FAIRMONT, W.Va. -- For many retailers who have decided to sell to Dallas-based 7-Eleven Inc. in its recent acquisition push, their reasoning centers on this dilemma: grow or go.
Last fall, Prima Marketing LLC, Fairmont, W.Va., sold 76 sites in four states--West Virginia, Pennsylvania, Kentucky and Ohio--to 7-Eleven, after shedding 26 sites to independent retailers throughout the year. The company, which had been a 7-Eleven licensee since 2003, was in discussions with 7-Eleven for about a year before it sold. According to CEO Jeff Kramer, the pressures of being a midsized retailer in a growth market were just too oppressive.
"Many companies of our size and model must either grow or sell. Frankly, there's an ever-increasing regulatory burden out there, and it tends to hurt small and medium businesses rather than larger ones with more scale," Kramer told CSP Daily News. "I think we will see more of it."
For more on 7-Eleven's growth strategy and acquisition details, see “Related Content” below for the cover story of the January issue of CSP Magazine.
In Prima's case, that regulatory burden encompassed everything from potentially increased health-care coverage requirements and costs because of the Affordable Care Act to greater environmental costs. "It's just something that businesses have to live with more and more," Kramer said. "Unfortunately, it means there is an ever-increasing overhead burden, and because of that, the bigger companies are better suited to handle it."
Open Pantry Food Marts of Wisconsin had hoped to grow its store count beyond its 27 sites in Milwaukee and Madison. But a few years ago, when the Pleasant Prairie, Wis.-based chain hashed out the potential of a local acquisition with a capital investment firm, it realized that it could not secure enough funds to sufficiently upgrade the new sites.
It again was one of those classic grow-or-go crisis points, but Open Pantry was not ready to go. Instead, its best sites went on the block with the intention of using those funds to reboot into a smaller, less capital-intensive core of eight sites, which could eventually provide the model for a retail package it could sell to mega-jobbers for their own dealers.
Ultimately, Open Pantry ended up leasing 18 sites to 7-Eleven, what CEO Robert Buhler described as the "beauties" of the chain on prime corners. 7-Eleven has since rebranded the locations.
"Our mission was to close," said Buhler. "7-Eleven had the money, had the credibility, dealt with us equitably, had a very in-the-zone price. And, at the end of the day, to agree and do leases with us handled my personal needs."
While Prima had received other offers, 7-Eleven's was not only "competitive and favorable," but also the easiest option for the licensee. From Kramer's standpoint, the retail giant is in prime condition for future growth. "They are a solid buyer in the marketplace today, and it's in part because they have a solid model for growth," he said. "They are centralized quite a bit to save overhead, and they have strong marketing and operations people."
While some of Open Pantry's sites originally had a much different feel than the typical 7-Eleven--with some featuring fireplaces and leather chairs, encouraging customers to linger--Buhler believes 7-Eleven's model can be just as successful in the long run. "7-Eleven can come in and will take market share from the medium market, no doubt about it, because of who they are and what they offer," said Buhler. "Will they attract the high-end customer? Probably. A woman in her BMW, her kid likes Slurpees as much as anyone else."
For more on 7-Eleven's growth strategy and acquisition details, see “Related Content” below for the cover story of the January issue of CSP Magazine.
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