Cutting Remarks

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Cutting Remarks

By Barbara Grondin Francella

Who knew a dust bunny could be so destructive to the bottom line?

With costs up and margins squeezed, convenience store operators are finding ways to reduce store expenses -- from cleaning their cold vaults' refrigeration coils to switching computer screens -- without slashing payroll. W. Daly Ward, general manager of Tucker Oil Co., took a leap of faith when he contracted with a local company that said it could reduce the c-store operator's electric bill 10 percent by cleaning its Corner Pantry stores' refrigeration equipment. "Everyone knows equipment that cools or heats pulls a lot of current and you have to keep that equipment as efficient as possible," Ward said. "It made sense."

The result? The Columbia, S.C.-based operator of 32 stores immediately saw "noticeable savings in electricity use," Ward said. "The cleaning keeps our equipment operating within acceptable temperature ranges so we aren't losing sales when product is kept and sold warm, and we have less product loss due to spoilage. The stores aren't losing a door of milk or a coffin freezer full of ice cream anymore."

When Ward joined the petroleum marketer five years ago, the c-stores were frequently replacing compressors. "That can mean spending several thousand dollars, depending on how many major components you replace," Ward said. "Now a compressor going out is very rare. I am amazed at how much dust, grime and gunk can come out of those."

The service, provided by Coil Tek of Raven Gap, Ga., costs $300 per store. It is done twice a year, in late spring before the long, hot South Carolina summer and in early fall, "to clean up after the high-demand season," Ward said.

A two-person crew attends to each store's walk-in coolers, concentrating on blades, fan covers, evaporation coil fins, compressors, coils, drain pans -- anywhere grime collects.

Along with having an outside firm clean and maintain its 10 stores' HVAC systems, which has significantly reduced electricity use and part replacement costs, the management team at Stop'n Go of Medina Inc., also found small changes can add up to big savings.

In a few older stores, incandescent light bulbs have been replaced with compact fluorescent bulbs, which last longer, give off better light and use less energy, according to vice president Frank Shotwell.

The management team of the Ohio-based c-store operator also focuses more store-level training on cost-cutting measures such as keeping cooler doors closed. "Sometimes you'll find an employee with the cooler door propped open while he is stocking the shelves," Shotwell noted. "You need to explain that for every degree the cooler temperature rises, the longer the compressor is running. We had a few employees who would shut the coolers off while they were working in them for their own comfort. It used to drive me nuts!"

In a few locations, lock boxes have been placed over older thermostats to keep employees from adjusting the heat or air conditioning. Newer stores have temperature-control thermostats, which require a passcode to reset.

Shotwell personally keeps tabs on the chain's two in-bay automatic carwashes, especially during the winter months. "You have to watch the weather closely, because you don't want to run the floor heaters if you don't have to. They are a constant energy drain. If you just let them run, it's a big waste of money. But if they aren't running when you need them to, something will freeze up, costing you money to fix it, plus the lost sales," he said. Winter is the carwash season in the Snow Belt.

"We are working smarter and looking at many different areas where we can reduce costs," he added.

At Lassus Bros. Oil Inc., based in Fort Wayne, Ind., COO Michael Bates and his colleagues have chipped away at store costs for the last few years. The operator of 30 Handy Dandy stores renegotiated all big-ticket items and re-bid out contracts for various services, as well as the interest rate and spreads on its bank lines of credit. It also reworked real estate mortgages to reduce overall interest expense.

In another instance, the convenience store operator saw a healthy return-on-investment when it moved to cash-counting safes and began armored car pickup. The retailer analyzed the payroll costs associated with cashiers and managers handling money -- including cashiers counting the money, writing down the amount on a shift report and adding up the total funds dropped over one shift, plus managers counting each drop envelope, re-adding shifts that needed corrections, researching shortages, preparing the deposit, separating change needed for the change safe, delivering the deposit to the bank and retrieving change orders. The executive team soon realized it could recoup the cost of equipment and armored car fees.

"In our highest volume stores, we could handle the same amount of cash and cut our payroll well beyond the added cost of the system," said Andrew Carmichael, Indiana operations supervisor. "The new system also allowed us to accomplish our goal of maintaining very low funds on hand at all times, resulting in a much safer store and reducing our likelihood of armed robbery.

"At high-risk stores, we were able to cover the cost of equipment and service, and break even. But we also decreased our liability substantially," he said.

Managers, meanwhile, spend more time ensuring quality customer service, mentoring staff and managing multiple product categories, he added.

Another cost-saver is Lassus' intranet, created two years ago and greatly expanded since then. The intranet rid the stores of cumbersome forms, saving significant sums on paper and mailing costs. Among the paper eliminated: employee manuals, job descriptions, training and troubleshooting guides, and more than 20 different forms managers use occasionally.

"Not having to print these forms up in pad form is one big advantage, but knowing the forms are up-to-date and there is no way one is laying around from the year before is also beneficial," said Greg Smith, Lassus' director of management information systems.

Web-based forms include store maintenance requests, which allow maintenance techs to prioritize work orders; bank deposit forms; car wash incident reports; and store supply and first aid order forms. "What started as a good idea has turned into a valuable addition to supporting the cost of our wide area network infrastructure," Smith noted.

The chain also made an energy saving decision when it replaced its store-level computers a few years ago, switching from CRT monitors to LCD monitors. "The direct electrical savings from using an LCD is around $20 a year," Smith noted. "LCDs reduce display energy use by 60 percent."

To help cash flow, the chain invested in software that better tracks gas inventories. "With extreme day-to-day fluctuations in fuel costs, our fuel transport manager is able to make better decisions on in-ground inventory levels based on projected sales," Bates said. "We don't want to have too much product sitting in the ground, risking that the cost of replacement gasoline will go way down."

This summer, the petroleum marketer moved to pre-pay at the gas pumps, began accepting debit cards at the pump and started selling its own prepaid cards, substantially cutting down on transaction fees.

"By placing an emphasis on the debit and gift cards as a first option of payment, the savings have been significant," Bates said, adding several Handy Dandy stores were seeing drive-offs of nearly $1,000 per month before the switch to pre-pay.