new and improved

Branded fast food and a retooled ’people process’ inspire New West Petroleum to new-found profitability in the Golden State.

California’s New West Petroleum often interviews 40 candidates to fill one store manager’s job or 20 candidates for one sales associate’s job. But the pools of talent in the two major markets in which the company operates— Sacramento and San Diego—are no deeper than in any other region in the United States. New West has made its selectivity a competitive advantage, according to Chris Moore, vice president of retail operations for the Sacramentobased chain of 35 convenience stores, car washes and branded fast-food franchises.

"[Our selectivity] is the only reason we’ve had increases in our convenience stores sales for five years straight," says Moore. "Whether it’s 20 people or 40 people we have to interview, we’re not letting expense get in the way of making sure we hire the right person."

As a result, New West has grown both in-store sales and gross profits, regardless of the performance of chain’s already substantial gas volume. Moore says the chain has always been judicious in hiring, but listening to former JetBlue Airways exec Ann Rhoades at a National Association of Convenience Stores Leadership Assembly a few years ago provided an epiphany that has had a profound effect on the company’s operations.

"[Listening to her] completely changed the way we were thinking," Moore admits. "Whether it’s a sales associate or someone in management, we need our people to understand and believe the ideals that we portray. If they don’t [represent our ideals], we’ll let them go at the beginning."

Bringing on a human resources expert topped the list of New West’s organizational changes. In October 2000, the company hired Katherine Clark, who before joining New West had worked for the Sacramento Kings of the National Basketball Association, as its director of human resources.

"We changed from top to bottom to increase the quality of our team members," Moore says. "With Katherine, we have much more than just a payroll person, which is how we used to view our HR director. With her coming aboard we’ve instituted background tests, a drug test and, for managers only, a credit history and three-month training program."

In the training program, managers work a five-day rotation in which they spend one day a week in the classroom and four days in the stores putting that "book knowledge" to good use.

Before implementing the managerintraining program, New West would send a manager to "shadow" another manager for two to four weeks, depending on the evaluation of the supervisor. The results between the two approaches, according to Moore, are night and day. Manager turnover and theft used to be commonplace. But now that New West gives managers extensive training and the ability to ask questions as they learn, the chain has watched manager turnover decrease by 20%.

Satisfying the hunger
The newly-discovered "people process" started in New West’s convenience store division, but Moore says it is also changing the way the company manages its two other divisions—wholesale and fast food. The concept is fairly straightforward: Treat people right, and they’ll treat you right and make you look good; if sales associates are happy, they’ll make the customers happy.

"Our concentration at first was in retail," he says. "The fast-food business is a whole different animal, and before we partnered with Paul Lewicki, our mentality for running that business was completely different. Labor is 50% of our costs in fast food, but we’re probably more conscious of our labor in terms of hiring and retention than a traditional c-store business would be. And as a result we’re definitely seeing some benefits."

Lewicki, a 25-year veteran of the Wendy’s culture, joined New West in 1995. He’s a "hands on" partner in the company’s fast food business, managing seven co-branded units: two Wendy’s restaurants, two Del Tacos and three Baskin-Robbins franchises. The branded units represent more than 11% of retail sales at stations owned by the Moores.

"If we build a new store now, we’ll only do it if we can co-brand," Moore says. "I’ve talked to some oil companies and they’ve had the opposite experience, but we couldn’t be happier. We’re franchisees, so we operate the restaurants ourselves—it’s not a situation where you have conflicting egos and there are issues with signage or some other headache. We’re on the same team—that’s key."

All of New West’s food operations share lots with the company’s convenience stores. Actually, they share roofs, too. Such close quarters has caused a few skirmishes, but nothing that makes the chain question its decision to remain branded. For example, fountain rights at all Wendy’s and Del Taco units belong to Coke. Pepsi has rights at New West’s stores. The first year the units opened, the company tried to discourage cross-usage.

"In those outlets we put as much distance between the fountains as possible," Moore says. "But the last three years we haven’t been sweating the small stuff so much. A customer is a customer. Making them happy is more important than that 2′ or 3′ per ounce, so if a customer wants a Pepsi instead of a Coke, or vice versa, that’s their option."

If anyone still questions the drawing power of branded fast food, Moore uses fountain as an example. New West’s Wendy’s restaurant in Livermore is the company’s bestperforming co-branded unit. That restaurant sells more gallons of fountain than all of New West’s convenience stores combined.

Better off branded?
Moore has watched the development of proprietary programs like those of regional operators Sheetz, Huck’s and Wawa. His company might have considered developing such an option if not for the constraints of its facilities. The chain has grown primarily through acquisition, meaning it inherited the layouts of its stores. In many ways, this has forced the chain to stay with branded concepts—not that it’s complaining.

That being said, New West continues to look for more and better ways to market its convenience store foods, namely hot dogs and breakfast sandwiches. So it is moving toward creating a "private label" brand for its convenience foods. But it’s moving slowly, making sure to keep the emphasis on consistency and quality.

"We have a cleaning regiment we follow daily and weekly for our hot dogs, for example," Moore says. "We set specific time frames for when we want the product offered, we want a full presentation, and we have our team focused on accepting a certain degree of spoilage. Our team cares so much about spoilage, we need to get them used to throwing away a certain amount so we don’t sacrifice quality.

"But we’re taking our sweet time," he adds. "If we do a proprietary program, we’ll make sure we have all our ‘Is’ dotted and ‘Ts’ crossed."

Shacking up

Call John DiCapo nostalgic. Years ago the president and founder of DiCapo Foods developed a line of Americanstyle tamales, following a hunch that people in his native Kansas City would fondly recall the tamale vendors from their childhood and buy the parchment-wrapped dashboard delicacies en masse.

His idea was on target, having sold tons of cases of his Jim’s Famous Hot Tamales in convenience stores and other retail outlets throughout the Midwest (see Yo quiero tamale!, June ’03, p. 56). And he’s at it again, this time as owneroperator of a restaurant concept he intends to franchise—The Chili Shack (www.chil
ishack.com). The 1,600 sq. ft. restaurant, which resembles the Kansas City chili parlors popular in the 1960s, offers a limited menu of value-priced items, 90% of which were produced by DiCapo’s manufacturing company.

"The food we serve is the food people want," says DiCapo, who grew up in the restaurant business. "If a truck driver sees on one side of the road a store that sells cold ham-and-cheese sandwiches, and on another side he sees my Chili Shack offering a hot bowl of chili topped with cheese and jalape®os for $2.99, I’ll take that bet anytime.

"Even before I opened the Shack, everyone said they wanted to buy one; they just didn’t want to be the first," he

continues. "I’m developing the operating procedures and everything else an operator needs in order to do this in another location. We don’t plan to operate any more of these [restaurants] ourselves, but we should have three or four more open by the end of this year. We already have two people that have signed letters of intent, and we’ve been open for just three weeks."

DiCapo spent about $110,000 getting The Chili Shack off the ground, but it had no HVAC, no plumbing and no electrical infrastructure. So far, sales average between $750 and $800 a day, with an average ticket of about $5.50 per customer. The Shack is located in a fastdeveloping section of downtown Kansas City that already has about 14,000 people living and working within a mile of the restaurant’s doorstep.

While his restaurant has a sizable operations footprint with seating for 50, DiCapo envisions future Chili Shacks fitting in much smaller spaces. He sees convenience stores and other retail outlets near college campuses as ideal breeding grounds for more Shacks.

"Including the office it’s about 500 square feet—the normal size most stores might consider for a food operation," he says. "And labor is the best part. Here, we have three people on staff, including me. The whole idea of the concept is that a husband and wife can run the show."


Submarined!

While some convenience retailers now run their own proprietary food programs— quite successfully, in some instances—branded foods remain the preferred choice among many retailers trying to replace evaporating fuel margins.

Add to that list Moore Oil Co. (Monroe, LA), which plans to add more Subway restaurants to its chain of 26 Stop N Save stores. Moore Oil has tried everything from its own line of fried chicken to plate lunches, but the company couldn’t keep sales and food/paper costs at their desired levels. Moore Oil began its relationship with Subway about five years ago, and it hasn’t been disappointed, according to Vice President Roy Cole.

"Our philosophy with our c-stores is that we like to have multiple profit centers on the property—more than just a store with gas—so we look for things like car washes and fast food to diversify our

sales," says Cole. "Historically, for whatever reasons, we’ve never been satisfied with our ability to manage and run a proprietary food program. And, as a result, we migrated to Subway."

Moore Oil has six Subways up and running, with two more on the drawing board, and one KFC. Branded foods have a strong presence—street signs, back-lit awnings, etc.—in Stop N Save stores, so there’s a clear message as to what customers will find onsite.

"If you perform according to the [Subway] formula from an operations standpoint, you should have a good rate of return," says Cole. "We look for an 18% to 20% return on sales—and we’ve been able to get it."

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