EZ Riders
This one-year-old is going places. EZ Energy USA, the Mansfield, Ohio-based operator of 25 stores, is counting on an experienced management team and two-pronged retail strategy to propel it into the ranks of the largest convenience retailers in the country.
The c-store retailer is a subsidiary of EZ Energy Ltd., an Israeli, publicly traded holding company controlled by Eli Zahavi, formerly vice president of marketing/operations for Delek Group's Israeli operations and former vice chairman of Alon USA, the Dallas-based refiner and operator of 300 c-stores in west Texas and New Mexico.
Today, EZ Energy USA is being built on the solid performance of eight Easy Trip stores, acquired in June 2007 from Central Ohio Energy, and 17 Pittsburgh-area BP stores. Of those sites, 12 are being converted to franchised ampm stores, five others to Easy Trip.
President and CEO Gregg Budoi, former CFO of Dairy Mart Convenience Stores Inc., is running the growing collection of stores.
"We believe the ampm franchise offering will be a great part of our growth," Budoi said. "At the same time, we are looking to create another very solid brand of convenience stores, Easy Trip."
Budoi is joined by Oren Zahavi, EZ Energy's vice chairman, concentrating on mergers and acquisitions. CSNews recently talked to Budoi and Oren Zahavi about building a new c-store company from existing stores in a challenging economic environment.
CSNews: Why enter the U.S. convenience market now?
Zahavi: There is limited opportunity, in terms of retail space, in Israel. When you look at the opportunities here, in terms of land, population, retail environment and laws, there are many favorable elements in play today to move into the U.S. very quickly.
CSNews: EZ Energy is one-year-old, but Eli and your management team have a great deal of experience in the industry. What are your plans for this new venture?
Zahavi: Being publicly traded, we are heavily motivated to grow. We have received significant interest from sellers of smaller chains, and we are pleased to work with the major oil companies, such as BP, in their quest to exit [directly operated] retail operations.
In the end, we have two growth paths: through acquisitions to gain scale, and through organic growth in our own stores with brand awareness and improved offerings. In the next couple years, we plan to operate hundreds of locations.
Budoi: As we create our own brand and our own comprehensive, quality foodservice offerings, one of the best ways to do it is to copy someone doing it very well, like ampm, and then create own our more innovative offerings in the future.
Being an ampm franchisee gives us a chance to run and grow those stores, while leveraging some ideas into our Easy Trip stores. As an acquisition company -- while we may build a few stores along the way too -- we may come across a brand more meaningful or significant than Easy Trip is now. Because we are in our infancy, that may justify us re-branding our Easy Trip stores. But one thing is sure: Having a solid and consistent brand message to the consumer is very important to us.
CSNews: The industry is familiar with the ampm offer, including a strong foodservice business and a wide variety of fountain drinks. What will customers find at Easy Trip?
Budoi: They will be very similar to the ampm stores, although not exactly alike obviously, because of ampm's proprietary offer. But we are heading down the same path -- prepared foods, grab-and-go meals, bringing the foodservice offer through the day and into the evening meal.
My main focus is having quality operations, clean stores and employees who understand foodservice and customer service. We want to have more of a restaurant mentality, while offering customers other standard c-store products so they have an alternative to going to a 120,000-square-foot box to get quality products.
We want to be consistent in our core brand offer, but encourage store managers and regional managers to tweak the mix and make changes unique to the neighborhood.
CSNews: Last year, you had a deal for a chain of stores that fell through. What happened?
Budoi: It's not dead, but it's not going forward immediately either. As a publicly traded company, that's about all I can say.
CSNews: What type of stores are you looking to buy?
Budoi: The Central Ohio Energy stores fit our profile perfectly. They have above average gasoline and inside volumes and physical facilities are large enough to do our foodservice offer very well. Most of the stores in Ohio have kitchen facilities and freezers, making it easier to create our own offer.
Generally, we are looking for smaller organizations with quality physical assets, above-average inside and at-the-pump sales, and have an opportunity to improve on the organization in some form.
Everyone has facets of their brand and offering working well, but may not have everything exactly where it needs to be. We all have our own view of the business and what we think will be successful. We plan to utilize certain elements from each of our acquisitions to get one unified offering.
Geographically, we are concentrated in Ohio and Pennsylvania, and see ourselves growing around that area. But at the same time, we'd like to diversify our markets. We are actively pursuing assets in the Southeast. Ideally, as we become a chain of a few hundred stores, we would like a presence in the Midwest and Southeast and grow around those two hubs.
CSNews: You have a great deal of competition eyeing those same stores. What gives you a leg up on, say, Couche-Tard or other large chain?
Budoi: I think we are more willing to work with owners to help them exit their business, if that is what they choose to do. If they have 25 stores and 18 are the highest quality, but the remaining are average, instead of cherry-picking good sites, we are trying to work with owners to buy the whole chain, so they don't have anything hanging.
We bring a more personalized ability to work and find a solution to each acquisition. There are creative ways to do that. Although c-stores are very similar, the people running the business are very different, with very different needs. But every owner has the same goal: get as much money as they can for their chain, in the quickest possible time.
CSNews: We've seen many large, once-successful retailers fail after growing too quickly. How do you avoid that?
Budoi: We are trying to be very selective and every deal has to stand on its own. We are trying to grow at a pace we, as people in management, can handle, and we don't want to tax ourselves from a capital position. Sometimes the best deals are those you never do.
CSNews: The Ohio stores are branded Marathon, Pittsburgh-area stores fly the BP flag, and you supply fuel to other dealer stores. What are your plans as a petroleum marketer?
Budoi: We believe in leveraging the strength of a quality brand and in our markets, BP and Marathon are leaders. We are mostly focused on operating locations as company-operated stores, but we do have a small dealer network, and we are always looking to grow that side of the business too.
CSNews: In this economy, why are you optimistic EZ Energy can grow, and remain profitable, at the pace you expect?
Budoi: Our biggest challenges are those everyone else faces -- credit card fees and finding, hiring and motivating people. But it is all in the execution.
Our success depends on the people behind the counter. For the most part, our employees came with the stores we purchased. We have some top-quality management and operations folks on the ground managing the stores. Store managers really bought into the process, and we try to include them by developing programs and bonuses to encourage that.
C-store experience in employees isn't mandatory. It's more about the right attitude -- something customers notice.
Zahavi: We were recently named Rookie of the Year for ampm franchisees. Except for one franchisee, out West, who beat us by a slight margin, we had the highest average quarterly inspection scores across the country, and set individual records at five of our ampm stores. The stores are ranked between 0 and 100 percent; we had stores scoring in excess of 100 percent in operations.
As far as the economy and capital markets are concerned, there is always capital available for quality operations and quality assets.
The c-store retailer is a subsidiary of EZ Energy Ltd., an Israeli, publicly traded holding company controlled by Eli Zahavi, formerly vice president of marketing/operations for Delek Group's Israeli operations and former vice chairman of Alon USA, the Dallas-based refiner and operator of 300 c-stores in west Texas and New Mexico.
Today, EZ Energy USA is being built on the solid performance of eight Easy Trip stores, acquired in June 2007 from Central Ohio Energy, and 17 Pittsburgh-area BP stores. Of those sites, 12 are being converted to franchised ampm stores, five others to Easy Trip.
President and CEO Gregg Budoi, former CFO of Dairy Mart Convenience Stores Inc., is running the growing collection of stores.
"We believe the ampm franchise offering will be a great part of our growth," Budoi said. "At the same time, we are looking to create another very solid brand of convenience stores, Easy Trip."
Budoi is joined by Oren Zahavi, EZ Energy's vice chairman, concentrating on mergers and acquisitions. CSNews recently talked to Budoi and Oren Zahavi about building a new c-store company from existing stores in a challenging economic environment.
CSNews: Why enter the U.S. convenience market now?
Zahavi: There is limited opportunity, in terms of retail space, in Israel. When you look at the opportunities here, in terms of land, population, retail environment and laws, there are many favorable elements in play today to move into the U.S. very quickly.
CSNews: EZ Energy is one-year-old, but Eli and your management team have a great deal of experience in the industry. What are your plans for this new venture?
Zahavi: Being publicly traded, we are heavily motivated to grow. We have received significant interest from sellers of smaller chains, and we are pleased to work with the major oil companies, such as BP, in their quest to exit [directly operated] retail operations.
In the end, we have two growth paths: through acquisitions to gain scale, and through organic growth in our own stores with brand awareness and improved offerings. In the next couple years, we plan to operate hundreds of locations.
Budoi: As we create our own brand and our own comprehensive, quality foodservice offerings, one of the best ways to do it is to copy someone doing it very well, like ampm, and then create own our more innovative offerings in the future.
Being an ampm franchisee gives us a chance to run and grow those stores, while leveraging some ideas into our Easy Trip stores. As an acquisition company -- while we may build a few stores along the way too -- we may come across a brand more meaningful or significant than Easy Trip is now. Because we are in our infancy, that may justify us re-branding our Easy Trip stores. But one thing is sure: Having a solid and consistent brand message to the consumer is very important to us.
CSNews: The industry is familiar with the ampm offer, including a strong foodservice business and a wide variety of fountain drinks. What will customers find at Easy Trip?
Budoi: They will be very similar to the ampm stores, although not exactly alike obviously, because of ampm's proprietary offer. But we are heading down the same path -- prepared foods, grab-and-go meals, bringing the foodservice offer through the day and into the evening meal.
My main focus is having quality operations, clean stores and employees who understand foodservice and customer service. We want to have more of a restaurant mentality, while offering customers other standard c-store products so they have an alternative to going to a 120,000-square-foot box to get quality products.
We want to be consistent in our core brand offer, but encourage store managers and regional managers to tweak the mix and make changes unique to the neighborhood.
CSNews: Last year, you had a deal for a chain of stores that fell through. What happened?
Budoi: It's not dead, but it's not going forward immediately either. As a publicly traded company, that's about all I can say.
CSNews: What type of stores are you looking to buy?
Budoi: The Central Ohio Energy stores fit our profile perfectly. They have above average gasoline and inside volumes and physical facilities are large enough to do our foodservice offer very well. Most of the stores in Ohio have kitchen facilities and freezers, making it easier to create our own offer.
Generally, we are looking for smaller organizations with quality physical assets, above-average inside and at-the-pump sales, and have an opportunity to improve on the organization in some form.
Everyone has facets of their brand and offering working well, but may not have everything exactly where it needs to be. We all have our own view of the business and what we think will be successful. We plan to utilize certain elements from each of our acquisitions to get one unified offering.
Geographically, we are concentrated in Ohio and Pennsylvania, and see ourselves growing around that area. But at the same time, we'd like to diversify our markets. We are actively pursuing assets in the Southeast. Ideally, as we become a chain of a few hundred stores, we would like a presence in the Midwest and Southeast and grow around those two hubs.
CSNews: You have a great deal of competition eyeing those same stores. What gives you a leg up on, say, Couche-Tard or other large chain?
Budoi: I think we are more willing to work with owners to help them exit their business, if that is what they choose to do. If they have 25 stores and 18 are the highest quality, but the remaining are average, instead of cherry-picking good sites, we are trying to work with owners to buy the whole chain, so they don't have anything hanging.
We bring a more personalized ability to work and find a solution to each acquisition. There are creative ways to do that. Although c-stores are very similar, the people running the business are very different, with very different needs. But every owner has the same goal: get as much money as they can for their chain, in the quickest possible time.
CSNews: We've seen many large, once-successful retailers fail after growing too quickly. How do you avoid that?
Budoi: We are trying to be very selective and every deal has to stand on its own. We are trying to grow at a pace we, as people in management, can handle, and we don't want to tax ourselves from a capital position. Sometimes the best deals are those you never do.
CSNews: The Ohio stores are branded Marathon, Pittsburgh-area stores fly the BP flag, and you supply fuel to other dealer stores. What are your plans as a petroleum marketer?
Budoi: We believe in leveraging the strength of a quality brand and in our markets, BP and Marathon are leaders. We are mostly focused on operating locations as company-operated stores, but we do have a small dealer network, and we are always looking to grow that side of the business too.
CSNews: In this economy, why are you optimistic EZ Energy can grow, and remain profitable, at the pace you expect?
Budoi: Our biggest challenges are those everyone else faces -- credit card fees and finding, hiring and motivating people. But it is all in the execution.
Our success depends on the people behind the counter. For the most part, our employees came with the stores we purchased. We have some top-quality management and operations folks on the ground managing the stores. Store managers really bought into the process, and we try to include them by developing programs and bonuses to encourage that.
C-store experience in employees isn't mandatory. It's more about the right attitude -- something customers notice.
Zahavi: We were recently named Rookie of the Year for ampm franchisees. Except for one franchisee, out West, who beat us by a slight margin, we had the highest average quarterly inspection scores across the country, and set individual records at five of our ampm stores. The stores are ranked between 0 and 100 percent; we had stores scoring in excess of 100 percent in operations.
As far as the economy and capital markets are concerned, there is always capital available for quality operations and quality assets.