When Afroz Painter hires a new manager for one of his 10 Georgia gas stations, he sends them to QuikTrip to buy a Coke and check out the competition.
He wants his employees to see QuikTrip’s large, brightly lit stations and clean, well-staffed convenience stores, and take note of its attentive customer service.
“They have set the bar high for all the other operators,” said Painter, president of Rocket Fuels, which operates metro Atlanta Shell, Chevron, BP and Citgo stations. “We try to imitate them.”
QuikTrip, even with its Tulsa, Okla., headquarters and a slow start when it entered the Atlanta market 25 years ago, has become the dominant gas retailer locally.
It’s responsible for a third of all gas sold in metro Atlanta, and it was QuikTrip’s high-volume, low-margin model that decades ago led to a downward push in metro Atlanta’s gas prices, leaving the region as one of the country’s most inexpensive for fuel, even as prices rose, said Tom Kloza, Oil Price Information Service chief oil analyst.
Competitors gripe about the unbranded gasoline that Quik-Trip sells, insisting their own brands are better for car engines, but they praise the company for its friendly staff and well-stocked convenience stores.
While QuikTrip isn’t the only metro Atlanta gas retailer to offer these amenities, Kloza said it is the leader in the region, where it took on Atlanta-based RaceTrac on its home turf.
QuikTrip has 122 Georgia stores to RaceTrac’s 64. Atlanta is QuikTrip’s biggest market anywhere. RaceTrac’s largest presence is in Dallas, where QuikTrip also is a competitor.
RaceTrac has operated in the Atlanta market for 75 years, but only converted to a larger-store format in 1999, said Trina Potts, executive director of strategic marketing and programs. RaceTrac continually looks at Quik-Trip’s pricing and tries to stay competitive. It will unveil a new store design by next year to create an atmosphere more conducive to selling food.
The details are not set, Potts said, but the store layout will change. Checkouts will be closer to the door and RaceTrac is considering the addition of side entrances.
“We’re completely re-imagining it,” she said.
With their large-format stores and stations that can have close to two dozen fueling stations, RaceTrac and Quik-Trip already dwarf a number of their branded competitors, and QuikTrip is getting bigger.
QuikTrip is using its Atlanta base to expand into North Carolina and South Carolina. It is building a new generation of convenience stores 24 percent larger than the normal 4,600-square-foot footprint, with side entrances, dedicated delivery doors and made-to-order specialty drinks.
Any new Atlanta gas stations, such as a controversial Ormewood Park outlet in Atlanta south of I-20 that neighbors are trying to stop because of its proximity to houses, will offer the new layout where space allows it. Stations in Jonesboro, Suwanee and Doraville will begin construction in the new format in the coming months.
Gas retailers in other states, such as Sheetz and Wawa, have similar offerings to the two Atlanta big boxes in terms of fountain and hot drinks, fresh food and operating several pumps beneath a huge canopy.
For that reason, Paul Tomaszewski, who as Pacer Fuels president owns 12 metro Atlanta Chevron and Texaco stations, said it’s hard to give one retailer too much credit for changing the industry. The business evolved, he said, and good ideas spread quickly.
Yet Tomaszewski said RaceTrac tends to follow the trend and QuikTrip is the company to beat.
“They presented the best mouse trap I have seen,” he said.
QuikTrip first came to Atlanta because the company thought the market would be competitive, evolving into a “gasoline town,” said Mike Thornbrugh, public and government affairs manager.
“We were right,” he said. “We were lucky.”
The company operated alone in its large-scale format for more than five years while other gas retailers watched its progress, Thornbrugh said. QuikTrip emphasized customer service and cleanliness, and made safety at the stores a priority.
It averages 14 to 16 fueling stations per location to minimize waits. It also decided a gas station convenience store should have more beverages and more space.
Recently, the need to diversify has increased. A third of a convenience store’s indoor sales traditionally had come from tobacco products. With smoking bans and higher costs leading to decreased sales, it made sense for QuikTrip and others to look at new ways to drive indoor sales. With the possibility that gasoline demand reached its peak as prices rise and people look to cut back on their fill-ups, the need to find an alternative was strong, Thornbrugh said.
QuikTrip turned to food after watching Sheetz and Wawa have success with fresh offerings.
Now stores such as QuikTrip and RaceTrac have more than jerky and candy bars. They sell yogurt, fresh pastries, hot items like corn dogs and taquitos and sandwiches. They plan to continue expanding what they offer, each indicating the potential food possibilities are endless. QuikTrip intends to add soft-serve ice cream, and RaceTrac said it could eventually see offering made-to-order food and taking customers’ orders at the pump.
QuikTrip, a private company, said its sales were just shy of $8 billion in the 2010 fiscal year, which runs from May to May. More than half of that was gasoline, Thornbrugh said. RaceTrac, also private, would not share its sales figures.
The margins on QuikTrip’s indoor offerings are substantially higher than on gas, Thornbrugh said. Because the gas margins are so low, the company relies on high sales volume to make up the difference.
That can be problematic for smaller gas stations that have less volume, Kloza said. The low-margin model keeps the price down in an area and means gas stations that sell less still have to compete.
Last year, the average gross margin for gasoline was 16.3 cents per gallon, Kloza said. For QuikTrip in Atlanta, it was just 9.1 cents per gallon over the wholesale cost.
“They’re terrific, terrific operators,” Kloza said. “If you’re in the Southeast and you’re one of the major brands and you pass an empty lot that says, ‘Coming Soon, QuikTrip or RaceTrac,’ your day’s been ruined.”
Painter, who sends his employees to QuikTrip when he hires them, sets his prices based on what QT does, both inside and out. While he said it is impossible for him to sell gas as low as QuikTrip does, he tries to stay just a few cents over per gallon to remain competitive.
The Atlanta Retailers Association, a trade group Painter belongs to, is banding together to use its buying power to try to undercut QuikTrip on the price of some indoor items, such as a 12-pack of Coke.
Regardless of what competitors do, there are customers who say they prefer QuikTrip. Valerie Coron, who works outside picking up recyclables, comes in at least twice a day for sunflower seeds and a melon-berry smoothie. Almeta King picks up a Diet Coke and a lottery ticket after Bible study. Cole Farmer walks in three times per day in search of cigarettes, energy drinks or something to eat.
“Everything I need, I pretty much come here,” Farmer said. “This is like the Walmart of gas stations.”
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