Casey’s Walljasper: No More Franchising

Casey’s General Stores Senior Vice President and Chief Financial Officer William Walljasper gave an earnest interview to The Wall Street Transcript this week, touting the chain’s rural store format and conservative strategies as pivotal elements to its growth over the years.

The chain has 1,450 corporate-owned stores and 14 franchise locations, though all of those franchise agreements are set to expire by the end of this year, Walljasper told the publication. He said the chain started franchising just years after its 1968 inception, mainly as a way to “grow critical mass.” Since the chain went public in 1983, however, it hasn’t added a franchise and has purchased back many of those franchised stores, and expects to be entirely franchise-free by year’s end.

“We are really unique in the convenience store industry and with our business model, locating stores in smaller rural communities throughout the Midwest,” Walljasper told the publication. “The majority of our stores are in towns of 3,000-person population or less. We serve not only as the gas station but also in many cases the grocery store and restaurant.”

Walljasper said various offerings differentiate Casey’s from other retailers in the industry, such as its proprietary prepared food program.

“We make from scratch not only pizza, but donuts as well and offer a wide variety of other products,” he said. “In fact, we are a top 10 retailer of pizza and donuts in the nation. We also own all of our assets, which is unique in the business, and self-distribute about 90% of the grocery products in our store; it comes out of our distribution center centrally located here at corporate headquarters.”

Walljasper said the chain’s focus on rural markets has contributed to its success: “Being located in smaller communities, there is less competition not only from a convenience store perspective, but less competition from a quick-serve restaurant perspective, from an entry-level labor perspective, lower cost to build and even lower cost to purchase when we go under acquisition strategy.”

He also said the company is “relatively conservative” and doesn’t grow just for the sake of growing, “but having to manage that growth plan.”

“We have very low debt, a very strong balance sheet,” he said. “In fact, we would be considered investment grade. So I think all those components kind of rolled up sum up the success of our company.”

Walljasper said the fuel side of the business is impacting all retailers, and Casey’s same-store gallons sold for the year ending April 30 was down about 2%.

Despite the lagging gas sales and general economic challenges nationwide, Casey’s same-store customer count “continues to be very solid,” Walljasper said.

“People are still coming into our stores, they are still buying the soda or the cup of coffee or donut or a slice of pizza or whatever they are buying,” he said.

Walljasper said Casey’s, as compared to smaller c-store chains in its operating areas, purchases direct from vendors to give it some buying power. It also has a strong balance sheet, Walljasper said, which ensures the company has good credit and payable terms.

“For example, with gasoline, several years ago a load of gasoline would cost $10,000,” he said. “Now a load of gasoline is somewhere between $30,000 and $35,000. We turn our gasoline about every three days and our payment terms are 10 days. I am pretty confident that some of the smaller operators would not have that same type of payment term. It’s been, quite frankly, a crunch on working capital for some of the smaller operators.”

Ultimately, it creates acquisition opportunities for Casey’s.

“Anytime there is pressure in our industry, I believe it creates opportunities to perhaps purchase some of the operators that don’t have the same type of structure that we do,” Walljasper said. “So the opportunities in that regard going forward from within are not only our nine-state market area, but we also did a warehouse expansion several years ago, which will enable us to add another 1,000 stores above the ones we currently have, which means that we may look to go into other states that border our current market areas, states such as Michigan, Ohio, Kentucky, Tennessee and Arkansas.”


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