When Arie Kotler returned to the convenience-store business in 2011, his approach had changed from his first time around eight years earlier.
“I didn’t come back to buy a company, make improvements and then sell my interest for a profit,” he said. “I’d done that … buy for a dollar, sell for two dollars and move on.
“Now, I want to build something I can be proud of. I’m enjoying that.”
Kotler is the chief executive officer of GPM Investments LLC, and what he and his team are building is a convenience-store empire — Fas Mart and other chains along the East Coast.
Last summer, GPM more than doubled its size with an acquisition that added 263 company-operated convenience stores and 33 independent locations that GPM supplies with fuel.
The company now owns and operates 467 stores — including 147 Fas Mart locations — and supplies fuel to 117 independent stores. GPM is the 17th-largest owner-operated chain in the country, according to an annual survey by trade publication Convenience Store News.
GPM has about 4,000 employees.
The company is still in a serious growth mode with plans to add about 200 more stores soon, Kotler said, without elaborating.
Leading the company with Kotler is a team of industry professionals, including Chief Operating Officer Chris Giacobone and food-service expert Bill Reilly, GPM’s senior vice president of marketing.
Reilly, a graduate of the culinary program at Johnson and Wales University, has worked with Marriott Hotels, Disney’s U.S. and European operations and Sheetz and other convenience-store companies.
“What our customers are telling us is that they’re starved for time,” Reilly said. “That’s what we respond to. We are convenience. … We embrace convenience.”
Reilly was running a consulting business in Nashville, Tenn., when GPM expressed interest in his services and then asked him to join the company, he said.
“Arie and Chris told me about their plans for the company and asked me to come with them,” Reilly said. “I was convinced.”
Reilly has stepped up the company’s emphasis on food service, in some locations with established brands like Subway and Quiznos, and in a few others under GPM’s fledgling Red’s brand with its slogan, “All in Good Taste.”
“We’ve added variety to our menus,” he said. “Fas Mart is already well-known for great fried chicken. We’re adding pizza, made-to-order paninis, salads, grilled chicken and other healthy alternatives. We’ll have cold food, too — plenty of road-friendly go-go-go items.”
Reilly said research indicates that for stores like the GPM chain locations, “it’s all about speed of service. And clean bathrooms — that’s extremely, extremely important,” he said.
The company declined to say whether the emphasis on food service has had an impact on its revenue.
The convenience-store industry is evolving, Giacobone said, as sales sag for some of the longtime leading products.
“Cigarette sales continue to decline,” said Giacobone, who has been with GPM since 2005, coming aboard as a result of one of the company’s acquisitions. “And fuel sales decline as cars get more efficient. We needed a more sustainable strategy.”
Reilly’s arrival signaled the company’s determination to improve its food operations, he said.
“Bill has a background as a chef,” Giacobone said, “and he liked what we wanted to do here. We’re not trying to confuse anybody, we’re still a convenience store. We want to have quality food and do it quickly.
“And we’ve added healthier options,” he said. “Personally, there are very few things I would eat in a traditional convenience store. Here I can get that grilled chicken.”
With nearly 600 stores, GPM’s size enables it to sell other products — for example, hand wipes and hand sanitizer — in quantities great enough to enable the company to offer a very competitive price, he said.
The company has an employee incentive program dubbed “suggestive selling,” Giacobone said.
Each week GPM distributes to its stores a list of items to be promoted by employees in conversation with customers. Sales are weighted by customer traffic at the stores so employees in remote locations can compete with those at high-traffic stores.
“Every associate can see on the Internet who is ahead,” Giacobone explained. “There’s a spirit of competition, and a chance to win a bonus.”
The leadership of Kotler, Giacobone and Reilly makes GPM one of the industry’s strongest players, said Mike Davis, vice president of member services for the National Association of Convenience Stores, based in Alexandria.
“One of the ways to compete in this industry is to get bigger,” Davis said. “But you have to be prepared for the larger scale.”
With Kotler’s financial savvy and Giacobone’s strategic expertise, the addition of Reilly’s food-service and marketing experience put the company in a position to continue its growth, he said.
“They have a great team at the top,” Davis said. “Bill Reilly is one of the smartest guys in the business. He’s the right guy for the position.”
While fuel accounts for about 70 percent of sales at the average U.S. convenience store, it accounts for only about 30 percent of the profit, Davis said.
“The pricing for gas is extremely competitive,” he said. “What other product has the price posted on a sign you can see half a mile away? You can look around and see what five or six stores are charging for gas — you aren’t going to have much of a profit margin.
“So you have to make a profit on the 30 percent of your transactions that are made inside the store,” he said. “Good food is one of the ways to do that.”
Kotler, who has lived in the U.S. since 1997, used his position as CEO of an Israeli-based venture capital firm to engineer the creation of GPM Investments LLC and its 2003 purchase of the bankrupt Fas Mart chain — 169 stores in and around Virginia.
The company thrived under new ownership, and in 2006 he sold his interest in GPM at a healthy profit, he said. Although he was no longer an owner at GPM, he kept tabs on the company.
By 2011 GPM’s growth had slowed. The company was searching for a new CEO and lacked the capital to acquire more stores. That August, Kotler bought the company a second time through a $50 million injection of credit, paying off a debt with a stiff interest rate and putting the company on track to grow again.
He filled the CEO position and has orchestrated the company’s continued expansion.
“I like retail,” Kotler said. “I like finding more ways to make life more convenient.”
For example, he said, the chain offers Western Union service so customers can pay bills, transfer funds, receive money — when they can’t get to a bank.
He said the company’s strength is in its 4,000 employees, including about 3,800 in the stores — “regional managers, store managers and all our store employees.”
Will GPM ever rival industry giants? The biggest are 7-Eleven with more than 7,000 stores, Shell Oil with more than 5,000 or BP North America with nearly 4,400. All three are based in Texas and most of their stores are franchise operations.
“Maybe when I grow up we could be one of the largest in the country,” Kotler said. “Right now we want to keep growing and do it right.”
Richmond Times-Dispatch. Used by permission.