Pay Dirt

Explosion of new builds ushers in era of the big format.

By  Abbey Lewis, Executive Editor

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The New Store

Of course, one of the main reasons leadingedgeretailers prefer new builds is foodservice.For DeSutter, Stripes’ Laredo TacoCompany occupies about 20% to 30%of a store’s footprint, with serving areas,preparation areas and dining areas pushingthat up to about 40% in its newest models.

“When we evaluate existing storesto acquire in our retail chain, the size of property, parking and the store footprintare key filters,” DeSutter says. “So we’regoing to look at the overall investment,the potential we see for the site andcompare it to starting fresh in a nearbylocation if one exists. The size of theproperty and store are not as importantwhen we are thinking about locations toadd to our dealer network.”

Stripes plans to build 29 to 35 newstores in 2013. All of the new stores featurethe proprietary Laredo Taco Companyauthentic Mexican food brand,which currently is found in about 60%of Stripes stores. “We’d like to have it atthe 100% level,” DeSutter says. “ We’veowned some stores for over 20 years,and there just isn’t enough room to addour fresh food offering in them, unfortunately.”

The story is similar at Kum & Go,where Miller says that while the companystill embraces its acquisition history,things are different today. “Whata new-store build allows us … is thestore prototype and footprint we wantto build,” he says. “It adds to brand consistencyand the standard we want toachieve across all company [stores].”

The chain’s new prototype is 5,000square feet vs. its legacy footprintof 3,400. The new stores are LEEDcertified,boast attractive architecturalelements and feature a robust madeto-order pizza program, along with delisandwiches and breakfast offers.

“When you look at others that have[been acquiring], it fits their strategy,”Miller says. “We’re not going to grow byhundreds of stores, but we have madethe conscious decision that to build newstores is our best path forward.”

The Time Is Now

For those in the position to grow, a hostof positive factors have fallen into place.For Parker and his chain of 30 locations,expansion is a no-brainer.

He describes a seemingly perfectstorm of opportunity. For one thing, he’sbeen able to take advantage of extremelylow-interest loans, borrowing $10 millionwith a 15-year fixed rate of 3.03%interest, 85% loan to value. “Money isso cheap,” Parker says.

His company is building six storesthis year, which will cost $15 million to$19 million total. And with the cost offinancing so low, he’s made a decision togrow organically going forward.

And that doesn’t mean a large foodservicesolution for every new store,either. “We’ve created two prototypes.One has a food concept; one does not,”Parker says

“I’ve come to the realization thatthere’s a lot of opportunity to growwithout spending $3 million per store.”That doesn’t mean Parker is averse toacquisition. “I’m not leveraged enoughas a company … [and] to properly growI should look at acquisition,” he says. “Ifthe right opportunity presents itself, [wewill acquire]. But we want to grow inareas that are growing, and in concentriccircles around where our brand value isgreatest, so our advertising dollar goesfurther.”

Keeping Up

Growth may not mean the same thingto all retailers. For some it’s new stores,and for others it’s about reinvestingin given assets. Bill Weigel, chairmanof Weigel’s Stores, Powell, Tenn., justupgraded all the pumps at his 80 storesto a single, state-of-the-art line, allowing for increased levels of data security, cardprocessing and flow speeds

“Pumps don’t last forever, so it justmade sense to me,” he says. “It’s a decisionfor the long term.”

For Weigel’s stores, the new pumps,supplied by Austin, Texas-based Wayne,a GE Energy Business, provide anupgraded look for his forecourts, hesays, citing how customers respond tomodern-looking sites. The change alsoincreases fueling flow speeds and solvescalibration issues he was having withhis older pumps. It also helps positionhis chain for pending government anddata-security mandates. While decliningto give specific costs, he says the efficienciesalone help establish a strong case forreturn on investment.

“Some companies build to sell andnot to last,” he says. “We’re a familycompany. It’s about this generation andthe next generation. For us, it’s the rightthing to do long term.”

From Fisher’s perspective, retailerscan still compete with the new breedof c-store coming online. “Just becauseWawa comes in doesn’t mean you haveto throw your hands up and sell,” he says.It’s both an issue of commitment toa chosen business strategy and the factthat the channel has proven that manydifferent models can thrive in today’smarket

Hartman of Rutter’s agrees. “In thisindustry, they’re really is no right orwrong model,” he says. “There have beenplenty of people who have taken olderfacilities and figured out how to makemoney, just as there have been peoplewho have built from the ground up andmade money from that.”Ultimately, for the industry, the pictureis an optimistic one.

“It’s a great time to grow becauseproperty is cheaper, unemployment isstill up [in parts of the country], contractorsand subcontractors are lookingfor work,” Parker says. “And when theeconomy starts to heat up, we’re sittingthere in the sweet positions.”

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