As s Joe DePinto was going through airport security one day, a TSA agent noticed the 7-Eleven logo on his shirt and asked him, “Have you seen that show ‘Undercover Boss?’ ”
DePinto, president and CEO of 7-Eleven and one of last year’s debut subjects for the CBS reality series, smiled and said yes. The woman went on about the show—clueless, simply and utterly.
A step behind, his wife, Ingrid, having taken in the entire exchange, interjected, “You know, he was the Undercover Boss.”
The agent looked to Joe, paused, and then whispered to Ingrid, “They made him look heavier on the show.”
Joe DePinto laughs when he tells that story, knowing the spotlight burns as much as it shines.
Truth is, DePinto is pretty fit. It’s no wonder, though, that Hollywood starlets have to be stick-thin just to look normal. But what cameras can’t distort is this guy’s sincerity. As a close industry colleague says, “There are no secrets with Joe.” His personable, affable style runs almost contrary to someone in charge of the largest convenience-store chain in the world. He’s not overly tall or statuesque. He has cheeks that grandmas want to pinch and a voice that is congenial, not domineering. And yet clearly, the man CSP has named its 2011 Retail Leader of the Year has made a monumental impact.
In just six years at the helm, this West Point grad and former Army serviceman has successfully launched initiatives that are literally transforming an iconic brand, strengthening both 7-Eleven’s portfolio and balance sheet:
Financial Turnaround: A focus on finances has greatly enhanced the chain’s capital ability, with Moody’s recently increasing the company’s credit rating from Baa3 (in December 2005) to Baa1 and Standard & Poor’s from A to AA-.
Culture Change: Whatever day-today mantras were in place prior to DePinto are gone. The new “servant leadership” paradigm has been a source of physical and psychological transformation, influencing everything from corporate response time to potato chips at the store.
Strategic Vision: If culture change greased the wheels, strategic direction laid the track. DePinto’s leadership led to a tangible plan that both sets a course and fuels momentum.
Supply Chain: What’s in the stores, and how and when all that stuff gets there, is also morphing. Proprietary goods, wine, sandwiches and pastries are today helping 7-Eleven reintroduce itself to a new generation. Indeed, some 7-Eleven execs now call it the “demand chain,” impelling suppliers to respond to the consumers’ wants.
Aggressive Consolidation: Buoyed by its newfound fiscal strength, 7-Eleven has made acquisitions integral to its rebirth, with more than 400 stores bought in Florida, Texas and the Northeast in recent months. Not since 1986 has 7-Eleven been this aggressive, company officials acknowledge.
Agreeably, these milestones define a retail leader. But the dichotomy remains. On one hand, DePinto is a visionary executive, with military credentials and a string of high-profile positions in business. Then there’s “Danny,” the late-shift persona DePinto took on in “Undercover Boss”—fighting a losing battle with facial hair and a yawn building since midnight. CBS asked DePinto to be himself, so inside DePinto there’s got to be a little bit of Danny.
So who is this guy? And more importantly, what emanates from someone to effect change of this magnitude?
A hint comes from Darren Rebelez, 7-Eleven’s executive vice president and COO. “Part of servant leadership is providing what [franchisees and field staff] need, which is not necessarily what they want,” he says. “Improving store standards takes a lot of hard work. It’s easier to maintain the status quo than to change. So we provide leadership, set standards, have a friendly relationship with franchisees, but nevertheless, a poor store isn’t an acceptable outcome.”
So what appears unsaid in the servant leadership CliffsNotes—and something DePinto seems adamant to uphold—ties back to personal responsibility. And quite possibly, it took an everyman, an average Joe, born and raised with Midwest sensibilities of fair play and teamwork, to help a vast network of executives, vendors, franchisees, managers and cashiers to think differently.
It’s a hypothesis, in any case. The truth is difficult to pinpoint.
But take the current triumphs and roll back the clock. Six years ago, the Dallas-based behemoth with more than 8,900 stores in North America and above 43,700 worldwide was in financial strain. It had a nonresponsive, Ma Bell culture; customers were becoming increasingly less satisfied with the product mix; and the economy was about to hit the skids.
Then DePinto’s phone rang.
At the time, DePinto was president of GameStop Inc., a video gaming and supply retailer based in Grapevine, Texas, with 6,500 stores worldwide. He had climbed the executive ranks through businesses such as Thorntons Inc., Louisville, Ky.; and PepsiCo Inc., Purchase, N.Y. This is not to preclude his time with Dallas-based 7-Eleven, having been its vice president of operations from 2003 to 2005, and its division vice president the year prior.
After getting the call from 7-Eleven, DePinto recalls, “I was in a comfortable spot, doing interesting stuff with Game- Stop, but the thing that was so intriguing was I knew we could change 7-Eleven for the better.”
That assurance came from somewhere.
Born in Chicago in 1962, the eldest of four to parents John and Ann, Joe DePinto grew up in a stable, middle-class environment with his father, a dispatcher for Alberto-Culver of Melrose Park, Ill., for about 35 years; and his mother, who worked as a hair stylist and a shop owner. Stories such as that of a doting grandmother, Josephine, who taught him how to play cards, and a young Joe caring for an abandoned robin’s egg until it hatched, sketch a childhood of support, care and self-reliance.
Baseball and hockey were fertile training grounds on his path to leadership, with his coaches his first formal role models.
DePinto remembers growing up in Little League from age 8 to 12, starting as one of the runts yet eventually leading the team.
DePinto learned a tough lesson in fairness while on his Junior hockey team, says his former coach, Peter Roche. With his sights already on West Point, DePinto was elated to learn a scout from the school would be at one of his games. Unfortunately, on game day, the scout could stay for only the first of the day’s two games. But Roche needed his best goalie, DePinto, for the tougher second match. The coach stuck to his decision, and the scout did leave before the second game.
“It was a sellout crowd and Joe had the game of his life,” Roche recalls. “We needed him the entire game. It went into overtime and we won 4-3.” Joe’s performance earned him an MVP nod.
“All I can assume is that his performance and that [MVP] trophy alone convinced West Point that he was the guy they wanted,” Roche says.
West Point would undoubtedly defi ne DePinto. After his graduation, when the family was returning from the ceremony to his campus home, his brother David remembers, “Joe had his diploma. He kind of pointed it at me. ... ‘This represents a lot of hard work,’ he said.”
Those familiar with Joe DePinto during his West Point days recall someone who thrived in that environment, learning how to take orders at fi rst and then setting high standards for underclassmen.
Yet while trained under a traditional military hierarchy, DePinto embraced the military’s underlying ethics of teamwork, commanders supporting those in his unit, and the motto of “no man left behind.”
Today, DePinto fi rmly believes what he learned in the military corresponds directly with servant leadership. “There are different styles and different ways people react, different buttons to push to motivate people,” he says. Ultimately, he says, quoting former President Eisenhower, “Leadership is the art of getting someone else to do something you want done because they want to do it.”
Leading by Serving
DePinto often says servant leadership means “turning the pyramid upside down.” So with top-down management out, what’s in is a structure in which corporate is meant to support those in the field.
The way he describes it, one store out of thousands will call in with a problem, major or minor considering the big picture. In the past, corporate may have been slow to act. “But to that store, it’s a big problem,” DePinto says. “So we have to respond like it is.”
Farazana Mannan, who runs a 7-Eleven store in DePinto’s current backyard of Southlake, Texas, agrees that a “big, big change” has occurred: “I feel like people are listening a little more closely now that he took over.”
Change wasn’t easy, according to Rebelez. “A large organization rarely moves quickly,” he says. “There’s a lot of inertia. ... It takes a lot of energy to change.”
The culture shift needed an infrastructure of training, incentives and supervision, a process that objectively measures people’s performance not only by the result, but also how staff achieved those results. So the metrics included rewarding behavior they believe reflected servantleadership values.
New faces accompanied the culture change; among them were Rebelez and Jesus Delgado-Jenkins, the company’s senior vice president of merchandising, marketing and logistics. Both West Point graduates also, the two share similar sentiments regarding leadership style. “Joe gets good people in and leaves them alone,” Rebelez says, a point echoed by other executives in the company who are more likely to extol DePinto’s overall managerial style than to cite flashes of genius.
DePinto himself would concur to a degree. “You have times when the organization doesn’t need a lot of push—where people are self-motivated,” he says. “Other times you have to get engaged.”
Cleaning Financial House
Though a successful shift in culture may have provided a psychological boost, 7-Eleven’s current success stands on a solid fiscal foundation because of DePinto and his team. At the dawn of the recession in 2007, he sounded the alarm.
“We thought, wow, it’s tough now and it’s going to get tougher really fast,” DePinto says.
Crediting CFO Stan Reynolds, DePinto and his team huddled for what he calls “tough decisions,” the charge to reduce overhead and boost income. “We had to be efficient, productive and improve overall margin and profitability,” he says.
Cuts occurred internally and externally, with jobs and processes scrutinized and streamlined. The moves also included environmental efficiency and installing LED lighting throughout the chain; re-evaluating the supply chain, and stepping up data-collection and inventoryimprovement efforts; and expanding high-margin items with foodservice and proprietary goods.
In the end, the company turned out a “clean” balance sheet, sharply cutting debt and positioning itself to not only ride out the recession, but also grow at a record pace.
In the past five years or so of DePinto’s tenure as CEO, Reynolds says, the company has experienced double-digit annualized growth in net earnings, which was fueled by the more than 20% growth in the chain’s store base and its continuing 14-year trend of positive same-store merchandise sales growth.
“At Joe’s direction,” Reynolds says. “7-Eleven has also undertaken a number of projects over recent years that have been focused on reducing costs, driving earnings and restructuring our organization to increase efficiency and effectiveness.”
Reynolds cites the improvements in its ratings from Moody’s and Standard & Poor’s as further validation of the company’s financial efforts.
Along with the financial piece, DePinto ushered in a strategic plan meant to provide concrete direction moving forward. In the past, “it was plan du jour,” says one executive.
“We have an excellent, excellent strategy map,” says Delgado-Jenkins, citing how it ties to merchandising, franchising, real estate and company culture. “That strategy map grounds us and helps each area of the company understand its role within the broader corporate strategy.”
Rebelez agrees that much of the strategy development and culture-change movements go back to DePinto, but ultimately, these decisions fit in well with a franchised operation. “Franchising is suited to servant leadership,” Rebelez says. “It’s about co-prosperity. We split gross profits vs. taking sales off the top, so we’re … linked” to their success.
Transforming the Stores
Fiscal strength and culture change are laced through multiple aspects of 7-Eleven’s business, all the way down to what customers see in the store. Part of that transformation had to do with technology and identifying what is moving. Delgado- Jenkins now calls it a “demand chain,” because it’s driven more by what customers want vs. instinct or manufacturer input.
The technology to accomplish this already existed, Rebelez says, but focused efforts, including an ongoing test in Los Angeles, are reaping rewards.
“We organize and rationalize, identify what’s trendy that we’re missing in our stores,” Delgado-Jenkins says, “now that we know what the pull is—what the consumer wants—and what’s the right frequency and right cost for those components.”
Part of 7-Eleven’s vision going forward is fresh foods and proprietary products, Rebelez says. The company’s goal is to match or exceed the quality of a national brand at 20% to 30% better margins. “We’re able to address that across a wide spectrum of products,” he says. “We’ve had great success. And it’s timely in this economic current.” From a marketing perspective, Delgado-Jenkins says one of 7-Eleven’s biggest challenges is luring in new customers. “Customers who come in every day know the breadth of [our] assortment. … I would say they’re very happy with what we’re offering, they’re loyal and keep coming back,” he says. “Something we’re struggling with are customers who don’t know us yet, but when they come in, they say, ‘I didn’t know you have fresh food. You guys have carrots, celery sticks with ranch dressing? Chicken salad? I had no idea.’ ”
To address this, the company introduced a strategy they call “CMR,” or “Concentrated Market Rollout,” in the summer of 2010. Before, the company would reimage stores based on a store-by-store method, Delgado-Jenkins says. Now it takes an entire market and brings all stores up to the same platform, “so that all the stores will have hot foods, all the stores will have the new coffee bar program, all the stores will have been reimaged over the past three years.” Before CMR, there was an obvious problem: Stores had one or more of the updates but not all three. “So,” Delgado-Jenkins says, “you had a mixed bag. If you were to advertise … there is an inconsistent set of platforms in the marketplace.”
The company rolled out CMR in the Northeast and Mid- Atlantic this past February and updated 1,000 stores by June. Conversions were followed with a summertime marketing blitz resulting in strong performance. Delgado-Jenkins says, “We’ve had a tremendous amount of learning, which we’re going to apply in round two.”
And the evolution continues. Delgado-Jenkins says the company has a new project that is going to be “groundbreaking.” It’s a concept “driven by the customer to more closely align the atmosphere they want to shop in with the product assortment we’re offering. We’re going to push the envelope.” While that concept has not been defined, some of the words he uses are “fresh, pleasant, colorful, bistro-like, good value, premium products, innovative products.”
The goal, he says, is to debut the concept in two to three years based on piloting and consumer input. “We want to deny the past,” he says. “We need to find new ways to apply our fundamental principles to give the consumer a newer, more colorful, more exciting experience.”
When one thinks about M&A in the c-store channel, names certain to surface are Couche-Tard and The Pantry. But 7-Eleven?
This year alone, the company has picked up more than 400 sites, with significant acquisitions in New York and Florida. And the growth will continue.
Prior to this spurt, the strategy was to “build 30 to 40 and then close 30 to 40,” says Rebelez. “This was yet another culture change that we had to evolve into.”
Simply put, 7-Eleven is exploiting a recession-focused economy to bolster its ambitious growth strategy. Moored by facile equity, a site-conversion group and a strong commissary and distribution system, 7-Eleven is well positioned to be a major buyer for years to come.
Part of the challenge with quick acquisitions, DePinto acknowledges, is melding cultures. To address that, “we take care of people,” he says. Most of the employees, for example, were retained in the relatively recent ExxonMobil deal in Florida, and 7-Eleven is making concerted efforts to do the same with the Wilson Farms acquisition in Buffalo, N.Y.
Addressing concerns about oversaturation, Rebelez says the company takes great care on that issue, especially in markets with high concentrations of 7-Eleven stores. But he suggests that there is a lot of opportunity in the nation’s urban areas; despite the fact that many of their stores don’t sell gasoline, the profitability of these locations is still above industry averages.
Oddly enough, many of the messages of growth and internal and external transformation came through in that odd marketing move the nation knows as “Undercover Boss.”
DePinto initially said no to the project. “When CBS came to us, at first I said, ‘No way,’ ” he recalls, shaking his head and waving his hand adamantly. “But then I realized, what better way to communicate to our customers that we had great coffee, that we had fresh sandwiches, that we made our own pastries? And then internally, that we cared about our franchisees, that we were here to support them.”
There were risks, of course. The premise was of a corporate executive infiltrating the rank and file to see the reality of what was going on in the field, including his own humanity—spilling coffee and letting a scraggly beard and errant yawn define him to his supervisors. But in the end, DePinto showcases the heart of those who day after day make the pastries, stock shelves and clean aisles.
Undoubtedly, DePinto’s West Point education and military history have something to do with his ability to marshal respect. But most favor his endearing qualities: his desire to listen, respond with intent and, ultimately, make people feel that their voices matter.
He could be your big brother. And not in the paranoid, scifi, always-watching-you sense, or the catty, salacious, reality-TV genre either. But a big brother from the plains of the Midwest. The one who watches out for your silly noggin. The guy who in one breath groans over the last spill you took and, with the other, stands up for you in a fight, a real fight. The one who is Danny and who’s the vigilant goalie guarding his team.
Family, friends and colleagues describe Joe DePinto as a caring, genuine leader, but also someone who is passionate about the success of franchisees in the field.
“Your goalie’s position is like a fireman. You do not need them that often, but when you need them, they better be great. Joe had that kind of personality.” Peter Roche, Junior hockey coach
“He is a very open, very forthright, very genuine person.” Jeff Morris, Alon USA
“Let me tell you—Joe put the fear of God in those plebes, and as soon as he finished with them, he would have a smile upon his face. It was never personal, it was always professional, and it would always end up helping them.” Robert Lott, West Point classmate
“He wasn’t born with a silver spoon. The impact that he’s achieved, everything he accomplished, he accomplished on his own. It’s really the American dream.” George Arvanitis, childhood friend “Joe was determined that he was going to succeed. I see that now. I did notice it back then. He was pretty focused on doing his best.” Ann DePinto, mother
Going Home Again
Back in late July, I racked up a first as a CSP reporter: I spent almost a full workday in the company of the parents of the CEO of the largest convenience-store chain in the world.
John and Ann DePinto were generous enough to open their home in the far north suburbs of Chicago to me. A short line of their oldest son’s friends and family sat in the “hot seat” to be interviewed in preparation for CSP’s Retail Leader of the Year presentation, which took place during the NACS Show.
Initially charmed by the Julius LaRosa song that serves as the couple’s doorbell, I was soon swept into a well-kept, old-world-decorated townhouse with the hearty welcome of an old friend or family member.
Coffee, bagels, doughnuts and more, all were proffered, not unlike one of their son’s 7-Eleven stores. Never did it feel like I was intruding or taking up time this couple couldn’t spare. In fact, by the time Joe DePinto’s brother David, his grade-school friend George and his old hockey coach Pete arrived, I felt I had been absorbed into this group. No, I couldn’t share stories from years and decades gone by, but I could appreciate the amusement, the sincerity and the emotion with which the stories were told.
Some interviews can be clinical and rote; that wasn’t the case here. In sharing stories of Joe’s childhood interests (caring for a robin’s egg until it hatched), competitiveness (yearning to play in a hockey game his coach wanted him to sit out) and self-driven ambition (getting a first job so he could pay for his own hockey gear, despite his parents’ willingness to pick up the cost), I found myself in Anyhome, USA, a place where parents still dote on their now-adult children, revel in those children’s accomplishments and marvel that all their kids “turned out OK.”
Even friend George’s G-rated stories of high-school shenanigans—seriously, this stuff could have been right out of a 1970s sitcom—ingratiated me to this family.
But was Joe DePinto some school-aged genius with a goal to be a heavy hitter in the retailing—or any—industry? No. And his mother makes no apologies about it: “Joe was a perfectly typical kid who did typical-kid things.”
Today, his friends quote 7-Eleven statistics, his brother teases him about spilling coffee on his episode of “Undercover Boss,” and his parents, married 50 years, gaze glowingly at photos of Joe’s family as they marvel at how tall “Little Joey” and Johnny are.
Thousands of stories like Joe DePinto’s have been told, but there’s nothing mundane about it. Every “perfectly typical kid” who finds the right path and achieves greatness should be celebrated. “Never forget where you came from,” his father taught him. For Joe DePinto, that place was—and remains today—a source of great support, respect and love. I only hope that my own family will someday be reflected on in the same way. —Steve Holtz
Though a private company, 7-Eleven has shared certain numbers with the industry. Here are a few:
8,900 Number of stores in North America
43,700 Number of stores worldwide
80% U.S. franchise percentage, with 100% the goal for 2013
$63 billion Annual sales worldwide
20% Growth in store base (2006-2010)
14 years Continuous positive same-store merchandise sales growth
Can 7-Eleven Get Any Bigger?
The answer is yes, according to Chris Tanco, senior vice president of 7-Eleven’s international business. Just “optimizing the growth potential” in the 16 countries where the chain already has stores is a daunting task.
For instance, he says, there are 230 million people in Indonesia—a politically stable country—and more than 50% of the population is under 21. “It’s right in our bailiwick,” Tanco says. “We ought to have 4,000 or 5,000 stores in Indonesia.” He refers to 7-Eleven’s success in Thailand, where there are a mere 60 million people. 7-Eleven has 6,000 stores there and is growing by 550 a year.
Now at 43,700 stores worldwide, 7-Eleven intends to grow stores “significantly” by 2020.