U-PAK-IT’s Business Model Proves Successful

U-PAK-IT Corp., the third largest Louisiana-based c-store chain, features a unique business model that helps mom-and-pop stores unite to compete in an industry that often eats single stores for breakfast.

The first U-PAK-IT store was opened in Winnsboro, La., in 1986. The company quickly grew when a number of neighborhood stores, faced with rising prices and increased competition from major chains, decided to join forces to stay afloat.

“They knew a long time ago that the mom and pops—the single store operators—were going to be a thing of the past, and if they didn’t all band together and do something in a unified way, it was going to be the demise of all their stores,” said Brad Lemoine, marketing director for U-PAK-IT Corp.

Today, the chain is composed of 40 locations run by owner-operators, all of which use Evans Oil Co. as their fuel supplier—a requirement of joining the chain. The stores are branded Chevron, and occasionally Texaco, if there is another Chevron already in the vicinity.

Wagons in A Circle
In the early days, the stores elected one operator each year to act as marketing director and chipped in financially, adding money into an advertising account and then agreeing on a promotion. As the number of stores multiplied, the operators decided a marketing officer was in order. Enter Lemoine.

“I was brought in to open the U-PAK-IT marketing office in Monroe, La., in November 1999 to pull the group of store operators and locations together in an attempt to utilize our collective strength to negotiate best cost and program development with our vendor partners,” Lemoine said. “At the time of my arrival, we were a loose caboose of 26 independently-operated locations all getting picked apart by our collective vendors.”

The marketing office negotiated “collective deals” to secure lower cost and rebates to add revenue to each operator’s bottom line. At the time, the stores were purchasing from three grocery suppliers and getting overcharged by all three.

Many vendors, whom the company no longer does business with, warned Lemoine the company and its new marketing office would not last six months. “That was over 10 years ago. We now purchase about $15 million a year from Church Point Wholesale, a local Louisiana grocery distributor and we enjoy cost benefits,” Lemoine said.

Lemoine credits the company’s success with the fact that the stores stick together no matter what, banding together to demand the best deals. “We like to call it ‘wagons in a circle.’ We are like no other convenience store model I have witnessed. We just try to do what makes sense,” he said.

U-PAK-IT, however, is not a co-op. While the chain does enter into rebate programs and makes certain stores qualify and submit velocity reports and forms to collect rebate money, the office doesn’t keep any of the profits. Co-ops, by contrast, exist by splitting rebates.

“We issue a monthly P&L and charge each location an equal amount of monthly expense or G&A. That’s it. All monies collected go back to the stores 100%. The operator is motivated to do as much as the marketing office launches in an effort to get the best return on investment over the monthly expense,” Lemoine said.

While the marketing office advises and assists its operators with everything from planograms to product mix and new retail programs, it is the operators that govern the marketing office and not the other way around. A steering committee of five operators helps the office with decisions and focus, and reviews the P&L and general ledger to ensure all expenses and payments are properly accounted for.

Because the operators who run the stores depend on them for their livelihood, they are motivated to run the business well and gain the most revenue possible from each program. “That’s how they’ve been able to survive in a very competitive environment,” Lemoine added.

Foodservice
The stores have been involved in foodservice since the beginning. Some of the older U-PAK-IT stores continue to offer the very first program the company rolled out—fried chicken, while a number of locations feature a barbeque deli with ribs. Eight sites offer a Subway program, which was added after the group decided a branded program was needed to better compete in the marketplace.

Currently, the chain is considering introducing a panini sandwich offering to new stores. “Whatever type of food is really hot at the time a store joins our team or when we build a store, that’s what we tend to add. Every few years we try something different,” Lemoine noted.

Loyalty
Currently, U-PAK-IT’s Winnsboro, La., location is testing a new loyalty program. The pilot program asks customers for minimal information, and awards random prizes to loyalty guests.

“They might come in on their third visit and win a free drink or a free bag of chips. Everybody wants to get something for free, so we think that increases the destination to the store,” Lemoine said.

The program also allows customers to collect points, which they can redeem to get discounts on certain purchases like 50 cents off a 16-ounce Coke. If customers gain enough points, they earn a free coffee. Once the chain has tested the program for about six months and is certain it meets with customer satisfaction, it will be rolled out at all the stores.

“We like to build our own programs from scratch,” Lemoine said. “Our rewards program is a vendor assisted discount. We provide documentation to the vendor of what we want to give away and the vendor assists us in selecting the items we put in our rewards program, so we can give our customers a bona fide reward.”

Catering to diverse demographics
The company’s mix of stores comes in a variety of footprints. Store sets are adapted to fit each location and its demographic. In less affluent areas, for example, the company stocks a generic brand called Hy-Top, which makes everything from peanut butter to household items. The alternative brand sits beside name brand products, but sells for a cheaper price.

“We do a lot of grocery business in our stores. We don’t have four-foot grocery sections—we run bigger departments and it separates us from our competition in that we have a larger offer,” Lemoine noted.

Expansion
U-PAK-IT Corp. continues to grow. Most recently, it changed over a store in the Alexandria, La., market called BJs, after the owner, who qualified by buying his fuel from Evans Oil Co., joined the group.

While U-PAK-IT continues to build stores, much of its growth has come from stores that note the company’s success and ask to join. “They come knocking on our door and say, ‘Let us in. We’re mom and pops and we’re getting killed out here,’” Lemoine said. “‘We want to be a part of what you do. We want in on your circle of wagons.’ That’s one reason we’ve grown from 26 to 40 stores in just over 10 years.”

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