In addition to expanding its contract management business both nationally and abroad, Strasburger Enterprises is growing its Quix c-store brand with a renewed focus on foodservice.
By Erin Rigik, Associate Editor.
Wherever oil companies and convenience store chains are divesting stores or taking on new assets, Strasburger Enterprises is often a lifeline on speed dial. The Temple, Texas-based company is prepared to swoop in, often with little notice, and operate stores for other companies on a short-term basis.
It’s a strategy that allows the company to differentiate itself without solely relying on c-store sales, a crucial advantage in an industry dealing with volatile fuel pricing and uncertainty in the tobacco category.
With a retail history that dates back to the 1920s, Strasburger Enterprises is hardly a neophyte when it comes to managing c-stores. Its 40 company-owned Quix convenience stores along the I-35 corridor in Texas are evolving with consumer trends with the debut of a unique foodservice offering that promotes a menu that is uniquely Texas.
Strasburger Enterprises has shunned the spotlight in recent years to focus on fine-tuning its contract management business. Today the chain is as committed as ever to growing its Quix convenience store brand, but it’s also prepared to expand its contract
management business internationally, as well as take on new national clients.
The company’s contract management clients include major oil companies, banks and investors involved in the retail business that don’t want to run the retail sites themselves, or lack the resources in the interim during a sale or new investment.
“We’re not a dealer. We’re not a franchise. We actually run stores on a fixed-fee basis,” said Roy Strasburger, president of the international division for Strasburger Enterprises, who also oversees the Quix convenience stores business. “Clients pay us weekly, and we agree to the cost of operations and are reimbursed for our operating expenses. Then we collect a performance incentive fee based upon improving the performance of the site we’re operating. We make our money only if we enhance the revenue stream of the store we’re operating.”
A New Business Model
The contract management venture developed in the U.S. about 10 years ago during the onerous credit crunch that permeated the c-store sector. Strasburger Enterprises began working with banks that had taken sites back in default after a company went bankrupt and would operate the stores until the banks could find a new buyer. From there the company expanded the business to manage sites for U.S. oil companies.
“If companies were divesting, they would sometimes pull their retail programs out of their markets before they had sold their sites. So we would run them until someone could buy the store, and we still do that,” Strasburger said.
In 2003, at its busiest peak, Strasburger Enterprises was running close to 500 stores across the country. The company provides two services for oil companies. One is called a bridging program. If companies have a dealer or franchise that goes out of business, Strasburger Enterprises operates the site on a short-term basis until they can find a new dealer. In a second scenario, Strasburger Enterprises offers a cheaper cost of operations than the oil companies can, providing an alternative to using their own retail network.
In addition, the company caters to investors who are buying sites but don’t have enough operational backup, providing a turnkey operating system from product ordering and employee training to IT and accounting services for a fixed fee, on a short-term or long-term basis. Projects can last anywhere from 90 days to five or six years, depending on a client’s needs.
Typically, it hires the existing staff from the store it is summoned to run and takes care of all employee responsibilities from workman’s compensation issues to hiring and firing.
“We like to have two weeks notice, but we have done store takeovers with 24-hour notice, where they call and we’re operating the stores tomorrow—it’s unusual, but it does happen,” Strasburger said. “Once someone contacts us, we start by changing all the permits and licenses over—everything from alcohol to tobacco—and start setting up vendor relationships. We have fuel supply arrangements across the countries that we can work with if we cannot supply the fuel ourselves, and we start training the employees.”
The company’s biggest takeover to date consisted of 175 stores in just 10 days in the summer of 2009. “Most of our clients don’t want people to know we’re running their sites for them. We represent the client, so, for example, if we’re running a BP, Mobil or Shell site, we are BP, Mobil or Shell to our customers. It’s providing the same kind of experience as they would get at a site that was operated by that company,” Strasburger said.
Such fast turnovers are possible thanks to a dedicated staff from upper management “all the way down to the part-time midnight shift that keeps the stores open and running around the country,” Strasburger said. “This is a team effort. We have a fantastic team that can do amazing things. During our biggest takeover, the amount of effort, pain and suffering, sweat and tears, and staying up all night getting stuff done was absolutely outstanding. I am privileged to work with a great group of people. They are very good at what they do.”
Moving into 2011, Strasburger Enterprises is looking to expand its contract management business across the U.S., and is prepared to cater, not only to convenience stores, but also to coffee shops, QSRs, restaurants and other retail establishments that can benefit from its expertise.
“The contract management business is where we see our big growth at the moment, and it’s where we’re focusing our time, attention and capital,” Strasburger said. “Then our business goal is to continue to reduce operations costs with the lowest amount possible on a per store overhead basis. We’re already below the industry average and we want to drive it lower. We’re not growing the Quix chain with acquisitions where we buy the sites. Our growth is coming from managing sites for other people.”
At its company-owned Quix stores, Strasburger Enterprises is growing internally with new efficiencies as it looks to maximize its profit value at current locations. It built its newest Quix store in Temple three years ago.
“When we find an opportunity to build a new store, we’ll do that, but rather than acquiring sites, we’re putting our money into better technology, better systems, foodservice and better performance,” Strasburger said. “Foodservice is not as big a component in Texas as it is in the Northeast with chains like Rutter’s, Sheetz and Wawa—we don’t really have that kind of culture here in Texas, but we’re working on changing that.”
Quix is leading that change by rolling out a new enhanced foodservice program that centers around providing fresh foods for on-the-go consumers. The offering will cover multiple dayparts and will go beyond the hot dogs, prepackaged meals and beverages the chain has concentrated on in the past.
“We look to folks like Sam Susser with the Stripes program as leaders in this area, but we’re also picking up our cues from local taco trucks—trailers where you can buy food on the side of the road around here,” Strasburger said.
These small mom-and-pop food operators that sell roadside food out of trailers in central Texas are all the rage among consumers. In Austin, Texas, for example, Strasburger noted that customers can find an array of options, including tacos, Thai, Indian, sushi and even doughnuts from road-side food vendors that have carved out an impressive niche with ethnic foods.
“It’s taking the idea of street food you see in other countries, especially in Asia, into the U.S. and figuring out how we translate that to something we can offer in a c-store without killing ourselves on the labor budget,” Strasburger said. “We have really good folks on our team, specifically Perry Kilgo, our head of operations, and Wendy Woods, who is responsible for our marketing department, who both have done remarkable work on this for us.”
The new food program’s initial trial is hitting select stores at the end of April and gearing up for a full rollout this summer.
In addition to foodservice, Quix is focused on maintaining and improving a high speed of service—ensuring that customer visits are as quick and meaningful as possible. The chain is also improving its product selection in stores using scan data technology to optimize the merchandise set. “We’re trying to get more aggressive in combing our product selection to make sure we have the right mix for each location,” Strasburger noted.
Quix has also made strides toward maximizing its back-office efficiency. By the middle of 2011, the chain aims to be running a completely paperless store-reporting program complete with inventories and paperwork at its stores in an electronic format, a move expected to increase speed of communication and speed of processing.
“That might not be really important with 40 stores in Texas, but it is important when we’re running 250 stores across the country through our contract management business,” Strasburger said. “We might have one store in New York City and one store in Oakland, Calif., and so to manage those and give them the top line professional service they deserve we must fine-tune our processes and programs so we can deliver a consistent offering on short notice. That’s a derivative of having to compete with the big corporate players.”
As a 40-store chain, Quix is caught in what Strasburger dubbed the “no-man’s land” of c-store retailing, sandwiched between mom-and-pop stores on one end and major chains on the other.
“I firmly believe if you’re in between 10 stores and 200 stores, you’ve got to be a really good operator to be productive and profitable, because you don’t have the same low cost of operation as a single-store operator that has family members running the business, nor do you have the economy of scale of the big chains that own distribution centers and have more buying power,” Strasburger said. “So we have to be very nimble, very quick and very smart about how we run our business at the size we are to stay competitive and make money in a very competitive market, which Texas is.”
Strasburger Enterprises got its start after Roy Strasburger’s great grandfather, a German immigrant, moved to America in the 1890s. He began working in Chicago for the railroad, which had a line that ran down to Temple, Texas—a major railroad intersection. Before long, he moved to Temple and opened a saloon. When prohibition came around he shut down the saloon and opened a meat market, which he later converted to a grocery store business in the 1920s.
Strasburger’s grandfather took over the business and grew it to about a dozen grocery stores before he handed it down to Strasburger’s father, H.T. “Tommy” Strasburger, in the mid-1950s.
“At that time, we were at a crossroads where if we were going to stay in the grocery business we needed to get much bigger and build some large stores, or the other option was to stay with smaller convenience stores that were just starting to pop up across the country, and my father chose to go with the convenience store model,” Strasburger said.
The company developed the Quix brand of stores and Strasburger Enterprises in 1974, soon becoming the largest independent gasoline wholesaler in Texas.
By 1994, Quix had grown to 150 stores in the Lone Star State. It sold a large portion of the chain to Diamond Shamrock—now Valero—after the savings and loan crisis hit.
“We’d never been late on a bank payment, but the bank we had a relationship with was taken over by the government and they called our notes, and we had to sell off half the chain to be able to make the note payments,” Strasburger said.
Despite being blindsided, Strasburger Enterprises turned this obstacle into an opportunity, working with banks to manage retail locations facing foreclosure, and its contract management business was born.
Strasburger also has a long history of operating internationally, dating back to 1984 when Strasburger’s father delved into the c-store business in Sydney, Australia, following a family vacation in the area. “At the time Sydney was a city of about four million people and there were only a dozen c-stores, so we started a c-store business originally called Express, and grew it to about a dozen stores in the market,” Strasburger said.
The company then formed a joint venture with Mobil Australia and acted as the operating partner for Mobil’s company-operated sites for 15 years—managing about 250 sites at the peak. “For more than 25 years or so, we were doing business with about 10,000 sites in 35 countries,” Strasburger said. “But we were operating, assisting or managing companies around the world.”
Strasburger Enterprises has worked with Shell, Mobil, Chevron, Copec in Chile, and ERG Petroli in Italy, among others. “Most of our international business has been with major oil companies, so we’ve worked with the majors in New Zealand, Egypt, Zimbabwe, the Caribbean, the UK, Norway, Finland, Scandinavia and France,” Strasburger said. “The list goes on and on.”
The company continued to undertake international joint venture products until 2009—the last of which was in Italy—when the company decided to abandon the joint venture model in favor of the contract management model it had spent several years perfecting in the U.S.
After nine months of laying the foundation to bring its contract management model abroad, Strasburger Enterprises is now ready to introduce the program to overseas customers in 2011.
“It’s a little more expensive on an international basis because we don’t have the local infrastructure to pull from like we do in the U.S.,” Strasburger said. “But we do get a lot of scale using our systems based in the U.S. in other countries.”
As a longtime player in the c-store industry, Strasburger has seen how c-stores have evolved from local grocery superettes to gasoline sites with snacks to today’s cutting-edge stores that push upscale foodservice. While the stores have changed, the goal is the same. “It’s all about providing convenience and great service,” he said.
C-stores must continue to evolve especially as competitors like McDonald’s and Starbucks up their game. “When you have McDonald’s starting to sell lattes, the expectations on us change quite a bit,” Strasburger said. “We have to meet those expectations. And, as an industry, we continue to do so.”
As Quix prepares for its foray into foodservice, and the contract management business goes international and expands nationally, Strasburger Enterprises is heading back into the spotlight to spread the word about its new initiatives.
“We have a business model we think is usable for folks who want to be in the retailing business, and so we are in the process of trying to raise our profile a bit and letting people know we provide this service,” Strasburger said. “We are not just a regular c-store retailer. We provide a lot of day-to-day products to our customers in the Quix stores, but we also provide products and services to people who are looking to make money in the retail business.”
At a glance: Strasburger Enterprises
Strasburger Enterprises remains a family entity headed by President Roy Strasburger. Roy’s father H.T. “Tommy” Strasburger is acting as CEO and chairman of the company, and his brother Gregg is managing the fuel business and ancillary business that includes travel agencies, banks and an agricultural business. Strasburger’s two sisters are active on the board of directors, and his brother-in-law Roger Ingram acts as general council.
Store Count: 40 Quix units in Texas
Gas Brand: All but two Quix sites provide gasoline. Brands include Shell, Mobil, Chevron and CITGO.
Number of Employees: 450
Chairman and CEO: H.T. “Tommy” Strasburger
President, International Operations: Roy Strasburger
President, Fuel and Ancillary Businesses: Gregg Strasburger
Director of Operations: Perry Kilgo
Marketing Manager: Wendy Woods