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2018 Retail Leader of the Year: Kyle Krause Builds a Legacy

How the third-generation CEO positioned Kum & Go for a new retail age
kyle krause

DES MOINES, Iowa -- Imagine if Bill Krause had been your dad. For those who knew the co-founder of the iconic Kum & Go convenience chain, the phrase “larger than life” comes to mind. Krause, an imposing figure, was always ready to extend a hand, look a person straight in the eye and coax out a story. His role as a pioneer of the convenience-store industry was so great that in 2008, CSP named him its Retail Leader of the Year. At the time, Kum & Go had $1.7 billion in revenue with 430 stores [CSP—Nov. ’08, p. 34].

For his son Kyle Krause, who would take the reins of Kum & Go in 2004, the expectations must have been staggering. But Kyle, who was stocking store shelves at 9 years old in the chain’s trademark pressed white shirt and brown necktie, considered it a chance to build upon—and make his mark on—the family business. And he did.

In the past 14 years, he has transformed the chain almost entirely, rebuilding more than half the network from the ground up, repositioning stores and expanding the format to tackle the immense challenge of foodservice. Revenue has doubled to $2.4 billion and earnings have quintupled. And foodservice has gone from 4% of inside sales to 20%. It’s for this foresight and its transformative effect on Kum & Go and the industry that CSP has named Kyle its 2018 Retail Leader of the Year, marking the first time it has honored a parent and son in its 16-year history.

For Craig Bergstrom, CFO of Kum & Go, Kyle’s initial moves seemed risky. The investments in new ground-ups and foodservice programs were heavy and the returns slow to come. But 13 years after joining Kum & Go, Bergstrom is a believer in the rewards of Kyle’s long-term strategic vision.

“His long-term strategy worked,” he says, “despite my questioning it early on.”

And the luxury of running a family business made those early, seemingly risky decisions possible—and ultimately rewarding, Kyle says.

“You’re allowed a long-lens view of what success means,” Bergstrom says. “Success doesn’t mean you make the most profit one month, or one year or even five years. You look at qualitative successes and you do what Kum & Go should be doing. That’s the benefit of not worrying about shareholders: You do what you believe and make those beliefs come alive.”

Family Dynamics

Bill and his father-in-law, Tony Gentle, started Kum & Go with a single, scrappy gas station in Hampton, Iowa, in 1959. Company history famously has it that when Bill’s mother-in-law, Mary Angela Gentle, saw the one-room gas station, she stood there and said, “We paid [how much] for this?”

For Kyle, working in Kum & Go’s stores as a child was the family’s thing. Nothing to question. Nothing to ponder.

And it was fun. “I remember the interactions with associates and customers,” he says. “It’s a fast-moving, changing environment that’s all about customer service. Working side by side with people is the inspiration of retail.”

Then there was the impromptu training while growing up. Bill would show up at his son’s middle school and whisk him off to a business deal. What some would call playing hooky was, for Kyle, an internship. He remembers one business meeting involving a bank, and the discussions were prolonged and complicated. Even though the negotiations didn’t end in a deal, Kyle understood the lesson: Business was fluid, complex and compelling.

Soon after receiving his bachelor’s degree in business finance from the University of Iowa, Kyle became vice president of finance for Kum & Go, which at the time had about 130 stores. He was 23.

“He’s willing to take risks, and it’s OK if you fail with a well-thought-out plan.”

The convenience-store business was also young. Bill and Gentle over three decades had built Kum & Go into a regional empire, acquiring locations in fits and spurts.

Kyle entered the business with a familial yet entrepreneurial dynamic firmly in place. He describes his grandfather, Gentle, as the “consummate merchant.” Having come from the drugstore business, he enjoyed all things having to do with floor plans and product placement, all the science behind what sold with what and why.

His father, meanwhile, was a “large personality,” Kyle says. “Dad was a people person. He loved people. He’d do store tours, talk to a general manager and a year later he’d remember that his son Jimmy played baseball. So his connection with people was fantastic.

“Both of them were inspirations for me.”

It could be tough to manage Kum & Go’s many growth spurts. Kyle recalls one acquisition from 1998 that vaulted the chain from 150 to 250 stores overnight.

“You’re laughing and crying,” he says, remembering the enormity of managing that integration. “I’m at this new store asking myself, ‘What do I do?’ Having gone through that shows you what you can do when you want to.”

Kum & Grow

At 6,000 square feet, a Kum & Go store today would be a supersized version of the ones Bill rolled out back in the day—and a quantum leap from that one-room gas station that his mother-in-law stepped into almost 60 years ago.

The chain’s newest stores boast a modern storefront with contemporary, finished canopies of contrasting wood tones; fueling options that include E85 and E15; an open kitchen and foodservice counter in the center of the store; a beer cave; a wall of dispensed beverages; shelves of branded and proprietary snacks and candy; a growler station next to indoor and outdoor seating; and outside, a stand-alone, 10-foot ampersand sculpture representing the “and” in Kum & Go.

On the menu in Kum & Go’s two-year-old Go Fresh Market kitchen concept are Philly steak sandwiches; beef barbacoa  burritos; Angus bacon cheeseburgers; Greek, Caesar and southwestern “salads with flair”; pizza; and breakfast options.

Visually, the new interiors are a confluence of convenience store meets Starbucks meets Panera Bread meets corner pub. They reflect a larger trend in retail, with supermarkets developing food court concepts and banks opening coffee shops in their lobbies.

The small design touches make all the difference. They include metal-forged ampersand door handles; a large, red Plexigas ampersand affixed to the 20-foot ceiling above the cashier; a whitetile backdrop behind the kitchen counter; and a warm, illuminated lighting scheme. All of it is housed in a building certified in Leadership in Energy and Environmental Design (LEED) sustainable construction standards.

“Kyle is a visionary,” says Kelly Housby, partner with the trucking distribution and retail sales firm Housby Mack Inc., Des Moines, Iowa, and a longtime friend. “When he first took over the Kum & Go business, he moved it from rural markets to larger populations, built larger store sizes and brought in different products and categories that led to their Go Fresh Market of fresher foods and higher-quality options. His vision was extraordinary.”

While one part of Kyle’s vision transformed the stores, the other part targeted the physical location of the assets.

Unfortunately, the ability to select new markets, interstates and intersections was new for Kum & Go at the time, Bergstrom says. “We were built on acquisitions, with almost everything done through the M&A world and not building our own,” he says. “So we were very inconsistent in where we had stores and what they looked like.”

The chain had 350 locations then, Bergstrom says. “That’s a lot to change over time,” he says, “but it was about consistency and consistency of offer.”

“In his head, he can come up with the answer faster than you can think of the question.”

To transform itself, the company had to get away from buying cheaply and streamlining operations to picking the right locations and building the retail format that would represent its burgeoning brand. “Again, it was Kyle’s trust in the long term and that things would ultimately make sense,” Bergstrom says.

Today, site selection is systematic, says Niki DePhillips, senior vice president of store development for Kum & Go. Before selecting its most recent new market—Denver—Kum & Go reviewed 85 markets in 16 states. Team members asked  themselves: What markets would be good for the long term? What was the competition like? What was the real-estate availability and cost?

After weighing those variables, they chose Denver in 2016, with the deciding factor being the chain’s heavy presence in the state and resulting brand recognition, DePhillips says.

Entering new markets was only part of Kum & Go’s new equation, DePhillips says. More than 550 assets have come into or out of its network since 2004, leaving total store count the same today at about 400 as it was back then, she says. Today, the chain stands at No. 20 on CSP’s 2018 Top 202 list of the largest c-store chains in the country.

“Kyle felt that at some point, an asset becomes obsolete,” DePhillips says. “If it’s a 2,000-square-foot store, it’s hard to put in foodservice, or how two dispensers don’t make sense and you can’t add dispensers without scraping and starting over. It was about the quality of the asset and setting up for growth long term.”

Proving Grounds

Navigating the twists and turns of any dynamic enterprise isn’t for the faint of heart. Fortunately for Kyle, his upbringing prepared him for such a journey.

Growing up with an entrepreneurial father meant many dinners spent talking business. “We didn’t eat dinner early, but when he got home, frequently the conversation at the table was business-focused,” Kyle recalled in a 2008 CSP interview, remembering family dinners with his mom, brother Kevin and sister Kate. He remembered his father as always focused on the business.

“It’s not that he didn’t ask how things were in school, with sports or whatever, but … business permeated many types of conversations and it wasn’t necessarily related to how old you were,” Kyle said. “At a young age, we would be exposed to business, business opportunities, types of transactions that probably most people my age weren’t exposed to.”

In terms of the future, both Bill and Kyle seemed to align early on. “When I grew up, it wasn’t, ‘Gee, I want to be a fireman,’ ” Kyle says. “I wanted to be president and CEO of Kum & Go. And from my dad’s standpoint, this is what he wanted, to perpetuate the family business for another generation. To me, it fit. It fit our personalities.”

As Bill told CSP at the time, Kyle was prepared to lead the company from the very beginning. “We were going to a board meeting one day, and I had taken him out of school,” Bill recalled. “On the way over—he was 11 years old—I said, ‘Kyle, what do you want to do when you grow up?’ He was half-insulted. ‘Dad, I’m going to work for you.’ ”

Still, Kyle felt the burden of being the boss’ son. “I certainly wasn’t the only qualified person to be able to run Kum & Go,” he says, “but I did definitely need to prove myself along the way.”

The combination of mentorship, talent and motivation shaped the kind of leader Kyle would become. His colleagues and friends often describe him as someone with high expectations who wants people to come to meetings prepared and on their A-games.

“Kyle doesn’t care to waste time,” says Dan Houston, chairman, president and CEO of the Principal Financial Group, Des Moines, Iowa. “If you’re going to have a meeting with him, be on time, focus on the ‘ask.’ He gets it. He’s well-read on topics. Don’t waste Kyle’s time and he won’t waste yours.”

Kyle moves and picks things up quickly, friends and family say.

“If there’s anything Kyle does better than anyone else I know, it’s math,” says Sharon Krause, his wife. “No one can challenge him. In his head, he can come up with the answer faster than you can think of the question.”

That ability to distill information and stir the imagination extends into their life as a couple. For example, Kyle once decided he would concoct Sharon a new cocktail almost every day. She never landed on a favorite, but she enjoyed the surprises.

Kyle’s curiosity and penchant for exploration also reveal another side of his personality that shapes his leadership style: a high tolerance for risk.

“My role as CEO is to make sure that a generation from now, the business is successful.”

Bergstrom points to Kyle’s plans to transform the Kum & Go network in the mid-2000s: “Some leaders are risk-averse—not Kyle.” That said, Kyle “loves metrics and analytics,” Bergstrom says. “He wants things to be data-driven. He’s willing to take risks, and it’s OK if you fail with a well-thought-out plan.”

Mark McManigal, former in-house counsel for Kum & Go and a longtime friend, remembers a basketball game in which Kyle broke his femur for the second time. “He has an incredible pain tolerance,” McManigal says. “I witnessed the break. When someone asked him what happened, he was calm and said, ‘I broke my femur. I’m pretty sure it’s broken; I’ve broken it before.’ Kyle handled it.”

Kyle is just as level-headed about business threats. While many c-store operators are losing sleep over the disruptive threat posed by Amazon, he is genuinely excited by the opportunity for retailers to reinvent themselves.

He points to Ann Arbor, Mich.-based Domino’s Pizza as a relevant company to aspire to, saying it was a pizza business that saw itself as a digital company.

“Retail disruption has been happening since all of us have been around,” Kyle says. “As a family business, you have to stay relevant to your customer 20 years from now. Digital is one of those chances.”

Coming Into His Own

Confidence has its rewards. And for Kyle, turning Kum & Go into a stable, successful platform seems to have freed him personally.

Take soccer, for instance. He did not grow up playing soccer, but his children did. He’d go to their games and get excited about the action. Eventually his enthusiasm led him to purchase the Des Moines Menace, the regional professional soccer team. His love for all things Italy led to the purchase of two wineries there.

Then there’s his love of contemporary art, a thread that has woven its way into his business. Dozens of paintings, sculptures and even a hologram adorn the walls of the Kum & Go offices. Kyle’s clean and uncluttered office in the West Des Moines headquarters could pass as its own art museum, but with a whimsical twist. Standout pieces are a large shadowboxed collage of multicolored confetti over a festive sheet of loose, metallic lavender, and next to it is a small, white stool. But it’s not for sitting—it’s art. Behind the stool is a plaque with the work’s title and artist’s name.

Kyle started collecting art 25 years ago. It was a penchant he acquired after meeting artists and discussing their work. Now he and Sharon have infused art throughout Kum & Go’s main office.

“One associate may look at a piece and say, ‘My 9-year-old daughter could have drawn that,’ ” Kyle says. “But another might say, ‘I couldn’t solve a problem, but I walked around and [that piece] inspired me.’ ”

Kyle also continues Kum & Go’s philanthropic spirit. The company gives 10% of its profits to community charities, and Kyle and Sharon are personally involved in organizations such as the Des Moines Art Center and the Community Foundation of Greater Des Moines.

“Kyle gets most excited where he’s going to have great impact,” says Kristi Knous, president of the foundation, which aligns donors with charities that have matching interests and missions. “Kyle and Sharon are interested in startups. They’re first in the door, first to take a leap. That’s their mindset.”

Coming Back to Family

Beyond art or charity, however, Kyle’s biggest motivator has been family.

“In a family business, you think differently,” he says. “My role as CEO is to make sure that a generation from now, the business is successful. It’s not about one quarter, three years or five years. It’s about my children and my children’s children.”

While risk and reward seem to be a common theme with Kyle’s leadership of Kum & Go, one of his safest bets has been his son Tanner Krause.

Like his dad, Tanner worked in Kum & Go stores at 9 years old and wore the customary brown necktie. “There’s pictures of Tanner where the mop he’s holding is taller than he is,” Kyle says. (Kum & Go switched its uniform to black golf shirts in 2016 in response to associate feedback).

Tanner, who was named president of the chain earlier this year, speaks about his family with reverence and respect. He describes his father and grandfather Bill as both “incredibly intelligent” men.

“My grandfather had a tremendous love for our associates. And he also loved making deals. He loved to buy chains and diversify,” Tanner says. “Dad shares a passion for people, but on the business side he’s more process- and data-driven vs. having a deal-making approach.”

As leader of Kum & Go, Tanner looks to strike a balance: maintain the chain’s growth while focusing on people, developing the chain’s human resource strategies and improving on benefits and tenure.

DePhillips says the transition between Kyle and Tanner has been seamless. “For me, as an associate, I don’t have to worry about the company being sold or what might happen next,” she says. “It’s clear there’s going to be continuity of leadership.”


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