Quiktrip Corporation Business Information, Profile, and History

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History of Quik Trip Corporation

QuikTrip Corporation operates more than 325 convenience stores in Tulsa, St. Louis, Kansas City, Wichita, Omaha, Des Moines, Atlanta, Phoenix, Dallas, and smaller cities and towns in nine states. Each QuikTrip store features a large soda fountain, a coffee bar, the company's Quick `n Tasty and HOTZI brands of heat-n-serve sandwiches, as well as QuikTrip's private-label gasoline, Redline.

Exceeding Initial Modest Goals

Chester Cadieux and a college friend opened the first QuikTrip convenience store in a small strip center in Tulsa in 1958. A $5,000 loan from Cadieux's father brought the initial capital investment to $16,000. The store stocked a limited selection of groceries with high prices for the convenience. Cadieux hoped to eventually operate ten stores in the Tulsa area. With the investment by suppliers, Cadieux gathered the capital to open additional stores, quickly exceeding his goal. In 1962 sales reached $1 million and the company recorded net income of $25,000. QuikTrip expanded outside the Tulsa area to Wichita, Kansas City, and Des Moines. One of the secrets of Cadieux's success was that he paid his store managers much higher than the industry standard, attracting quality workers to the company. Also, he reduced overhead by using vendor jobbers for stocking inventory.

In the early 1970s, Cadieux changed the product selection at QuikTrip stores. QuikTrip began to sell gasoline in 1971 as states legalized self-service stations. Cadieux eliminated slow-moving merchandise from his inventory, such as canned vegetables, and stocked a larger quantity of items, priced low for high-volume sales, such as beer, soda, coffee, cigarettes, and candy. QuikTrip introduced a low-priced, private label beer called QT, for 'Quittin' Time,' finding regular customers among college students and blue collar workers. Cadieux registered the QuikTrip name for federal trademark status in 1975.

QuikTrip expanded its capacity for gasoline sales in 1980, including the introduction of a private label brand of gasoline, Redline. The company added more pumps at existing stations and installed canopies over the pumps to protect customers from the sun and rain. In order to accommodate gasoline sales, QuikTrip relocated over 100 stores between 1982 and 1988. The units closed tended to be small, neighborhood stores or stores located in small towns, whereas new stores served a larger customer base from high traffic locations. QuikTrip experienced some difficulties in relocating stores, having to grapple with zoning ordinances or local resident opposition. In St. Louis, for example, local laws prevented the sale of alcohol at gasoline service stations; in some cases the law was later changed.

In the mid-1980s QuikTrip decided to enter the St. Louis and Atlanta metropolitan areas. QuikTrip considered several markets, but once the decision was made, the company sought saturation in the market. By 1988 QuikTrip had opened ten stores in Atlanta and eight stores in St. Louis. While the company expected to open an additional 100 stores in the St. Louis area over the next decade, in 1988 QuikTrip announced its intention to open 75 QuikTrip stores in the Atlanta area over the next five years. At a cost of $250,000 to build each store, including gasoline pumps, the Atlanta project involved a $50 million investment. QuikTrip usually purchased the land, usually one-acre lots, and then arranged a sale and leaseback of the land after the store had been built.

Stores under construction included large 'travel centers.' A smaller version of a truck stop, the travel center included a 5,000-square-foot store, 12 gasoline pumps, five diesel fuel pumps with elevated canopy to accommodate large trucks, a truck scale, and a store to serve the needs of truck drivers. Travel centers required a three-acre lot, cost up to $1 million to build, and faced tougher local scrutiny due to concerns about increased traffic and noise.

The company also decided to give QuikTrip stores a new, more vibrant look. QuikTrip replaced the earthtone exterior and interior with a bright red. The interior decor featured red countertops and a red quarry tile floor; almond tile on the walls interspersed with painted red sections of the walls to create contrast. Some gold trim maintained continuity from the previous decor. The company also took more care with landscaping around the store.

Competition from Oil Company Convenience Stores: Late 1980s

While sales exceeded $400 million in the late 1980s, and with half of revenues based on over 200 million gallons of gas, QuikTrip experienced increased competition from oil companies. Oil company service stations started to add convenience stores to their gasoline outlets, such as the Star Markets at Texaco stations. When an oil company gas station and convenience store opened near a QuikTrip store, merchandise sales decreased by $1,000 per week, while gasoline sales decreased 2,000 to 3,000 gallons per week. QuikTrip responded to the situation by adding more gasoline pumps at QuikTrip stores as well as complimentary products, such as motor oil and automobile accessories As QuikTrip accelerated its growth in 1986, with 112 of the company's 290 stores opening between 1986 and 1990, QuikTrip included gasoline pumps at almost all of its new stores. QuikTrip planned to close about 80 stores and reopen twice as many while including more gasoline pumps and seeking better locations for its stores.

Another method used to attract customers to QuikTrip stores, rather than the competition, involved the installation of Automatic Teller Machines (ATMs). The machines did not dispense cash, but dispensed scrip, a paper receipt which the customer exchanged for gasoline and store goods, with the balance of the amount paid to the customer in cash. This type of ATM machine was less expensive to install and provided QuikTrip with the possibility of impulse purchases. QuikTrip did not charge a fee to use the ATM, though individual banks did. QuikTrip tested the QuikTeller machines in Tulsa, later installing them in all of the company's 290 stores by 1990.

QuikTrip began to offer fast foods and fountain beverages at its stores, being the first convenience store to offer a self-serve soda fountain and a self-serve coffee bar. Expensive advertising led the company to phase out the private label beer by this time. In its place the company introduced in 1993 a private label brand of fast food, Quick `n Tasty and HOTZI sandwiches. Quick `n Tasty heat-and-serve sandwiches included Texas ham and Cheese, BarBQ Pork Rib, and the Super Po Boy. QuikTrip sold most of the jumbo-sized sandwiches for one dollar. HOTZI breakfast sandwiches included the sausage, egg, and cheese biscuit and the breakfast burrito.

In its desire to remain competitive and up-to-date, QuikTrip began to build bigger stores, with 4,000 square feet of space, as compared to 3,200 square feet for existing stores. These stores provided customers with larger restrooms, more space to form a line at the cash register, and a larger self-serve beverage area. The stores also added a large storage room for larger quantities of stock. The first such store opened in Wichita and the company planned to use this format for all new stores.

QuikTrip revised its strategy of finding profitable store locations, closing smaller or unprofitable stores and replacing them with stores in more convenient, high-traffic locations. QuikTrip sought locations which customers would find easy to stop into as they returned home from work. High traffic areas drew customers into the stores as long as the traffic was not so high as to prevent customers from attempting to reach the store. The company found that locations with high residential density, such as a nearby apartment complex, and near office parks to be the most successful.

As competition from the oil companies intensified, QuikTrip sought to address the competition 'at the pump.' The company expanded its service by adding more gasoline pumps, from four to eight, allowing stores to serve up to 16 customers simultaneously. In 1993 QuikTrip decided to begin selling gasoline for a lower price; this strategy reduced the company's profit margin, but garnered volume sales. Competition was particularly high in Atlanta, where no one convenience store or oil company dominated the market. QuikTrip began to test pay-at-the-pump machines at three stores in Atlanta. The new technology allowed customers to use credit cards or ATM debit cards at the gasoline pump, saving customers time from going into the store and waiting in line.

The company initiated a campaign to discourage customers from purchasing high-octane fuels which cost more, but did not provide better quality. Brochures distributed by the company stated that high-octane fuel helped problems with knock, but that most cars ran better on regular unleaded. QuikTrip sought to build trust by taking the stand as well as to increase sales of regular unleaded gasoline.

In 1994 QuikTrip opened its first dual-brand convenience store with a Wendy's Old Fashioned Hamburgers franchise. The store location was a new 9,800-square-foot facility, the company's largest 24-hour travel center, with shower and laundry facilities, and diesel-related products. QuikTrip hoped that dual-branding would generate more traffic at the travel center. QuikTrip began test-marketing the dual-brand concept in St. Louis, Kansas City, Springfield, and Atlanta, where a 3,000-square-foot Wendy's store was attached to each QuikTrip convenience store. In Des Moines QuikTrip planned a new store with a Burger King attached. The Burger King had a separate entry and a drive-through window, but a passageway allowed movement between the convenience store and the restaurant. Cadieux's logic for dual-branding centered on the idea that fast-food restaurants were not the competition, as generally assumed, but the oil company gas stations with their new convenience stores.

QuikTrip's methods of competing worked well for the company. QuikTrip reached a major milestone with the year ending April 28, 1996, exceeding the $1 billion mark in annual sales. The $1.2 billion in revenue marked a 21 percent increase over 1995 revenue of $883 million. While QuikTrip set perhaps an overly ambitious goal of generating $2 billion in sales for fiscal 1997, sales did reach $1.7 billion. In 1997 QuikTrip took the lead in quantity of gasoline sold in the competitive Atlanta market.

QuikTrip launched a web site in 1997, promoting all aspects of the company's business. The company posted its 'Guaranteed Gasoline' pledge which promised to pay for automobile repairs if they were caused by use of the company's gasoline. Included on the web site was information on the company's Fleetmaster program for commercial accounts. The program provided detailed reports designed to help transportation companies analyze fuel expenditures. These included an account of expenditures on a weekly and monthly basis, type of product purchased, and odometer readings.

Building on Successful Methods in Late 1990s

QuikTrip initiated another remodeling project in 1998 to improve the external appearance of its stores and to enhance merchandise display. In March QuikTrip started remodeling its 38 stores in the Wichita area. The company also continued to replace older stores with new, larger format stores, selling eight stores in Des Moines in late 1998 with plans for replacement with updated facilities. The age of a QuikTrip store averaged seven years, eliciting references to QuikTrip as an upscale version of the 7-Eleven convenience store.

QuikTrip drew high regard from its competition. In 1998 QuikTrip stores averaged $2 million in merchandise sales and three million gallons of gasoline. This compared to 7-Eleven stores which averaged just under $1 million in merchandise sales and 720,000 gallons for stores that sold gasoline. Oil companies still charged high prices for the convenience of location and speed and for their brands of gasoline, resulting in low volume. Cadieux attributed the success of QuikTrip to store managers whom the company paid $48,000 per year compared to the industry standard of $25,000. At QuikTrip revenues and net income reached $1.9 billion and $32 million, respectively, in 1998, attaining the company a place on Forbes Top 100 Privately Held Companies list. QuikTrip was the largest gas retailer in Tulsa and Kansas City, and third in St. Louis and Atlanta.

Competition with oil company service stations and convenience stores culminated in a reduction in gas prices in January 1999. In order to increase volume sales, Cadieux reduced the company's profit margins by taking a 9.5 cents per gallon cut on gasoline compared to the industry average of 15 cents. Along with reductions in the price of merchandise, QuikTrip's overall gross profit margin dropped to 26 percent, significantly lower than the industry norm of 32 percent.

The company sought to reinvigorate its advertising by hiring an outside advertising agency. After sending questionnaires to 20 agencies, QuikTrip chose Austin Kelly Agency of Atlanta, because it seemed most compatible with QuikTrip's methods and attitudes. While the search progressed, QuikTrip worked with specialty agencies. Sixty Second Airborne in Atlanta created advertisements to promote QuikTrip's private label Select Blend coffee. John O'Hurley, who played J. Determan on the popular television comedy Seinfeld, starred in a series of radio ads in which he portrayed the same type of character as he did on Seinfeld, pontificating with pompous amusement. In the ad titled 'Humunga Fantastica,' O'Hurley's narrative satirized coffeehouse chains, where a small coffee had been renamed tall. In 'Stunt Doubles,' O'Hurley philosophized about coffee.

Growth for 1999 and 2000 involved expansion into two new markets, Dallas-Fort Worth and Phoenix. The company opened its first QuikTrip store in Phoenix in February 1999 while plans for other stores were held up by local neighborhood groups. Quik Trip entered the Dallas market, the home city of 7-Eleven stores, with plans to open 70 stores in the area. The first store opened in Arlington in December 1999, followed by two stores in Plano in March 2000. At 5,000 square feet, the Dallas area stores were larger than existing stores. QuikTrip included a soda fountain and coffee bar, 12 fuel pumps, and 24-hour service.

Principal Competitors: Hale-Halsell Company; Phillips Petroleum Company; Texaco, Inc.

Chronology

• Key Dates:

• 1958: Company is founded by Chester Cadieux.
• 1962: Sales reach $1 million.
• 1971: QuikTrip stores begin selling gasoline.
• 1984: Company enters Atlanta and St. Louis markets.
• 1988: Stores are given a new look with QuikTrip's signature bright red decor.
• 1996: Sales exceed $1 billion.
• 1999: To compete with oil companies QuikTrip cuts per gallon gross profit to 9.5 cents.