Focused on the Franchise

BP At a Glance

BP is one of the largest integrated oil companies in the world, with an estimated global market share of around 3% of oil & gas production and 4% of refining capacity in the major global markets in which it operates. Its U.S. retailing brands are BP, ARCO and ampm.

Global sales: $365.7 billion
Number of employees: 97,600
In business since: Amoco 1889
ARCO 1866
BP 1909
BP Amoco 1998
No. of U.S. stores: 13,000
No. of refineries: Interest in 17 (five in USA, 12 in rest of the world)
Refinery capacity: 2.8 million barrels
Gallons sold in U.S. 15 billion annually

Despite a struggling economy, convenience store growth has been an unstoppable force that is evolving with strong customer demand. People are on the go and when it comes to either fueling their car or feeding their hunger, convenience stores are perfectly positioned to provide fast service in a clean, friendly environment.

Who should be providing this service is also still evolving. Most Big Oil companies have decided to get out of direct-store operations—a strategy shared by supermajors such as BP, ExxonMobil, ConocoPhillips and Shell. This decision is a win-win for the oil companies and their branded partners. It keeps the entrepreneurial spirit alive for smaller dealers and franchisees, while allowing the oil companies to significantly upgrade their branded network with local operators that understand their consumer base.

BP America is perfecting this strategy. In addition to making a hefty investment in its branded infrastructure over the past three years it has been selling off hundreds of company-owned stores to grow and strengthen its franchisee jobber network.

Since early 2006, the company has exited direct store operations in all five West Coast states and major markets like Orlando, Atlanta, Baltimore, Chicago, Pittsburgh and South Florida. Replacing BP Connect stores and BP Shops in these eastern marketing is its ampm brand, which, until 2006, was found only west of the Rockies. BP currently has about 1,200 franchisee-owned ampm stores now across the country and about 240 of these at BP-branded stations. Approximately 300 of these stores are still company-owned. Including licensees of the brand internationally, the ampm network is 3,000 stores strong.

“We recognize this is a time of unprecedented challenges for all areas of retail, but we also think there are many great opportunities for convenience store owners to thrive if they really focus on understanding and meeting increasingly tough customer needs,” said Fiona MacLeod, president of convenience retail for BP U.S. “We have put together a whole range of programs for folks to come and rebrand to ampm or even to bring in new industry stores ranging from construction financing to rebranding bonus programs.”

The industry is noticing the effort. In February, Entrepreneur magazine recognized ampm’s growth by ranking the convenience store brand No. 57 on its list of the fastest-growing franchises. That’s a jump of almost 20 positions from last year.

New Opportunities
While BP wants the ampm brand to thrive, it’s got a pretty rigid set of guidelines franchisees need to follow. “Brand standards are pretty common, but they are so important to maintain the integrity of the offering,” said Bill Fry, BP’s vice president of operations. “Customers have to know they can trust the brand whether they are in an ampm in Cleveland, Chicago or Atlanta.”

Among the market factors BP considers before rolling out its ampm franchise are potential store locations, competitive retailers in the area, number of households in the surrounding market, daytime density and potential growth. Operating factors include store size (at least 1,500 square feet is preferred), number of parking spaces, fuel volume potential and fueling positions. In recent months, credit worthiness and access to cash to purchase assets have become just as important.

“Credit is tight right now, but we’ve found that banks are still willing to lend,” MacLeod said. “So while things are slower, the reality is the economy is tough for everybody. Still, we’ve got buyers who may be on their third or fourth bank and they are getting the deals done, and I think that speaks volumes about the strength of our offering and their business reputations.”

Fry agreed, adding that banks have expressed support for the franchise model where operators have more support than just the company at hand. “One of the things we offer is a franchise business consultant who is out in the field visiting stores on a weekly basis,” he said. “When it comes time to make a decision to lend, banks do consider the whole support system behind the franchise and that makes them more comfortable investing in the enterprise.”

Long before moving into a new marketing area or converting an existing region, BP invests quite a bit of due diligence on the ground. It introduces ampm by hosting a franchise discovery day to define the brand, show the support it offers and to start recruiting potential franchisees.

“We’ve done this in about 12 cities over the past year and we’ll get anywhere from 100 up to 600 candidates in bigger cities like Chicago to come through the door,” Fry said. “Whether they are looking at ampm or the BP brand the theme of these meetings tends to be smaller business looking for opportunities to get bigger. Many of our franchisees— particularly in established markets—want more stores. So there’s a lot of pent up demand from existing franchisees as well as new customers.

“Ultimately if they’re passionate about retail, if they like to work under a franchise system and be part of a big group of franchisees in a single marketing area, pulling in the same direction, then we offer the kind of the brand that is ideal for them.”

Retail Offering
The ampm brand is centered on two core offerings: the convenience store and ARCO or BP fuel. Together, the brands serve more than three billion customers annually. On the West Coast alone, ARCO is the leading retail gasoline brand in areas such as Southern California and Sacramento, Calif.

Inside the store, the retail offering and marketing support includes:

• Proprietary brands such as fresh sandwiches, prepared foods, coffee and fountain drinks.

• Innovative branding and media advertising on TV, radio and billboards to promote ampm’s “too much good stuff” tagline.

• A combined one-stop shop to meet the needs of fuel and c-store customers with two highly visible brands.

“Our research and focus groups have found that customers’ top priority is to be able to get in, get what they want and get out,” said Andrew Baird, BP’s vice president of marketing for U.S. convenience retail. “They don’t want to be weighed down with cluttered stores and long lines. So our focus has been to deliver this value proposition–to very clearly offer good value, quality and outstanding service. That’s what ‘too much good stuff’ is all about.”

From the moment customers enter the store, ampm is a shopper’s delight. Stores are well-lit, easy to navigate and sections are clearly defined so even the c-store neophyte can quickly find what they are looking for.

Despite the recent increases in tobacco prices, the category is holding strong with a quite a bit of growth coming from the other tobacco (OTP) segment, Baird said. Another area of focus for ampm is beverages and energy drinks. Snacks and proprietary products are two other growing categories.

At the fountain, ampm boasts an impressive offering featuring 16- to 24-head dispensers offering two types of ice and up to five flavors of proprietary beverages including Essence Green Tea, Unbound energy and some local brands aimed specifically at Hispanic consumers.

Like the fountain, the coffee bar offers a wide-range of traditional brews, cappuccinos and iced coffee products, all in a variety of flavors and price points.

“We’re looking to do some different things with our schematics over the next few months and it will be driven by a very deep understanding of what customers are doing and how they’re shopping our stores,” Baird said. “We’ve got quite a few SKUs with nuts and seeds under our Shadow Hills br
and that have been doing very well for us so we’ll look to arrange those items throughout the center of the store to drive additional sales.”

In terms of foodservice, ampm has a large selection of sandwiches, hamburgers, wraps and prepackaged items that is constantly growing. The chain has a meal solution for all three dayparts. A supporting condiment bar offers up to 16 different toppings ranging from lettuce, tomatoes and pickles to salsa, jalapeños and peppers.

Plus, ampm has an extensive line of baked goods that are all prepared fresh onsite. Items include doughnuts, muffins and pastries, rolls and croissants.

Brand Support
With the retail offering solidified, ampm is able to provide deep operational support. “Most of our franchise consultants have been with BP, ARCO or another c-store operating companies for decades and have a lot of tried and true knowledge when it comes to offering assistance,” Fry said. “As a result we can offer a whole lot of hands on support right where the customer is.”

Plus, the company’s structure is such that it has regional sales managers to cover each marketing area and a team of support staff in La Palma, Calif., that manages in-store categories and marketing. “This is the kind of operational support franchisees are looking for,” Fry said. “We work with them on merchandising and marketing techniques and customer service. Additionally, we help them execute the various promotional programs, develop business plans and, most importantly, how to grow their business.”

In this economy, where many established c-store chains are struggling and a few have even gone under, ampm is confident is well-positioned for the future.

“I am very realistic about where the economy is,” MacLeod said. “ampm is a brand that’s got both value and unlimited potential. It’s a brand that allows franchisees to buy into it and grow, so to me it’s positioned perfectly for the business climate we are all facing.”

However, the success of the brand—and all retail brands at this point—rests with the company’s ability to guide franchisees through the next two or three years of a tough retail environment. MacLeod said BP understands the task that lies ahead and it’s prepared for the long haul.

“Don Strenk, our vice president of franchise operations, has been in the business for more than 30 years—you just can beat that type of expertise and relationship experience,” MacLeod said. “Franchises are healthy as long as they’re growing and that’s why we’re pleased to be growing so quickly—it’s a reflection that our franchisees are doing well and our customers are satisfied. We’ll come through the next couple of years successfully and that is going to give us a great launching pad to do more new and exciting things to move the brand forward.” CSD


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