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E-Z Does It!

It's not unusual, especially after a life-altering experience, for a 31-year-old to take stock of the past, look to the future with all its challenges and opportunities and decide to make some changes. Entering its fourth decade, E-Z Mart Stores Inc. has done just that.

Since the untimely death of her father in a plane crash, Sonja Hubbard, daughter of E-Z Mart founder Jim Yates, along with the company's longtime management team have worked to reposition the Texarkana, Texas-based chain to address the frenzied competitive environment in its five-state market. With an extensive chainwide image upgrade nearly complete, a huge investment in store automation meant to empower store-level employees and a new prototype for ground-up stores, the team at E-Z Mart is poised to recapture the attention of customers lost to newer c-stores, drug chains and, especially in Texas, aggressive big-box gas retailers.

"If we can stay competitive and make the customer's stop more convenient, we can develop some long-term loyalty and sell more products," said Hubbard, who has been with E-Z Mart for 14 years, including time as controller and chief financial officer. "There is a huge opportunity for home meal replacement and other products, but we must have the facilities from which people will buy those products. We see the opportunity to grow by improving our facilities, our product mix and how we train our staff. Women and traveling businesspeople are great opportunities for us."

To take advantage of those opportunities, in the last three years the chain has renovated its stores and updated its gasoline facilities, positioning each location to draw more customers and sell more high-margin products. Today, the 424-unit chain — down from 500-plus before this process started — is seeing a return on its investments and is moving to leverage them more fully.

Hubbard recently spoke with Convenience Store News about the challenging economic climate in which E-Z Mart operates and the exciting moves the chain has made.

In early 1999, E-Z Mart made three acquisitions, adding 128 units. But the chain has since closed stores, including 51 stores last year.

How did the competitive environment in your five-state market affect your vision for the chain?

For 10 years, our focus was growth. Everybody thought there was so much efficiency in numbers — there was and still is — but with so much new competition, we see you need more volume at an individual store rather than in the aggregate.

We'd rather operate fewer, higher-volume and higher-profit locations. We're more effective focusing on the stores with the most potential. Most of the stores we closed were older, existing operations, but almost a third were from the acquisitions we made over the past three years. We worked with some of the stores we had newly acquired for a while, but as is true in most group acquisitions, they weren't all cream. Additionally, we are operating in a different environment economically and strategically than we were just a few years ago.

How has the way you evaluate your stores changed?

In the measurement methods and benchmarks, and in frequency. We evaluate them more often and more critically. We review every store on an annual basis, but if a store is on the profitability/cash-flow bubble, we look at it quarterly. Before making a significant investment, like a major upgrade, you have to see what the potential is for each store long term and measure its potential rate of return.

The upgrades to existing stores made a striking difference in their appearance. What did you expect to accomplish with this chainwide reimaging?

Several things. Brand recognition and positioning were very important. Enhanced convenience, employee recruitment and retention and the successful merchandising of new and proprietary products were also a priority. We are trying to reposition our chain in the customer's mind. You can't just go and knock down almost 500 stores, so we had to come up with a cost-effective alternative. We painted them all a neutral color and we gave them a lighted kelly green, orange and white fascia with the adapted logo. Inside, we went with new graphics and a more modern, clean look.

While we want to sell more foodservice, part of the problem has been our presentation. People are more discriminating and will not just come in and take what you have to offer. The place has to look and smell appealing. Our intent was to create more zones, separating the instant-purchase items from the foodservice area.

In stores we have remodeled or rebuilt both the store and gas facilities, have experienced a 20- to 120-percent lift in gas volume and 10- to 100-percent sales increase inside, in spite of the economic downturn and increased competition.

You have many types of stores — urban stores, rural stores, neighborhood stores, stores with chicken fryers, others with limited foodservice. How did this effect the reimaging process?

Our diverse, non-cookie-cutter operation presented us with a very big challenge. We spent a lot of time designing and working with a variety of materials before coming up with a solution flexible enough to adapt to most locations. I say "most" because we still found a few that we just couldn't make look like the rest.

What are your plans for foodservice in the future, especially your new E-Z Eats program?

We have 19 locations with Orion Hot Stuff Pizza and Smash Hit Subs, five with Chester Fried Chicken, one Subway, two Piccadilly Pizza, 12 proprietary deli operations, six Deli Express Shotz [hot foods] programs and 37 stores with our new E-Z Eats hot foods programs.

E-Z Eatz is our developmental effort, not yet a year old, to add more foodservice items to many of our stores. We have 24-inch boxes that keep our products warm and also serve as display units. We sell sausage and biscuits; sausage, egg and biscuits; cheeseburgers; chicken sandwiches; burritos and other products through these boxes.

We've had good growth and success with this program as we continue to add new products to the program. We are considering additional family-focused proprietary branding and are excited about the potential.

FaEllen Coffee branding has been very positive in our stores and successful at positioning and growing our program. Several years ago, our coffee company suggested the development of a proprietary coffee brand and the idea of naming it after our chairman — and my mom — FaEllen Yates. We liked this personal focus. We are continuing to expand this brand in increased sales, recognition and loyalty growth and the addition of new and improved products.

Building new stores — especially larger ones — isn't cheap. As you raze and rebuild some locations and build this new, larger prototype at every new site, how comfortable are you with the return on that extra space and the investment-to-profit ratio of the new stores in general?

The Lubbock store was our first prototype store and we only had so much land. At 3,000 square feet, the store was not a significant change in size from our older stores. We would have loved to go bigger — and we would have if we'd had more dirt there!

We have been so impressed by the performance. We put in more gasoline dispensers and really saw the payback on that.

In Texarkana, we had the dirt and put in a full-blown quick-service restaurant featuring Smash Hit Subs and Hot Stuff Pizza. We included five booths to accommodate 20 people and put in a stand-up bar near the window. We are still unsure if all that seating is a good use of space. In the next store, we may do the stand-up bar and two or three booths.

We've been good at hitting the cost of building a new facility, while continually revising and finding ways to cut costs or improve the design. We know how much volume we need to offset the cost. After only six weeks of being open, the Texarkana store has already met our goals. The store in Lubbock exceeded our expectations from day one.

As I said, the reimaged stores are doing very well, but we saw an even bigger lift where we rebuilt a few locations. We already have a list of 10 existing stores that will be rebuilt — and we expect to at least double our volume. This is one of the exciting and fun parts of this business.

Beyond the raze-and-rebuilds, are you looking to add many more new units in the near future?

We do want to see unit growth. There are some markets that have great opportunities. We'd like to focus on areas just outside the metropolitan areas, the neighborhood markets in growing areas, in some little suburbs. Those customers tend to be more brand loyal, and serve up a higher ticket ring.

We also see an opportunity in developing brand loyalty in existing markets. Some things we can't do as well as other types of retailers, but we have such neat employees, who know their customers and we can make life easier for those customers. Our employees know their customers' names and know they want their paper and coffee every day. We have changed managers in the past and have gotten some ugly letters and calls asking, "Where is so-and-so?"

In the last three years, you've rolled out pay-at-the-pump, back-room computers, scanning registers and a new fuel management system chainwide, plus an interactive security system in 166 units. Last year, you added scanning to 75 stores with the remainder projected to be scanning by the end of this quarter. What have these investments brought to your business — and how have they changed the way you run your stores?

It would be easier to say how things haven't changed. We gather, account, report and communicate differently. The exciting thing is that we've got the hard part done. The systems are installed and we're now ready to reap the benefits.

Our whole focus has been to empower the store personnel. We spent years disempowering them. We told them to greet the customer, but we'll order for you, account for you. They didn't feel like a part of the business.

Now, we give managers information to make decisions, financial statements for their stores. They are taking ownership of the stores.

The use of the Internet has also helped us communicate better. In years past, I didn't have that much contact with store managers, I'm ashamed to say.

I tried to get out to the stores as often as I could and wanted to much more often, but the one-on-one is hard at our size. Now, I can send out e-mails to all the store managers and they will respond and tell me what they do and don't like. That has helped bring us closer and give them more of a voice.

Were there any concerns your existing store managers would not or could not change to meet the expectations of their new empowered roles?

We had some concern about that at first. And I was shocked to see how resistant some people were to change. But I'm surprised at how many managers love the new automation and new way of doing things. They are doing reports, using different software, even printing their own signs for changes on the fountain machine instead of handwriting their own. They want to grasp it. But it can be overwhelming. We need to break it down in little bites.

Though there was a little resistance at first, our store managers have absolutely stepped up to the plate.

As one of a growing number of second-generation c-store operators, how has growing up in the industry and the experiences of your father, who was one of the industry's most beloved figures, influenced the way you run E-Z Mart?

I think of all the struggles my father went through. I worked with him 11 years. This last year was difficult and challenging and I reflected back on the problems he faced and how he dealt with them and what I learned by that. I reflected a lot on how he would have dealt with different situations. That has really helped. He taught me so much.

My executive team has been here for an average of almost 20 years. We have a sense of "We survived that, we can survive this." I've read a couple of articles on the "new" CEOs and this downturn in the economy is something they've never experienced. The older CEOs were saying, "These folks haven't seen anything like it." I think they're kind of enjoying it — and we will later too, I guess.

Having grown up in the industry, I developed more of a passion for it. This isn't an easy industry. There are certainly easier ways to make money. But I grew up seeing my dad drawing out the first store and coming up with the name. He had such a passion for it. It was contagious, I guess.

How do you hope E-Z Mart is perceived in the future?

Instead of being known for having so many locations, I think we'll be known for having a more consistent look and more recognizable brand. Customers will have confidence in what they are going to get from us. The quality of offering will be the same at each store and they will know they can get gas, fountain drinks and restroom facilities in a clean and safe store.
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