A decade after Chevron piloted its ExtraMile c-store concept, the downstream landscape in which this oil giant operates has gone topsy-turvy.
In 2005, Chevron’s fellow majors—BP, ExxonMobil, Shell and ConocoPhillips— embraced the world of convenience retailing, balancing a network of franchisees and dealers with a breadth of company-operated sites.
Now Chevron Corp. stands alone, as others, most recently Hess, have divested their company-run locations. While it has whittled the number of company-owned and -operated sites (COCOs) from a peak of roughly 600 to 330 sites today, Chevron remains committed to maintaining a direct retail presence.
That’s because these sites serve as an outlet for fuels from Chevron’s Richmond and El Segundo, Calif., refineries, and as a showroom for the Chevron store and fuel brands. And they pilot new programs and promotions to test their soundness for the rest of the ExtraMile network.
“In every state we entered with ExtraMile, we always tested first with COCOs,” says Adrian Bendeck, general manager of COCOs. “That’s really to showcase the retail execution from our COCOs down to the retailers. We set the example.”
In recent years, the San Ramon, Calif.-based oil company has continued to upgrade its ExtraMile concept. While the store’s four core destinations—pack- aged beverages, coffee, tobacco and food- service—remain, the team in charge of its development continues to tweak the delivery. And this is happening as the store network shifts more toward a franchisee-dominated model, in which more than 56% of its 800 sites in its three-state foot- print of California, Washington and Oregon will soon be operated by franchisees.
As the ExtraMile concept marks its first decade, the team is recommitting itself to the original brand promise and determining how to keep it current.
Or, as Bendeck puts it: “What’s the overall strategy for ExtraMile moving forward, and what can we continue to develop to keep people interested and stay competitive in the market?”
CONTINUED: The Company's Core
Company Core
When Bendeck—a 20-year Chevron veteran who has overseen retail in Latin America and Thailand—first took charge of U.S. company-ops a year ago, he worked with the COCOs team to create a new vision for the ExtraMile business.
It wasn’t that the ExtraMile team did not have a vision before. But, as Bendeck explains, it was not “top of mind” for those who worked in the stores. “I felt the need to make sure people focused and were operating along the same lines, in the right direction, with the right path for everyone to follow, and motivate the team to do their best every single day out there to help the business,” he says.
If anything, it was a reconfirmation of the COCOs’ original intent. And Bendeck hopes it will translate into better service, management and operations at the site level.
One piece of this renewed vision is improved communication and visibility of executives at the stores. Bendeck plans to be in the field at least once a month and spend time with district managers, business consultants and station personnel to reinforce the key goals of the COCO operation for safety, operational excellence and compliance. The group also brought back a program to award store team members with recognition and financial incentives for doing the right things.
Chevron is conscious of the heavy cost structure required to maintain a company- operated network. The sites must hold up their end, achieving sufficient in-store sales and fuel volumes to sustain their overhead, all while dealing with the increased costs from factors such as the Affordable Care Act. Recent pushes to boost minimum wage in some of ExtraMile’s core markets—San Diego and Seattle, for example—is another area of concern.
At the same time, Chevron continues to invest back in the COCOs, converting old Food Marts to ExtraMiles (about 27 over the past three years), adding car washes or even new sites. A new COCO opened recently in Fairfield, Calif., near Chevron headquarters. The network will likely be sustained with 300 to 350 sites, says Bendeck, with a few new locations opening each year.
CONTINUED: Franchise Growth
Franchise Growth
The proof of ExtraMile’s worth can be seen in the fact that most of the Chevron- or Texaco-branded retailers who take over COCOs sign on as franchisees.. In fact, 29 COCO sites have converted to franchise ExtraMiles during the past three years. The franchise will have close to 450 franchisee-ops by the end of 2014, a 67% leap from only two years ago, and is on pace to sign up about 50 per year.
But as Ian Noble, manager of district sales for the franchise, explains, even at this brisk clip there is no big number that Chevron is trying to hit.
“It’s less about the overall number and more about being consistent with where we’re trying to focus,” Noble says. “It’s about matching where we have our company-op network with this business as well; that brings a lot of market know-how and expertise.”
This includes the main metropolitan areas of its three-state footprint: Seattle and Puget Sound in Washington; Vancouver and Portland in Oregon; and San Francisco Bay, Los Angeles and San Diego in California. The strategy is to build onto those metropolitan areas, creating a greater density from a marketing footprint point of view.
The franchise network is a true mix, with about one-half of franchisees having three or fewer sites. With this in mind, it would seem inevitable that the ExtraMile concept would become less defined because of inconsistent execution. But this has not happened, largely because Chevron keeps its franchisees involved in the development and growth of the business.
“Once you lock it down, you need to have a systematic approach to keeping the program consistent so consumers know what to expect,” says Noble. “We needed to develop a number of things to ensure we could evolve the program.”
Three times per year, all franchisees gather to discuss the state of business and participate in focus discussions, training and feedback sessions. A team of business consultants also meet with franchisees a few times per month to find new growth opportunities. One tool to this end is The Opportunity Finder, an analysis that helps highlight specific opportunities by site. The location’s performance data is compared to like sites in footprint, overall sales and other metrics, and reveals where a store is over- or underindexing.
For example, a franchisee’s site was underindexing on coffee sales in the early morning day-part. When the ExtraMile business consultant and franchisee investigated the opportunity, they realized that the site did not have the coffee ready early enough in the morning due to the way the shifts were planned. The franchisee adjusted the work schedules so employees were on site earlier in the day. Now with the full coffee offering available from 4:30 a.m., sales have jumped more than 20%.
To drive consistency, the franchise team turns to its ExtraMile Stars recognition and rewards program, which measures approximately 100 areas that affect the stores’ shoppability—cleanliness, service, out-of-stocks—every two months, at the end of each promotional cycle. The highest performers, or the Top 100 Club, are recognized regularly at meetings, while the top performers for the year are lauded at an annual awards event. That Chevron’s ExtraMile has repeatedly placed near the top of the annual CSP/Service Intelligence Mystery Shop is testament to the effort.
“The moment you put that ExtraMile sign over the front door, there’s a consumer expectation we want to be able to deliver,” says Noble. “It doesn’t matter if it’s COCO or franchise, single-site or multisite—we want consumers to know consistency in our stores.”
With COCOs and franchisee-ops in alignment, the ExtraMile concept has plenty of runway in front of it. “I really still see an open field,” says Bendeck, citing the 4,000 Chevron- and Texaco-branded fuel locations on the West Coast, which are the launching pad for future ExtraMile locations. “We’re at a point where we’re big enough, have a significant presence on the West Coast, and I think there will be more demand going forward for the ExtraMile brand.”
“The starting point for everything around the [in-store] offer is proven demand already for a particular product or concept,” says Paul Casadont, merchandising manager for the Americas (seen here, on the right, with Ian Noble, manager of district sales for the franchise, left, and Adrian Bendeck, general manager, center).
ExtraMile’s Extra Good To Go program offers a range of hot food from sausage and brats to taquitos and tamales. It also has a few fresh sandwich offers on the launching pad that are more targeted toward specific day-parts. “It’s less one size fits all, more targeted to specific shopping patterns in each location,” said Casadont.
Chevron has focused over the past several years on providing a consistent, competitive fountain and frozen-beverage offer, but it hasn’t yet reached the level of a true destination category, said Casadont. While the offer is competitive from the standpoint of pricing, cup size and variety, there is room for more customization. Chevron will be exploring new fountain technology in the coming months to help meet this preference.
Two years since the rollout of its Seattle’s Best Coffee (SBC) branded offer, the ExtraMile team is happy with the results, but believes there is even greater opportunity beyond traditional drip coffee. “Drip coffee is not growing at a very quick rate at all,” said Casadont, saying the real growth is in specialty coffees such as lattes and mochas.
While tobacco is a core focus of ExtraMile, it is no longer limited to cigarettes and OTP. The ExtraMile merchandising team is moving e-cigarettes into its tobacco backbar and testing vaping products at 10 sites. ExtraMile is also getting more location-specific on pricing tobacco, keeping it aligned with area competition.
Chevron is building its ExtraMile franchisee network in the main metropolitan areas of its three-state footprint: Seattle and Puget Sound in Washington, Vancouver and Portland in Oregon, and San Francisco Bay, Los Angeles and San Diego in California. The strategy is to build onto those metropolitan areas, creating the right density from a marketing footprint point of view.
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