and approach to market.”
Growing Share
QT’s formula is clearly working. Via exclusive market research, the company has found that once it’s in a market for at least a few years, its stores easily outpace most of its competition. A fascinating spotlight is the Phoenix area, long dominated by Circle K. In 2001, Circle K ran 300 sites with market effectiveness of 1.41. This means inside sales generated 41% above average c-store sales in that market. At the same time, QuikTrip’s first full year in the Phoenix area, QT stores scored an impressive 1.85—remarkable considering its newcomer status. In 2010, QT’s 67 stores outpaced Circle K units by nearly a full point on an average store-to-store basis: 2.13 market effectiveness vs. 1.2. (See full results in the sidebar on p. 42.)
Market jumping is no small feat. Successful chains have to establish a distribution network able to duplicate everything that defines a brand as it stretches from state to state. A QuikTrip in Dallas has to look like a QuikTrip in Tulsa.
To do this, QT plans in blocks, with roughly 10 stores the magic number needed to make that first phase economically viable, according to Jim Fisher, CEO of land-use specialists IMST Corp., Houston.
Typically, within two to three years, as the original cluster bears fruit, new ones spring forth, giving QT the prominence to effect a full-blown marketing program, leveraging scalability to turn investment into profit. In breaking into a new market, Quik-Trip often maximizes gas prices to grab market share, industry experts say. But fuel dominance is not the endgame, says Bob Stein, president and CEO of KSSFuels, Florham Park, N.J.
“These successful retailers going into new markets aren’t just about fuel,” he says generally about the industry. “It’s a starting point to get attention, but they’re coming in with a large, state-of the-art site, a presence in the forecourt and then, inside, great merchandising and foodservice.”
As its new-market strategy builds on itself, QuikTrip can backfill, adding both stores and infrastructure such as with its new stores in the Carolinas and new commissary in Atlanta.
The industry is also enamored with QuikTrip’s reputation of constantly renovating its portfolio. “I think their oldest stores are only eight to 10 years old,” says Bill Weigel, chairman and CEO of Weigel’s Stores, Powell, Tenn.
The continuous reinvestment in existing stock, on top of fresh ground-ups, makes QT among the most formidable competitors in the country. The company is not shy about withdrawing from markets, such as when it pulled out of Springfield,Mo., divesting five stores in 2010.
Equally true, the operator has little tolerance for legacy stores, even in its home state. So when the company made a full-fledge commitment to high-volume fuel sites, it may have been surprising at first glance for QuikTrip to divest its profitable older stores in Stillwater, Okla. But Cadieux is resolute: The reputation and expectation of QT’s portfolio outweighs laggard, even if moderately profitable, legacy locations.
“Those stores were still profitable, but when it came time for us to say [whether]we’re going to go invest in them to bring them to the newest standard—whatever that standard is—the answer was if we did, it would lose money,” he says. Once the decision was made not to upgrade, Stillwater became backwater, dissolved from QT’s stable.
So whether it’s upgrades, complete raze-and-rebuilds (either on the same property or a better location) or the shuttering of failing stores, QuikTrip is nimble enough to “close as many stores as it opens,” says industry consultant Dick Meyer of Meyer & Associates, Mesa, Ariz.
“They don’t like operating lower than-expected volume locations,” he says.“It’s not fun and not worth their business model. It’s not their core competency.”
Respect from Peers
As much as QuikTrip evokes fear and awe from competitors, it also draws respect.
Jim Griffith, CEO of Stillwater-based OnCue Express, calls QuikTrip “one of the best retailers in the country” and acknowledges that his 46-store chain looks to it for new ideas and inspiration.
“I just think the world of them,” he says. “Someday maybe I can grow up and be QuikTrip.”
Griffith, who started his c-store business in 1966 and created On Cue through a merger with a partner in 2004, has one store in a market occupied by two Quik-Trips. When he opened his Bartlesville, Okla., site in 1980, “the stores QuikTrip had were nothing like the stores QuikTrip has now.
“They have evolved considerably,” he says. He appreciates the size and dimensions of the facilities, which make it easy for customers. He also compliments its labor development and management.“They have extremely informed and friendly employees. They have a great culture.”
And when it comes to QuikTrip’s culture of employee retention: “My hat is off to them. It takes a lot of work. And they’ve done the work. Anytime you can reduce turnover, you reduce costs.”
QuikTrip consistently shows up as atop employer on national ratings lists. Jim Fram, senior vice president for economic development for the Tulsa Chamber of Commerce, credits the chain’s above industry pay and the fact that the retailer promotes from within for employee retention.
“[Employees] have their anniversary date on their name badges,” Fram says.“You don’t see very many people who have worked there only a few months. They are all long-term employees.”
OnCue Express is expanding in the Oklahoma City market, where there are no QuikTrips. Griffith’s chain has four new stores in the works in that market, bringing the total there to 12. “One of the biggest compliments I have,” Griffith says, “is when someone says, ‘Gosh, your stores remind me of a QuikTrip.’ ”
“The key is raising quality perception,” says Ben Brownlow, an Atlanta-based analyst with Raymond James & Associates, which has its main headquarters in St. Petersburg, Fla. “Their whole model is to raise the customer experience and capture market share.”
Fresh food, sandwiches, salads and improved lighting and flooring are part of the mix. “Customers are viewing it as less of a trade-down from [quick-service restaurants], leading to market-share gains in not just the c-store channel, but capturing market share from food service,” Brownlow says. “Their initiatives transition customers to a different perception of [c-store food.]”
“They keep reinventing themselves, “Meyer says. “But the core principles that they came from a long time ago still exist.”
QuikTrip employees are simply hard workers with a passion for customers.“It isn’t a new machine that came in yesterday or one that comes in to sell gas at a lower price,” he continues. “They do the same thing, every day, with the same passion to get up and serve.”
What’s Ahead
QuikTrip in fiscal year 2013 will build 60 sites known as Gen 3, which feature 16 gasoline pumps and a 5,700-square-foot facility. The design, with a brick and glass exterior, is more than 1,000 square feet larger than the previous prototype and is flanked with bookend entrances along with two central portals.
Inside, an arena-style ceiling immediately catches the eye. It is both artistic element and practical consideration, aimed at muffling excess noise. “It gets pretty noisy in here,” Cadieux says with deliberate understatement at one of the new Tulsa locations.
In addition to the rollouts, QuikTrip is also busy beta testing various programs:
Gasoline loyalty with a Tulsa grocer: The program is a classic cents-off gasoline redemption program that takes the supermarket consumer to QT for discounted fill-up.
Modularity: In years past, QT would build a new, larger format behind a legacy store that would then be razed. With the current building deeply egressed to allow for ample forecourt space, QT is piloting a modular, plop-and-play unit at existing raze-and-rebuilt sites. The goal is to sustain some level of operation while a permanent fixture is erected. “We’re testing it. We’re still in the very early stages,” Cadieux says.
Mobile apps: QuikTrip is testing a QT app. As of CSP’s deadline, the application had not been rolled out to test markets.
“We consciously stayed out of the first-generation of [Web-based loyalty], which was email marketing, and the second-generation of text marketing because our customers told us they didn’t want a convenience store to be marketing to them,”Cadieux says. “But they’re OK with an app.
“What they’ve said is, ‘I don’t want anybody sending stuff to my phone; the last thing I want is clutter. An app? That’s fine, because I’ve chosen to open it up or to set settings on it. I can set up the parameters myself.’ ”
Deep in Thought
The clock is ticking. A two-hour interview, among the few Cadieux will hold with a reporter, is nearing its end.
It’s a blustery day as January is about to cede to February. Cadieux is focused on his guests, only once looking at his smartphone and, even then, offering an apology.
It’s that focus, that eye-to-eye personal engagement that colleagues cite among Cadieux’s finest qualities: his ability to concentrate on what’s before him while possessing the wherewithal to keep sight of the big picture.
The question that follows is among the last and one that prompts a thoughtful pause. Which retailer today excites him? He considers Whole Foods but suggests its model is replaceable. He considers other brick-and-mortar operations but dismisses them as being potentially usurped by online commerce.
Then he lets loose a brief smile, and an intriguing answer.
“Trader Joe’s,” he says, “is interesting because almost all of their product you can only buy there, yet people want it. Even though it’s take-home, you cannot buy it on the Internet.
“It’s interesting they are that good in product development that they can make a business out of stuff only they have developed, by and large.”
QT’s model in some ways mimics and in other ways opposes Trader Joe’s. QT is built on commodity products readily available in most c-stores: major brand cigarettes, salty snacks, roller-grill options, carbonated soft drinks and the like.
True, it owns a strong private-label program and a vastly improving foodservice commissary. Yet, in these areas, QuikTrip is not Trader Joe’s.
What the Oklahoma convenience chain shares with that Southern California purveyor is extraordinary verticality. Both QT and Trader Joe’s have largely eliminated the middleman, investing in robust supply-chain dynamics they own and operate.
Both adhere to a culture of extraordinary consistency and build store formats with little variation by region or demographic. Both are recognized for hiring remarkable people trained in multitasking and delighting customers. And both promulgate the values of price and quality, from the fresh-cut flowers of Trader Joe’s to the robust fuel island of QuikTrip.
There are no shortcuts or undercuts. Just an investment tested, and tested again, with the results to show for it.
Output with Throughput
In gauging fuel performance, there are few better in the United States than QuikTrip. When looking at output per unit, only Wawa scores higher.
In 2012, QT controlled 2.63% market share with an outlet share of 0.57%, giving it a remarkable 4.58 efficiency rating.(Efficiency is market share divided by outlet share, with a higher number indicating higher per-store volumes.) Only Wawa scores higher, with an efficiency rating of 5.8. Sheetz finished third with 4.52, and Get Go fourth with 4.17.
For 2012, a typical QT site priced its pumps on any given day at $3.09 per gallon, considered below-tier direct competition.
In 2011, QT controlled 2.52% market share with an outlet share of 0.54%, for an efficiency rating of 4.64. They priced 3.04 cents per gallon below competitors.
QuikTrip
by the Numbers
Headquarters: Tulsa, Okla.
Store Count: 645Store
Breakdown by Market: Tulsa, 68; Kansas City, 79; Wichita, 38; Des Moines, 36; Phoenix-Tucson, 100; St.Louis, 73; Atlanta, 128; Dallas/Ft. Worth,99; Carolina, 24
Employees: Almost 13,0002012
Revenues: $10.77 billion company
Ranking: 26th largest privately held corporation, according to Forbes
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