[Editor's Note: This article is the third in an ongoing series on how the recession is affecting the convenience store landscape.] OAK BROOK, Ill. -- As CSP magazine reports in "Brave New World" in its February issue, Big Oil divestments have meant plenty of available acquisition prospects-if you have access to capital. But the credit crisis and other associated problems are not the only reasons keeping companies from making such deals. And many are turning to other avenues for development.
Dave McComas, president and CEO of the Fas Mart/Shore Stop c-store chain based in [image-nocss] Mechanicsville, Va., is no stranger to acquisitions, having doubled the size of the company within just the past year. But many of the oil-company opportunities simply hold no interest for him. "We don't pay much attention to that," he told CSP Daily News. "We have zero appetite because of the onerous terms of their supply agreements." McComas is, however, currently initiating talks with a small operator.
San Antonio-based Valero Energy Corp. has made larger-scale acquisitions- 72 convenience stores and fueling kiosks from Boise, Idaho-based Albertson's LLC. But the company isn't relying solely on acquisitions for its growth. "We also launched our expanded-format stores that are larger and carry more offerings than our traditional Corner Stores," said Valero spokesperson Bill Day. "We will continue opening the larger-format stores in selected locations."
In November 2008, Valero reported that it had opened five 5,500-square-foot stores (with three more under construction) "in locations that can support the investment, drive significantly higher inside sales and can support the traffic a store of this size generates," according to Gary Arthur, president of Valero Retail Holdings.
Others also are combining their acquisition strategies with other growth. In 2007, Corpus Christi, Texas-based Susser Holdings Corp. purchased 161 Town & Country stores. In order to focus on the integration of those stores, Susser slowed down the pace of new store constructions from 18 new big-box stores in 2007 to 11 or 12 in 2008. "[Our] business continues to prepare for growth, both organically through building new stores and through acquisitions," said Steve DeSutter, president and CEO of Susser's Stripes brand.
Others choose to forego acquisitions altogether. "Acquisition is just not our strategy," said Mike Thornbrugh, spokesperson for Tulsa, Okla.-based QuikTrip. He said the company last grew through acquisitions 30 to 40 years ago. "We like to do everything from the ground up," he said, noting that one reason is to maintain consistency in store formats. "And having a lot of good locations helps us to do that."
Thornbrugh said that if a store isn't doing well and is up for acquisition, "it's a bad location and a bad facility in our opinion. We don't see much logic in it."
The average age for QuikTrip stores is seven years, because the company also reevaluates stores to see if they are big enough, modern enough and have appropriate traffic flow, which often leads to a remodel, a relocation or a "scrape and build."
At press time, the company had more than 500 stores, with 19 more under construction. Thornbrugh said some were in the company's more mature markets, such as Tulsa (where the company has been for 50 years), and others are in its "newer" markets of Dallas-Ft. Worth and Phoenix, where QuikTrips have been operating for eight to nine years.
He explained why the company expanded into such new markets. "One of the things we're really known for is that we hire from within," he said. "We need new locations to give our employees a chance to grow and to succeed."
He added that a particular area of growth for the company is in its fresh-food offerings. QuikTrip is set to open two new large commissary facilities for fresh-food preparation in 2009, one in Atlanta in late spring or early summer and one in Dallas later in the year.
Dallas-based 7-Eleven is also expanding its foodservice offerings. The company recently opened a new Fresh Foods Commissary & Combined Distribution Center in Bohemia, Long Island, N.Y. The commissary will deliver fresh foods to 674 locations in New York, New Jersey and Pennsylvania. Another way 7-Eleven is changing is through converting "most all" of its stores to franchised operations, according to spokesperson Margaret Chabris.
Currently, 75% of 7-Eleven's more than 5,600 U.S. stores are being franchised. And close to 80 of the franchised operations are part of the company's business-conversion program, which allows independent business owners to apply to convert their retail operation to a 7-Eleven store, according to Chabris. The company plans to have the majority of the franchise conversions completed by 2012. Chabris says about 40 stores "at any given time" will remain as training stores.
"We are in the process of franchising all that we can," Chabris said, adding that the company will have a big focus on franchising formerly company-operated markets, such as Virginia, Colorado, Utah and Texas.
Meanwhile, some companies are turning to image refreshing to grow sales by enticing more gasoline customers to come into their c-stores. Eden Prairie, Minn.-based SuperValu is revamping 130 "Express" stores with the goal of developing continuity between sites and driving efficiencies.
San Ramon, Calif.-based Chevron Corp., one of the last major-oil companies to retain a strong direct-op presence while developing its franchisee base, began a "bright," "modern," and "engaging" image refresh program in 2006. The company estimated the program would take five years to complete and involves 500-plus sites. And Naperville, Ill.-based Clark Brands also recently announced image improvements for a "fresh, clean image at the pump," according to Karl Goodhouse, Clark's president.
And Columbus, Ohio-based Certified oil is converting 40 outlets to a new design scheme by the end of 2009, in time for its 70th birthday, to put a greater emphasis on food sales, as previously reported by CSP Daily News. Chief operating officer Greg Ehrlich hit on a key concept that is often kept top-of-mind during any change, whether it's acquisitions, image refreshing or other forms of growth: "Without question, it was time to refresh our brand," he said at the time of that announcement, "and, in the process, make a stronger connection with our customers."
For a more insights on the changing c-store merger-and-acquisition landscape and to view CSP's exclusive countdown of the nation's Top 10 Changing Markets, watch for the February issue of CSP magazine.
Angel Abcede contributed to this report.
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