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On the
QT
CSP sits down with
QuikTrip’s Chet Cadieux
for an exclusive look at
the company’s rapid growth
By Mitch Morrison, Angel Abcede and Kelly Kurt Brown || [email protected], [email protected]
Photos by Kelly Kurt Brown
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Chet Cadieux, chairman,
president and CEO of QuikTrip Corp.
CSP
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39
Common Culture:
Cadieux (second from
right) and store employees
embody QuikTrip’s speedy,
friendly culture.
C
het Cadieux pauses. The
executive’s easy smile, infectious and at the ready, turns
pensive. A full minute passes
as he ponders what he was just asked.
“That’s a really good question,” says
the 46-year-old Cadieux, who’s dressed
in the company’s red QT polo shirt, consistent with QuikTrip’s casual persona.
The question: Is there a retailer out
there that excites him?
For a chain recognized as arguably
the best in the c-store business, there
are few surprises at QuikTrip and few
answers the company doesn’t dispatch
with a finger’s snap.
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A visit to a QT store is a snapshot of its
culture, its soul. At a new site just blocks
from QT’s Tulsa, Okla., headquarters, the
scene whirs with activity. Blake is mopping floors, wiping down the coffee bar,
then assisting a customer. Erica is preparing a fresh pretzel, greeting a couple of
regulars, then hopping over to the register
to ring up a customer.
“These folks never stop moving,” a
barrel-chested customer says with envy.
“No wonder they stay so skinny.”
One of QT’s longstanding secrets is
its effervescent, clockwork chemistry. Its
team of store associates routinely cover
for each other, much like a veteran bas-
ketball team, whose members implicitly
know where the other will be with nary a
nod or gesture.
Blake and Erica are among the nearly
13,000 employees stocking, spiffing up,
circulating through the 645 stores bearing
the QT logo on a backdrop of red. From
August through December, Cadieux will
meet them all and make it a point to
remember as many names as he can. It’s
a side of Cadieux few in the public will
see—but it doesn’t faze him.
Frequently praised but protectively
private, QuikTrip is one of the industry’s
great stories, yet one without an easy
script. Its roots are well told, that of a single
“We’re fast,
we’re just
really fast.”
QuikTrip
by the Numbers
Headquarters: Tulsa, Okla.
Store Count: 645
Store Breakdown by Market: Tulsa,
68; Kansas City, 79; Wichita, 38; Des
Moines, 36; Phoenix-Tucson, 100; St.
Louis, 73; Atlanta, 128; Dallas/Ft. Worth,
99; Carolina, 24
Employees: Almost 13,000
2012 Revenues: $10.77 billion
Company Ranking: 26th largest
privately held corporation, according
to Forbes
store in Tulsa opened by Chester Cadieux
II and Burt Holmes, of their expansion
and embrace of fuel and later foodservice.
Over the past 20-some years, as QT
has grown, a young man bearing the
owner’s family name is working his way
up to the stage, from the store to the district to headquarters, and the transition
from Chester to Chet is done quietly,
transparently and without controversy—
the QuikTrip way.
Yet, for all its seamlessness, QT is a
company that abstains from notoriety.
It participates in few industry events,
disdains coverage in the trade press and
is perfectly fine letting other retail chains
garner the glory.
As QT manager Mike Thornbrugh
muses, “We don’t write a press release
every time we open up a new store or roll
out a new menu item.”
They don’t have to. Their customer
base bears out QT’s success. Store visits
in its hometown of Tulsa and one of its
newer markets, Phoenix, demonstrate a
fierce customer loyalty rarely seen in the
convenience channel.
“I like going there because their sandwiches are always fresh,” says Carrie, a
30-year-old Oklahoman visiting a site in
the Phoenix market. “They don’t taste like
typical convenience-store food.”
“QT is the best for gas,” says another
patron, a cab driver who fills up four to
five times a week. “You never have to wait,
and they have the best prices.”
Another, a longtime Arizona native,
cannot help but compare QT to a more
established competitor. “I didn’t know
what to expect when QuikTrip arrived,”
he says, alluding to an expansion that
began shortly after the millennium. “Now
they’re my store—for gas, for sandwiches,
for drinks, for everything.”
Finding negatives is a challenge, and
even then they’re often the flipside of a
positive.
“Hmm, what don’t I like about QT?”
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Market Share Battles
This exclusive industry data looks at how each store performs based on total c-store market
volume. A market effectiveness rating below 1 means the brand is selling less than the average
store in that market. A market effectiveness rating above 1 means the brand is outpacing its
marketplace on a per-store basis.
Tucson, Ariz.—2012
Core Brand Name
Number of Open Outlets
Market Effectiveness
7-Eleven
17
0.83
ampm
10
1.11
Chevron
5
0.59
Circle K
101
1.19
Corner Store
17
0.93
Giant
28
0.79
Quik Mart
25
0.75
QuikTrip
14
1.97
Shell
10
0.44
Super Stop
7
0.56
Number of Open Outlets
Market Effectiveness
ampm
47
1.45
BP
127
0.78
Chevron
269
0.85
CITGO
107
0.72
Exxon
69
0.77
Pump You Up
Atlanta—2012
Core Brand Name
Quik Mart
57
0.72
QuikTrip
114
3.20
RaceTrac
49
2.71
Shell
28
0.78
Texaco
125
0.77
Market Effectiveness
(over 2001-2010)
Number of Outlets
(over 2001-2010)
Phoenix
C-store brand
2001
2005
2010
2001
2005
2010
4 Sons Foods
0.82
0.8
0.75
10
18
21
7-Eleven
0.99
0.99
1.07
76
65
60
ampm
0.88
0.89
0.75
77
62
53
Chevron
0.6
0.69
0.71
70
53
53
Circle K
1.41
1.29
1.2
300
315
367
Corner Store
0.77
0.79
0.76
27
29
42
Danny’s Family Car Wash
0.49
0.71
0.96
2
5
13
QuikTrip
1.85
2.01
2.13
16
44
67
Shell
0.37
0.62
0.55
5
42
57
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one customer wonders. “The new stores
are great, but because of all the entrances,
you don’t always get greeted by the store
workers when you walk in. It depends if
you come in through the side or the main
entrance.” Yet the entrances shorten the
walk and take patrons to their preferred
destination.
Another customer laments that the
coffee and fountain bars are separated
in the newest stores, known internally as
Gen 3. But it is that very division that creates clear destinations and diverts in-store
traffic, which is often intense.
As busy as traffic can be inside a QT, the
forecourt often mimics early rush hour in
a modest city. Trucks, SUVs and sedans
negotiate off a thoroughfare, jockeying
for an MPD. Most stations feature 12
fueling slots; the newest sites boast 16.
Like RaceTrac or Pilot travel centers,
QuikTrip is a superpumper extraordinaire, driving high throughput off prime
locations. There are no gimmicks at the
pump—no TVs, coupon dispensers or
assorted loyalty programs. It’s just gas.
And, for that matter, cheap gas.
In virtually all 11 core markets in
which QT operates, the company either
drives the market or ranks among the
lowest-priced operators with its proprietary brand. As a private company,
QT declines to reveal its gallon sales, but
industry experts say there may be no
other in the channel that rivals QuikTrip’s
per-site fuel sales.
“They do a booming business on fuel
volumes,” one petroleum expert says on
condition of anonymity. “They move a lot
of their own product on the pipeline so
they can be very competitive with those
who have to buy from suppliers.
“They also buy a lot on contract.
Commissary Commitment: QT has
covered its foodservice bases with five
commissaries—each ready to double its
capacity if needed.
Again, when you can commit to good
monthly volume with a supplier, you can
get much better than average pricing.”
The upshot, says the petro expert, is a
highly profitable forecourt: “All contributes to stronger margins even with lower
street prices.
“Some chains of size don’t ‘put as
much’ into their fuel buying or lock in the
majority of their volume with one supplier. In my opinion, putting all your eggs
in one basket doesn’t give you as much
flexibility to move with the market. QT
seems to do a nice job of balancing.”
That balance is borne out in a recent
report by OPIS. The fuels wholesaling/
retailing specialist tracks what it calls an
efficiency rating, which is defined by market share—the amount of fuel volume—
divided by outlet share. So if a company
had 1% of all stores and 2% of all fuel sales,
its efficiency grade would be 2.0%
According to OPIS, by fuel perfor-
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mance, few perform better than QT. In
2012, QuikTrip controlled 2.63% market
share with an outlet share of 0.57%. That
gives QT a remarkable 4.58 efficiency
rating, trailing only Wawa among U.S.
operators. (See sidebar on p. 42.)
“They have a lot of sites … doing
300,000 gallons a month and $300,000 a
month in inside sales,” says OPIS chief oil
analyst Tom Kloza.
“What makes them interesting is they
have a trading operation. They trade for
profit,” he continues. “QT ships on the
pipelines, and they have clearly become
some of the best traders. They do spot;
they do hedging. They are very active in
the spot market and they know how to
take advantage in [times of] volatility.”
Put another way, despite ranking
among the lowest-priced operators in
its markets, QuikTrip is not skimping
on margins. “I’d put them up there with
Pilot in terms of sophisticated buying,
risk management and buying on dips,”
Kloza says. “They are strong enough that
over time they can buy below the rack
average and really take advantage of that.”
Not surprisingly, fuel plays an essential role in QT’s growth strategy. Talking about the company’s expansion into
the Carolinas, launched two years ago,
Cadieux shares the importance of drive
time not only in a city or county but also
the broader market when considering
new growth opportunities.
“Charlotte, Greenville, Spartanburg:
The bigger the city, the more fuel they’re
going to burn,” Cadieux says, “because
theoretically the drive time is longer and
our site selection model knows on average … how far somebody drives every
day commuting. We know in Atlanta, we
know in Dallas, we know in Chicago, even
though we’re not there.
“Miles driven per day equates to how
much gas you burn.”
Growth Strategy
QT’s soaring success in the PhoenixTucson market and new ventures into
North and South Carolina are no small
feats. Several factors stand out:
▶ Distribution: QT has invested hundreds of millions of dollars into opening
five commissaries in Tulsa, Kansas City,
Atlanta, Dallas and Phoenix. Each has
been designed to double in capacity if/
when necessary.
▶ Pipelines: Either through serendipity or brilliant planning, much of QT’s
growth is situated nicely near fuel pipelines, thereby saving shipping and overall
transportation costs. For instance, the
current ramp-up in the Carolinas aligns
with the Colonial pipeline in eastern
North Carolina.
▶ Culture: For QT, it’s all about
exporting a culture of fast, friendly customer engagement—with a notable nod
to speed.
“We’re fast, we’re just really fast,”
Cadieux says with certitude. “I don’t
know if anybody really measures that:
customer count per man hour. If that’s a
key customer service measurement for us
… then you can’t destroy that.”
Toward that end, QT is known for
relocating district managers and store
employees from successful stores to fresh
markets. Culture and career growth,
Cadieux says, are key drivers behind QT’s
expansion, and without store growth,
good employees will exit.
“It’s not so much a draft—more of
a volunteer army that’s going,” he says.
“And they’re excited about going and
sticking a flag in the ground in a new
geography and being part of the team to
build that market.
“It’s not like we take them at gunpoint
and say, ‘Move.’ It’s employees who are
excited about the opportunities,” he says.
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Output with
Throughput
4.58
In gauging fuel performance, there are
few better in the United States than
QuikTrip. When looking at output per
unit, only Wawa scores higher.
In 2012, QT controlled 2.63% market
share with an outlet share of 0.57%, giving it a remarkable 4.58 efficiency rating.
(Efficiency is market share divided by
outlet share, with a higher number indicating higher per-store volumes.) Only
Wawa scores higher, with an efficiency
rating of 5.8. Sheetz finished third with
4.52, and GetGo fourth with 4.17.
For 2012, a typical QT site priced its
pumps on any given day at $3.09 per
gallon, considered below-tier direct
competition.
In 2011, QT controlled 2.52% market
share with an outlet share of 0.54%, for
an efficiency rating of 4.64. They priced
3.04 cents per gallon below competitors.
Source: OPIS Retail Year in Review and 2013
Profit Outlook
And there is another layer to this
equation. “In markets where we are saturated … if there’s no store growth and
there’s no turnover, you basically have to
wait for somebody to die, quit or get fired
to get promoted.”
▶ Employees: In conjunction with
culture, consider this remarkable statistic. In a channel in which turnover
runs more than 100%, QT lists turnover of full-time employees at just 10%,
and 30% to 40% for part-timers. Some
attribute it to QT’s compensation plan,
which includes a base salary in excess
of $40,000 per year for a full-time store
associate, plus profit sharing.
Regardless of the reason, its employees
are recognized for sharing responsibilities, engaging customers and multitasking as if it were routine. “In those new
markets where we are growing fast, you
don’t want to open with inexperienced
staff. Those people aren’t ready to run
the store,” says Cadieux. “God help them!
Have you been in a QuikTrip? You know
how many transactions they’re running?
We’d be setting them up to fail.”
▶ Company Support: When QT penetrates new markets, typically with five to
10 stores, it’s a companywide story.
“As we say, store growth somewhere
creates promotion opportunities,”
Cadieux says. “Every other geography
we’re in wants the new market to do well.
It’s critical because, in the meantime,
they’re subsidizing that new market. As
long as that new market loses money, the
rest [of the company] is subsidizing. Not
to mention they’re all shareholders. In
every store we’re building, we’re investing
every employee’s money.
“The first five years we’re in a new
market, our employees are asking about
them: ‘How are we doing in the Carolinas?’ They’re shareholders. They get
it. They understand QT is taking their
money as shareholders and building these
stores as an investment in QT’s future—
their future.”
▶ Format: Defying conventional
wisdom, QT does not endorse differentiated store sets. So whether a market is
predominantly Hispanic, elderly, more
affluent or working class, those stores will
adhere closely to their QT peers.
“We just believe that in a given market, people are cross-shopping our stores
“We aren’t
planning
on doing a
different store
set to fit a
market; we’re
looking for
a market to fit
our product
offering and
approach to
market.”
regardless of what the demographic is
around the store,” says Cadieux, who
nonetheless politely acknowledges the
validity of his industry counterparts’
strategies. “Just because that’s where the
store is located doesn’t mean that’s who’s
walking through the door.”
Its fixed store set, in fact, is a slice of
the company’s site selection process.
“We’re looking for markets that fit our
model. We aren’t planning on doing a
different store set to fit a market; we’re
looking for a market to fit our product
offering and approach to market.”
Growing Share
QT’s formula is clearly working. Via
exclusive market research, the company
has found that once it’s in a market for at
least a few years, its stores easily outpace
most of its competition.
A fascinating spotlight is the Phoenix area, long dominated by Circle K.
In 2001, Circle K ran 300 sites with a
market effectiveness of 1.41. This means
inside sales generated 41% above average c-store sales in that market.
At the same time, QuikTrip’s first
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full year in the Phoenix area, QT stores
scored an impressive 1.85—remarkable
considering its newcomer status. In
2010, QT’s 67 stores outpaced Circle K
units by nearly a full point on an average
store-to-store basis: 2.13 market effectiveness vs. 1.2. (See full results in the
sidebar on p. 42.)
Market jumping is no small feat. Successful chains have to establish a distribution network able to duplicate everything
that defines a brand as it stretches from
state to state. A QuikTrip in Dallas has to
look like a QuikTrip in Tulsa.
To do this, QT plans in blocks, with
roughly 10 stores the magic number
needed to make that first phase economically viable, according to Jim Fisher,
CEO of land-use specialists IMST Corp.,
Houston.
Typically, within two to three years, as
the original cluster bears fruit, new ones
spring forth, giving QT the prominence
to effect a full-blown marketing program,
leveraging scalability to turn investment
into profit.
In breaking into a new market, QuikTrip often maximizes gas prices to grab
market share, industry experts say. But
fuel dominance is not the endgame, says
Bob Stein, president and CEO of KSS
Fuels, Florham Park, N.J.
“These successful retailers going into
new markets aren’t just about fuel,” he
says generally about the industry. “It’s
a starting point to get attention, but
they’re coming in with a large, state-ofthe-art site, a presence in the forecourt
and then, inside, great merchandising
and foodservice.”
As its new-market strategy builds on
itself, QuikTrip can backfill, adding both
stores and infrastructure such as with its
new stores in the Carolinas and new commissary in Atlanta.
The industry is also enamored with
QuikTrip’s reputation of constantly
renovating its portfolio. “I think their
oldest stores are only eight to 10 years
old,” says Bill Weigel, chairman and CEO
of Weigel’s Stores, Powell, Tenn.
The continuous reinvestment in existing stock, on top of fresh ground-ups,
makes QT among the most formidable
competitors in the country. The company
is not shy about withdrawing from mar-
Inspiring Respect: As one competitor
says, “Someday maybe I can grow up to
become QuikTrip.”
kets, such as when it pulled out of Springfield, Mo., divesting five stores in 2010.
Equally true, the operator has little
tolerance for legacy stores, even in its
home state. So when the company made a
full-fledge commitment to high-volume
fuel sites, it may have been surprising at
first glance for QuikTrip to divest its profitable older stores in Stillwater, Okla. But
Cadieux is resolute: The reputation and
expectation of QT’s portfolio outweighs
laggard, even if moderately profitable,
legacy locations.
“Those stores were still profitable, but
when it came time for us to say [whether]
we’re going to go invest in them to bring
them to the newest standard—whatever
that standard is—the answer was if we
did, it would lose money,” he says.
Once the decision was made not to
upgrade, Stillwater became backwater,
dissolved from QT’s stable.
So whether it’s upgrades, complete
raze-and-rebuilds (either on the same
property or a better location) or the
shuttering of failing stores, QuikTrip is
nimble enough to “close as many stores
as it opens,” says industry consultant Dick
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Meyer of Meyer & Associates, Mesa, Ariz.
“They don’t like operating lowerthan-expected volume locations,” he says.
“It’s not fun and not worth their business
model. It’s not their core competency.”
Respect from Peers
As much as QuikTrip evokes fear and awe
from competitors, it also draws respect.
Jim Griffith, CEO of Stillwater-based
OnCue Express, calls QuikTrip “one of
the best retailers in the country” and
acknowledges that his 46-store chain
looks to it for new ideas and inspiration.
“I just think the world of them,” he
says. “Someday maybe I can grow up and
be QuikTrip.”
Griffith, who started his c-store business in 1966 and created OnCue through
a merger with a partner in 2004, has one
store in a market occupied by two QuikTrips. When he opened his Bartlesville,
Okla., site in 1980, “the stores QuikTrip
had were nothing like the stores QuikTrip
has now.
“They have evolved considerably,” he
says. He appreciates the size and dimensions of the facilities, which make it easy
for customers. He also compliments its
labor development and management.
“They have extremely informed and
friendly employees. They have a great
culture.”
And when it comes to QuikTrip’s
culture of employee retention: “My hat
is off to them. It takes a lot of work. And
they’ve done the work. Anytime you can
reduce turnover, you reduce costs.”
QuikTrip consistently shows up as a
top employer on national ratings lists. Jim
Fram, senior vice president for economic
development for the Tulsa Chamber of
Commerce, credits the chain’s aboveindustry pay and the fact that the retailer
promotes from within for employee
retention.
“[Employees] have their anniversary
date on their name badges,” Fram says.
“You don’t see very many people who
have worked there only a few months.
They are all long-term employees.”
OnCue Express is expanding in the
Oklahoma City market, where there are
no QuikTrips. Griffith’s chain has four
new stores in the works in that market,
bringing the total there to 12. “One of the
biggest compliments I have,” Griffith says,
“is when someone says, ‘Gosh, your stores
remind me of a QuikTrip.’ ”
“The key is raising quality perception,”
says Ben Brownlow, an Atlanta-based
analyst with Raymond James & Associates, which has its main headquarters in
St. Petersburg, Fla. “Their whole model
is to raise the customer experience and
capture market share.”
Fresh food, sandwiches, salads and
improved lighting and flooring are part
of the mix. “Customers are viewing it as
less of a trade-down from [quick-service
restaurants], leading to market-share
gains in not just the c-store channel, but
capturing market share from foodser-
vice,” Brownlow says. “Their initiatives
transition customers to a different perception of [c-store food.]”
“They keep reinventing themselves,”
Meyer says. “But the core principles that
they came from a long time ago still exist.”
QuikTrip employees are simply hard
workers with a passion for customers.
“It isn’t a new machine that came in yesterday or one that comes in to sell gas at
a lower price,” he continues. “They do
the same thing, every day, with the same
passion to get up and serve.”
What’s Ahead
QuikTrip in fiscal year 2013 will build 60
sites known as Gen 3, which feature 16
gasoline pumps and a 5,700-square-foot
facility. The design, with a brick and glass
exterior, is more than 1,000 square feet
larger than the previous prototype and
is flanked with bookend entrances along
with two central portals.
Inside, an arena-style ceiling immediately catches the eye. It is both artistic
element and practical consideration,
aimed at muffling excess noise. “It gets
pretty noisy in here,” Cadieux says with
deliberate understatement at one of the
new Tulsa locations.
In addition to the rollouts, QuikTrip is
also busy beta testing various programs:
▶ Gasoline loyalty with a Tulsa grocer: The program is a classic cents-off
gasoline redemption program that takes
the supermarket consumer to QT for a
discounted fill-up.
▶ Modularity: In years past, QT
would build a new, larger format behind
a legacy store that would then be razed.
With the current building deeply egressed
to allow for ample forecourt space, QT is
piloting a modular, plop-and-play unit at
existing raze-and-rebuilt sites. The goal is
to sustain some level of operation while a
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permanent fixture is erected. “We’re testing it. We’re still in the very early stages,”
Cadieux says.
▶ Mobile apps: QuikTrip is testing a QT app. As of CSP’s deadline, the
application had not been rolled out to
test markets.
“We consciously stayed out of the first
generation of [Web-based loyalty], which
was email marketing, and the second
generation of text marketing because our
customers told us they didn’t want a convenience store to be marketing to them,”
Cadieux says. “But they’re OK with an app.
“What they’ve said is, ‘I don’t want
anybody sending stuff to my phone; the
last thing I want is clutter. An app? That’s
fine, because I’ve chosen to open it up
“We don’t write a press
release every time we
open up a new store or roll
out a new menu item.”
or to set settings on it. I can set up the
parameters myself.’ ”
Deep in Thought
The clock is ticking. A two-hour interview, among the few Cadieux will hold
with a reporter, is nearing its end.
It’s a blustery day as January is about
to cede to February. Cadieux is focused on
his guests, only once looking at his smartphone and, even then, offering an apology.
It’s that focus, that eye-to-eye personal
engagement that colleagues cite among
Cadieux’s finest qualities: his ability to
concentrate on what’s before him while
possessing the wherewithal to keep sight
of the big picture.
The question that follows is among
the last and one that prompts a thoughtful pause. Which retailer today excites
him? He considers Whole Foods but suggests its model is replaceable. He considers other brick-and-mortar operations
but dismisses them as being potentially
usurped by online commerce.
Then he lets loose a brief smile, and an
intriguing answer.
“Trader Joe’s,” he says, “is interesting
because almost all of their product you
can only buy there, yet people want it.
Even though it’s take-home, you cannot
buy it on the Internet.
“It’s interesting they are that good
in product development that they can
make a business out of stuff only they
have developed, by and large.”
QT’s model in some ways mimics and
in other ways opposes Trader Joe’s. QT
is built on commodity products readily
available in most c-stores: major brand
cigarettes, salty snacks, roller-grill options,
carbonated soft drinks and the like.
True, it owns a strong private-label
program and a vastly improving foodservice commissary. Yet, in these areas,
QuikTrip is not Trader Joe’s.
What the Oklahoma convenience
chain shares with that Southern California purveyor is extraordinary verticality.
Both QT and Trader Joe’s have largely
eliminated the middleman, investing in
robust supply-chain dynamics they own
and operate.
Both adhere to a culture of extraordinary consistency and build store formats
with little variation by region or demographic. Both are recognized for hiring
remarkable people trained in multitasking and delighting customers. And both
promulgate the values of price and quality,
from the fresh-cut flowers of Trader Joe’s
to the robust fuel island of QuikTrip.
There are no shortcuts or undercuts.
Just an investment tested, and tested
again, with the results to show for it. n