Pdq Food Stores Inc. Business Information, Profile, and History

Company Perspectives

Quick, Courteous Service is our goal and our Mission Statement. We strive to provide the highest quality products and services coupled with quick friendly service at the most convenient locations around town. We are a privately held family run company with over 50 years in the convenience store business.

History of Pdq Food Stores Inc.

PDQ Foods Stores Inc. owns and operates more than 40 convenience stores in Wisconsin, Minnesota, and California. The company ranks among the top 100 privately held companies in its home state of Wisconsin. In an era of sprawling superstores, PDQ lures time-crunched customers with the promise of convenience: convenient parking, convenient locations, convenient hours, and convenient shopping. Over the years, the family-owned operation has shifted strategy, first expanding then contracting geographically. During the last decade and a half, PDQ has been expanding the size of individual units, part of a national trend for convenience stores.

Madison Merchant Making Moves

Sam Jacobsen opened his first store, Tri Dairy, in 1948. A slow start-up, Jacobsen improved business by adding groceries, beer, soft drinks, and other merchandise. He operated a single unit for 13 years, until he had enough money to add a second store in 1962. Jacobsen's wife Mary adopted a World War I era saying, "Pretty Darn Quick," for the new store's name. The Tri Dairy store also changed its name to PDQ.

Madison, Wisconsin-based PDQ grew along with the rapid expansion of convenience stores across the United States. According to the Madison Capital Times, in 1986, PDQ bought 52 Kwik Way stores in southern Colorado. Operating 109 outlets in Wisconsin, Minnesota, Colorado, and Florida by 1991, Sam Jacobsen determined it was time to sell the business to his sons Jeff and Chris. But the chain would change its growth plan during the next few years.

Regional refiner and marketer of petroleum Diamond Shamrock purchased the Colorado operations of PDQ Food Stores in 1994. Twelve convenience stores/retail gas units were located in the greater Denver area, two in Colorado Springs, two in Pueblo, one in Falcon, and one in Canon City. The Colorado stores, which employed about 125 people, would be renamed Diamond Shamrock Corner Stores and join approximately 2,000 other branded outlets in eight states. According to the Journal Record (Oklahoma City), PDQ President Jim Shelton said the sale to the $2.6 billion San Antonio-based company allowed "PDQ to focus on our primary position outside of Colorado." Diamond Shamrock had been looking for an opportunity to expand in Colorado, where it already held about 100 locations. PDQ turned attention to its stores in Wisconsin and Minnesota.

Re-shelving

Seeking time-saving measures, PDQ eliminated the lottery in 14 of its 18 stores in 1995. While customer traffic fell off by 5 to 7 percent per week during the first few weeks, same store sales stayed steady. "From the start, we knew we did the right thing," PDQ Marketing Director Terry Dehring told National Petroleum News. "Before long, the numbers of customers returned to their normal levels. Then we found that turnaround time of customer transactions had improved 25% without lottery. The flow was much improved at the checkout area."

Dehring speculated lost lottery customers had been replaced by the return of people driven away by long lottery lines. Moreover, lottery ticket purchasers often bought little else. Other convenience store chains were evaluating the value of low commission lottery sales to their operations. PDQ had analyzed the effects of the lottery program on the stores prior to their elimination and had given customers notice of the pending change.

PDQ moved to protect its sales through the court system in the late 1990s. According to a January 1999 Supermarket News article, the company filed suit against Woodman's Supermarkets, a competing seven-store chain, over cheap gas sales. The state of Wisconsin imposed a 9.18 percent markup per gallon over the daily wholesale rate, which PDQ claimed Woodman's had failed to adhere to on a number of occasions in 1998. The markup was intended to create a level playing field for smaller players, by prohibiting below cost sales of certain products. An amendment to The Wisconsin Unfair Sales Act of 1939 allowed competitors to sue one another for injuries related to violations of the act. Woodman's denied the charges. Opponents sought repeal of the minimum markup law.

With gross sales for 1998 at $110 million, a survey by accounting firm Arthur Andersen ranked PDQ as the 79th largest privately held company in Wisconsin. The Jacobsen family continued to lead the operation. Jeff Jacobsen chaired the three-member board, which also included President Dave Savich and retired President Jim Shelton. Sixteen of the 40 PDQ stores were located in Madison, 14 in the Minneapolis/St. Paul area, and ten in the Milwaukee area. Employees numbered about 500.

After a half-century of operation, PDQ had become a fixture in the Madison area, successfully operating stores even in close proximity of one another. Obtaining hot locations, even when near an existing store, presented an opportunity. With two stores relatively close to each other but on opposite sides of a highway, customers could drop into a PDQ without the hassle of crossing over lanes of heavy traffic. "The market is there. We might as well be our own competition," Randy Manning, director of real estate for PDQ, told Mike Ivey with the Madison Capital Times.

But not everyone in the Madison area wanted a PDQ on the street where they lived. Detractors rejected the company's claims to being a close relation to the old neighborhood corner-grocery store. With all PDQ stores selling gasoline, 60 percent of total revenues were generated by fuel sales, according to the Madison Capital Times.

The National Association of Convenience Stores said about 93 percent of convenience stores opened in 1998 sold gas. Trucks and sport utility vehicles had helped drive up the nation's gasoline consumption. U.S. convenience store gross sales climbed 5 percent in 1998 to $164 billion and profit was up 37.8 percent over 1997. National convenience store chains included Dallas-based 7-Eleven, North Carolina's The Pantry Inc., and Marathon Oil Company division SuperAmerica. PDQ's competitors also included Madison-based Stop N Go Stores and LaCrosse-based Kwik Trip Inc.

Even though convenience stores had established themselves as part of the American landscape, over the years they had struggled with blows to their reputation. Open all hours, convenience store employees were more vulnerable to crime, putting a store's name on the front page. In addition, at times the merchandise they carried raised the ire of communities. "John Becker, president and CEO of Stop N Go Stores, said the industry in general is headed away from its beer and pornography reputation," Ivey wrote for the Madison Capital Times. The PDQ stores in Madison, for example, did not sell adult magazines or rolling papers.

PDQ had moved to differentiate itself from the run of the mill convenience store in other ways. In 1991, a relatively spacious 3,400 square foot format had been launched. The store was 50 percent larger than most of its competitors. Amenities included ATM machines, larger bathrooms, wider aisles, and designer coffee.

Bigger and Better

PDQ Food Stores, like any commercial venture, ran up against some obstacles in its path to growth. Some of those were peculiar to a particular location. In 2001, for example, PDQ faced an unwritten policy: beer and milk do not mix. Although there was nothing formal, lawmakers in a town southeast of Madison traditionally refused requests for beer licenses from food stores. In another matter, in the early 2000s, PDQ engaged in a legal battle over property polluted by a landfill in a town near Milwaukee.

In addition to adding to its number of stores, PDQ continued expanding their size. At least one visitor was impressed following a trip to a 6,000-square-foot PDQ store opened in August 2005. "Wow. I wished they'd build one out by us," Sharon Kelter told the Wisconsin State Journal. "We want more, more, more. We're all in a big hurry." PDQ customers at the chain's larger stores certainly did get more: 20 gas pumps, a double-bay automatic car wash, made-to-order sandwiches, and a walk-in beer cooler.

For the 21st-century convenience store, what was inside mattered just as much if not more than what was outside. According to the Virginia-based National Association of Convenience Stores (NACS), inside sales drove profitability. "You don't make your money on gas," NACS spokesman Jeff Lenard said in the Wisconsin State Journal. "You can make more on selling a doughnut." But convenience stores had to lure people inside to sell those doughnuts. For a customer to use plastic to pay for gas at the pump was just not enough to keep the operations in the black in days of volatile gas prices.

As some stores grew to 10,000 square feet, complete with restaurants, the NACS's definition of convenience stores had been outstripped. "A convenience store is defined by the association as a shop with off-street parking, extended hours of operation and seven-day-a-week service, more than 500 different items for sale and less than 5,000 square feet," Barry Adams explained in his Wisconsin State Journal article. In 2004 the nation had 138,205 convenience stores and reported record revenues of $394 billion. Retailing giant Wal-Mart produced $285 billion in U.S. sales that year.

As neighborhoods lost traditional grocery stores, some of those many convenience stores became the sole source of food for low-income shoppers. While PDQ emphasized the benefits of its operation for the neighborhoods it entered, others had a wait-and-see attitude.

"We certainly are happy to see redevelopment in that area," Middleton city planner Eileen Kelley told the Wisconsin State Journal. "One thing we're hoping is that there are uses that help meet the daily needs of those who live there." The site under development for Middleton, on the northwest side of the city of Madison, would be Dane County's 21st PDQ store.

PDQ was a bigger player compared to some competitors in its own neck of the woods, yet smaller than others. More than half of the convenience stores in the state were one-store operations. Kwik Trip, on the other end of the spectrum, was the Badger state's largest operator with 227 stores. PDQ had yet to announce plans for the development of additional stores in the Madison area, but during 2005 the privately held company acquired three properties, spending more than $2.5 million, according to the Wisconsin State Journal.

Even though convenience stores were trying harder to win food customers, the executive director of the Wisconsin Grocers Association could not see the day when convenience stores would replace grocery stores offering larger selection and lower prices. "Certainly it's competition, but you have to take into account what a consumer is looking for," Brandon Scholz told the Wisconsin State Journal. "In reality, there are more grocery stores than there have been in the past. The difference is there are fewer independents." PDQ for its part intended to make sure consumers looking for something in a big hurry equated them with "Quick, Courteous Service."

Principal Competitors

7-Eleven, Inc.; Exxon Mobil Corporation; Kwik Trip, Inc.; Valero Energy Corporation.

Chronology

• Key Dates
• 1948 Sam Jacobsen opens first store as Tri Dairy.
• 1949 PDQ Food Stores Inc. is founded
• 1962 Company opens second store, first under the PDQ name.
• 1986 Company buys convenience stores in Colorado.
• 1991 Sam Jacobsen sells business to sons Jeff and Chris.
• 1995 PDQ eliminates lottery sales to improve customer service.
• 1999 PDQ celebrates a half-century of operation.
• 2005 Company is now operating stores up to 6,000 square feet in size.