Casey's New Direction

Chain pulls back from franchising, targets other growth opportunities

By 
Linda Abu-Shalback Zid, Senior Editor

[Editor's Note: This is the second in a series of CSP Daily News features on franchise models. For more information on how franchising is reshaping the c-store industry, see the July issue of CSP magazine.] ANKENY, Iowa -- Casey's General Stores began franchising in the early 1970s, as a way to generate capital for the development of corporate stores, according to CEO Bob Myers. But the company decided to cut the cord on franchising efforts last year and hasn't looked back.

Myers told CSP Daily News in an exclusive interview that the [image-nocss] company at one point "got up to 230-some odd franchised stores." But there were only 14 in April of last year, and only a handful remained by year's end.

Franchisees originally signed 15-year contracts, followed by year-to-year extensions. While the company had been acquiring the franchises over the years, and no new agreements have been added since the early 1990swith the ones that remained last year operating on the year-to-year extensions.

"And it just got to the point where there were such a small handful of stores remaining that we had to announce to those that remained that we were going to terminate that at the end of last calendar year, which we did," Myers said.

Casey's, with its own freight trucks and distribution center, is known for keeping things self-contained, and Myers said that "absolutely" played a role in the decision.

He also added that the old franchising agreements barely covered expenses. "It was about a wash. We've not seen anything negative, nor was there a lot positive as a result of franchisingat least in these later years.

"Franchising was really a very, very small segment of our profitability as a company," Myers said of Casey's, which reported having 1,478 stores and record earnings for the fiscal year ended April 30.

Myers said that the company had examined possibly initiating a new franchisee program. "But we financially modeled that, and it wasn't where we wanted to place our efforts." He added, "We're much better off building or acquiring our own stores, as opposed to operating a franchise program. So we've looked at that, studied it in great detail and have elected not to pursue that."

Myers said that there has been a good relationship between franchisees and the company, and that there will even be a last hurrah trip to Tuscany, Italy, later this monthwith former franchisees, Casey's leadership and suppliers all being invited (at their own cost). Such trips were an annual tradition in the past, but Myers said that hasn't happened in a "number of years.""Franchising was good for Casey's in the early days. And it was good for the franchisees because most of them had highly profitable locations--and over the many years, we made very good offers to purchase those franchise stores," he said. "So all in all, it was a very good program for franchise owners, as well as for Casey's."

For more of this interview with Casey's CEO Bob Myers and how the chain plans to grow in the future, watch for tomorrow's CSP Daily News.