Sheetz's customer-centric retooling pays off with CSP-Service Intelligence Mystery Shop win.
By the time this issue of CSP is out, Sheetz plans to have 400 stores—opening about one a week throughout the summer. It’s part of a dramatic growth strategy that sees the company hitting 500 around 2015–2016.
The numbers are less about braggadocio than they are to extend the company’s $4.5 billion in sales and retail reach, which currently stretches across Maryland, North Carolina, Ohio, Pennsylvania, Virginia and West Virginia. The company has a $125-million capital budget, which Joe Sheetz, CFO and executive vice president of store development, plans to grow to $150 million in future years.
“We are not driven to hit some ‘magical’ size, and we want to grow only as fast as our ability to continuously execute our mission allows,” Joe says. “We are operators, and our name is on the building. We do not manage the sites as a portfolio of assets; we try to manage each of them like they are our only store.”
And unlike scores of other accomplished companies that are growing through rapid acquisitions, Sheetz will stick with its tried-and-true ground-up model. “We are willing to acquire ‘dirt,’ but not operating stores,” Joe says. Available stores typically don’t fit the company’s foodservice model, which requires substantial room for a kitchen, freezer space and other equipment. “Also,” he says, “our culture is very important to us, so we like to hire our own employees, train them well and promote from within rather than ‘acquire’ these human resources in a transaction.” In total, fiscal 2011 will bring 24 new stores, and he explains what to expect of those: “New stores will typically include seating and larger restrooms. If the site is big enough, you will see a car wash, a rear entrance to access additional parking and a drive-thru.” Some further details:
“Dabbling” in drive-thrus. By the end of 2011, there will be eight Sheetz drive-thrus. Calling it a “proven concept” at QSRs and coffee chains, Travis says it’s more of a challenge at c-stores, because of the gas pumps and the flow of the lot.
“It just makes things very busy and you’ve got to be careful on how you design it. “It’s also a challenge for us, because of our platform,” he continues, “which means every sandwich that we give you is made to order and we have thousands of combinations. We are committed to our made-to-order platform, and so we’re giving up speed because of that.” Travis says Sheetz drive-thrus are about offering convenience for customers, such as the mother with the car full of kids or the latenight craver out in pajamas. “What we’ve found is that there’s a market out there that really appreciates the convenience in drivethrus, and it has nothing to do with speed.”
Rebuilds. According to Joe, other growth initiatives include “tearing down and starting over” on stores that are less than 4,000 square feet, turning them into stores bigger than 5,000 square feet that emphasize foodservice. The company is doing six to eight of those a year, and Joe estimates it will take five to seven years to complete. “However, it is like painting the Golden Gate Bridge,” he says. “Once we get to that point, we will have other stores that have ‘aged’ and will probably have an entire new crop of rebuild candidates; we plan to always be rebuilding some percentage of the total.”
Remodels. The company is also remodeling some locations from “white block” to the company’s now-standard red brick, and putting in additional foodservice equipment and larger restrooms, at a cost of about $500,000 to $750,000 per site. Joe says the company is on track to complete 10 of those in 2011, with plans to ramp that up to 25 to 30 per year and complete the project in five to six years.
Altogether, the company’s plans annually over the next five years are to build 25 new stores, rebuild six to eight stores and remodel 25 to 30. Plans for growth, of course, don’t stop after those five years.
“Going forward,” Joe says, “I think you will see us continue to build 30 to 35 new sites each year in the six states where we already operate. We are not pushing the boundaries much right now, as much as we are filling in markets where we already operate. …There is still plenty of opportunity in our current markets.”
Inside the Box
Growth will come from both a larger portfolio and stronger year-over-year returns. Anchoring in-store performance and customer service will remain a focus for Sheetz. “Volume is a good thing and, obviously, you don’t want to get cleaner or faster by losing volume,” says Travis. “So the biggest challenge is going to be being able to get faster and still grow volume. And that’s why we’re trying to do things like ready-to-eat sandwiches and why we’re trying to create efficiencies in the kitchen and with the drive-thru. “We have to find a way to serve more people at a faster rate. It’s easy to do one or the other; it’s very difficult to do both, but that’s what we expect of ourselves.”
Working for Sheetz
A sign in the Murrysville, Pa., store says the company is hiring at $8.75 an hour. Pennsylvania’s minimum wage is $7.25. A glance at the Sheetz website shows that the company pays “in the top 10% of all like retailers in the industry,” along with providing many benefi ts, such as college tuition reimbursement, an employee stock-ownership plan, company-matched 401(k) and a bonus program. At press time, the company had 14,500 employees, and turnover was at less than 50%, compared with the 60% industry average reported in CSP’s NACS State of the Industry issue.
And of the six states that Sheetz operates in, it is included as “Best Places to Work” in four. (Maryland and West Virginia do not yet participate in the Best Places to Work program, from the Best Companies Group.) Some of the factors behind Sheetz’s remarkable people culture:
Bonuses and awards. Employee bonuses are based on regular customer service shops and quality assurance (QA) audits that happen twice quarterly—both of which focus on the customer’s experience. “In our internal shops, the focus is on speed up front, as well as service,” says Travis Sheetz, vice president of operations. “Our shop is really an attempt to mimic what a customer might be experiencing when they’re inside your store.” Shops also might include in-stocks, interior and exterior cleanliness, foodservice presentation and accuracy and speed. In addition to bonuses, awards are given to top-scoring stores during a year-end celebration. “So it’s highly competitive within our culture. One thing we do know for a fact is that our customer service shops that we do drive behavior, without question. If we decided we were going to measure anything you could think of in that shop, you would see the next day everything changes in those stores.”
Training. At Sheetz, the standard training program is about 80 hours, consisting of several modules of computer-based and store training to ensure everyone is trained in all aspects of the stores: point of sale, foodservice, making specialty coffee drinks. Employees are assessed by each module before they can work in those areas.
What to Wear. In the mystery shop, the company topped the list in employee appearance. Still, employees are allowed to wear jerseys of their favorite teams on the days they are playing. Travis says, “What we’ve tried to do is balance having a uniformity and having certain standards that we require, and then, on the other hand, letting people feel relaxed in what they wear to work.
“It’s a new world out there. These aren’t the days where people were wearing the ties and the aprons to work anymore,” says Travis, who at 41 is a refl ection of the company’s generation change and the stores’ evolving customer base “It’s important for them to express themselves through what they wear, and so we try to allow some of that.”
The Road Warrior
It evolved from my conversation with a gentleman on the plane to Pittsburgh. Being from the Midwest and never having experienced a Sheetz, I was curious about what he thought of Sheetz stores.
“I have one friend who goes there all the time for their sandwiches; he thinks they’re the greatest,” he said. “For me, they have a clean bathroom and a good cup of coffee.”
When I told him I was driving two hours east from Pittsburgh to Altoona, and hoped to stop at one, he laughed and said, “You’ll see plenty of them along the way.
” The “game” I invented for myself from there was simple enough: Stop at every Sheetz location on my journey, to see fi rsthand what made this company this year’s CSP-Service Intelligence Mystery Shop winner. I approach my fi rst Sheetz ever in Murrysville. I’m struck by how many people are hanging out at the tables outside. The mood is festive, like an ice-cream social, rather than a parking lot. I realize I have no cash on me, and notice the “surcharge-free” cash station. Now, that’s just nice. Later, Travis Sheetz, vice president of operations, explains to me that they do that as a traffi c generator. “People would come here as a destination to get money, and then spend some while they’re in here,” he says.
And as if to prove that point, after getting my cash, I apprehensively approach the ordering kiosk I have heard so much about. As I scan through the plethora of items (many such as fryz, sliderz, saladz and fl atbreadz), the man at the kiosk next to me is in and out in seconds; he’s clearly done this before.
I get nervous and quickly add macaroni and cheese as a side, and close out my order. Macaroni and cheese? “What kind of road warrior eats macaroni and cheese?” I chide myself. (To my delight, it fi ts neatly in the rental car cup holder—although I fi nish it before I get going, because it is piping hot and good.) In front of me is a middle-aged man in a long ponytail and leather vest (there is a unique collection of families, biker types and teenagers, all who seem to just somehow blend together as a “Sheetz community”), and there are many ahead of him. He teases the lady behind the foodservice counter. “Denise, how about No. 780?” She laughs, and asks him how he’s doing tonight. It is now my turn to pay. The fellow behind the counter is young, probably in his 20s. He smiles and is polite, but moves along at a steady pace because the store is full at the late-ish hour.
I spot three other Sheetz locations along the way on my 111-mile journey, and stop to fulfi ll the responsibilities of the game. And the experience is pretty much the same at each. A jovial atmosphere in the outside seating, customers joking with the clerks, a substantial product and clientele mix—and smiling politeness for me, the Sheetz newbie.
On the Grow
Sheetz plans to grow to 500 stores by 2016. The heaviest growth is planned for North Carolina and West Virginia, although about 40% will fill in the other four states, according to Joe Sheetz, CFO and executive vice president of store development. At press time, the current store count was:
35 West Virginia
31 North Carolina
Talking ‘bout My Generation
There are three generations in management at the Sheetz family business. Louie Sheetz, vice president of marketing, says Sheetz is in “very private” discussions about succession plans throughout the organization. “We have made it a much more conscious effort to think about what it takes in every position in the company, from director position up to the front-line leadership team,” which includes about 40 people, he says. Current efforts include looking at job qualities and skills that each position involves. Of Adam and Ryan, the two latest family members to jump on board, Louie says, “There’s two potential leaders for our company.” But just because your last name is Sheetz doesn’t mean you work there. “Although they’re encouraged to learn and work for the company, they’re encouraged to fi nd a career path that fi ts them; that’s not necessarily going to be a fi t for everyone,” Louie says. Growing up Sheetz also doesn’t mean you won’t work hard. “People in the organization might think you’ve got it easy. But there is a healthy pressure to work harder than anyone else, and prove your contribution with your work,” Louie says. “We don’t dwell on the fact that we’re a family business; we’re a business and we love what we’re doing.”