Out of the Box

Not long ago, a group of 15 frequent MAPCO shoppers sat in a focus group sampling burgers, breakfast sandwiches, wraps and paninis that, unbeknownst to them, were part of a new foodservice program in the works at the convenience store retailer. When asked where they would expect to get such food, the customers offered up the names of several fast casual chains, such as Applebee's, Chili's and O'Charley's.

"Would you buy it at a MAPCO store?" the moderator questioned.

Not surprising to MAPCO executives, the response was overwhelmingly, "No."

"What about this MAPCO store?" the moderator then asked the group, showing them renderings of the chain's MAPCO Mart prototype, a new upscale convenience store with a heavy emphasis on fresh-prepared food.

This time, the consumers' response was strongly, "Yes."

That shift in customer perception is exactly what MAPCO Express Inc. — a subsidiary of Delek US Holdings Inc. since 2001 — is hoping to achieve with its new MAPCO Mart store, the first of which debuted last December in Brentwood, Tenn.

"The customers need to see something different [if they are to buy into the foodservice offering]," Paul Pierce, vice president of marketing for the Franklin, Tenn.-based retailer, told CSNews in an exclusive interview.

The mantra of the convenience store industry has long been "location, location, location," he noted. But the way MAPCO executives see it these days, location is only good for so long — until someone moves into a better location.

"You have to have something that you can hang your hat on, something people know when they see your brand. Otherwise, you're solely dependent on your location," Pierce said.

Long-term, MAPCO believes its point of differentiation will be MAPCO Mart, an upscale c-store that caters to a more diverse group of people, provides a more pleasant shopping experience, stocks more products and offers quality food comparable to what's available at a fast casual restaurant, but at a better price point and in less time.

Already, MAPCO Marts are attracting a very different customer base than the traditional MAPCO Express c-stores. Businesswomen are shopping the store; mothers with children are stopping in for lunch. Half the customers coming in are not the traditional c-store customers, said MAPCO division manager Brett McCarthy.

Defining The Future

MAPCO Mart is the result of a bigger endeavor started by the chain's leadership in September 2004 and dubbed "Project Mercury." Their goal was to define what MAPCO was, what they wanted it to be and where they wanted it to go.

MAPCO brought in Toronto-based consulting firm Shikatani LaCroix Design and engaged more than 250 employees in the revamp process, from store managers to office clerks to top-level management. They broke the business into segments and did internal focus groups. And they conducted market research studies, customer surveys and external focus groups.

"The goal was not just to define a new store," said Pierce. "The goal was really to define more of a culture and find the direction we would go in the future. The store was a piece of that — a major piece — because ultimately it is what the consumer is going to see."

A critical part of making that future a reality was secured in May when MAPCO's parent company, Delek US Holdings, became a publicly traded company. Through its initial public offering, Delek raised proceeds of about $172 million (net of underwriting discounts), which executives said would be used to repay debt and for acquisitions and capital improvements. Recently, MAPCO reached an agreement to acquire all 43 fuel and c-stores of Dalton, Ga.-based Fast Petroleum Inc.

The MAPCO Mart concept, though, is the clearest sign of the retailer's new direction.

In developing the prototype, the company's strategy was to take many of the ideas in the c-store industry and other existing channels, and then step out of the box to develop something newer and different than anything in the marketplace today.

The differences between a new MAPCO Mart and a traditional MAPCO Express store are apparent as soon as customers lay eyes on the building. For starters, MAPCO Marts are more than 4,000 square feet compared to the existing store average of about 2,500 square feet, according to Dana Young, MAPCO's vice president of real estate.

The extra space has allowed the chain to beef up such categories as beer, cigarettes and other tobacco products, candy, ice cream and general merchandise.

The store's design is intended to convey the message that MAPCO Mart is a destination for food. The design team tried to make the store look like a sit-down restaurant from the outside in, starting with the stone and brick facade and using warmer earth tones inside. There's exterior patio seating and two interior seating areas — counter style along a wall and bar-top tables in the center — which Young said also lends to the restaurant feel. On average, about 35 percent of each MAPCO Mart is dedicated to the chain's new proprietary foodservice program, Grille Marx.

Grille Marx is a far cry from the foodservice at traditional MAPCO Express stores, which consists of coffee, packaged sandwiches, a hot dog program at about 180 locations, and an on-premise chicken program at 19 stores, said MAPCO's director of foodservice Jerry Weiner, who left Rutter's Farm Stores in January 2005. In just six months, he developed the foodservice program for MAPCO Marts.

As the name suggests, the Grille Marx program is based on the grill. It would've been easy to prepare the food in the back, out of sight from customers, but Weiner told CSNews the grill and the fryers are all part of the theater and help to set the tone of a restaurant. By preparing everything in front of the customers, the store gains the shoppers' trust and entices them to try something, said Weiner.

Menu choices range from the 100 percent Angus burger to Panini sandwiches with the choice of focaccia and ciabatta breads, to MAPCO's signature item — the cheese steak.

The staple convenience store roller grill offerings are still available as well. Every food product, aside from the roller grill items and desserts, has zero trans fat. MAPCO's main suppliers for its food products are Sysco and McLane Co. Inc.

"It was very important to me that we appeal to a mass audience, which is why the menu crosses so many food types," said Weiner. "I certainly didn't want to give up the core customer, but wanted to appeal to females, to older customers, to people not typical to c-stores. I think everybody is trying to find that magic bullet."

Soon, MAPCO will have enough sales history on each menu item to tweak the selection, adding or subtracting items, said Weiner.

New items already on the horizon are more appetizers, including five flavors of chicken wings, as well as soups and limited-time offers beginning this fall. Plans are also in the works to do catering, to go after the afternoon snack business with smaller-portion snack items, and to improve the elusive evening daypart, he said.

At the same time MAPCO Mart is creating the atmosphere of a restaurant, the chain is acutely aware that convenience is paramount to its hurried customers. Everything on the menu is assured to be ready in three minutes or less.

To speed up orders, MAPCO Marts feature touch screen ordering. Every store has a minimum of three interior touch screens, supplied by IDS. Receipts are assigned a number and a microphone system prompts customers when their order is ready.

"With touch screen ordering, you can have multiple people ordering at one time and once they're done, they're free to walk the store until their order is called," said Weiner. "You gain shopability. And touch screens have plus-selling ability, which adds to sales as well."

MAPCO Marts are testing the use of outside touch screens at the fuel pumps as well.

For the time-starved customer, MAPCO Marts also have hot and cold grab-and-go boxes with the same food that's made to order.

In beverages, MAPCO has placed a lot of emphasis on enhancing its Café Xpress coffee offering. At MAPCO Mart locations, there are five varieties of brewed products, including Extreme Caffeine, which boasts double the caffeine as regular coffee. The stores are also equipped with machines dispensing 16 different hot beverages, including lattes, steamers, cappuccinos and flavored hot chocolates.

"The coffee program is where I'm looking for the biggest growth," Weiner said.



Time and Patience

MAPCO's management is well aware that it's going to take more time and patience to build the Grille Marx brand, compared with an already established national or regional brand. MAPCO does have branded foodservice — Blimpies and Subway in select stores — but Pierce said the company felt it was necessary to go proprietary.

"The studies have shown that customers want fresh food and for them, the brands aren't as important as the freshness of the food," said Pierce. "Third-party brands speed up the process and that's a good program short-term. But if you're willing to make the investment today, we think this will pay off in the future."

He concedes, though, that the proprietary program is not going to be an overnight success. "It's going to take time. The first step is to get the food in people's mouths, get them to try it, and focus our time and energy on delivering a consistent product."

To that end, MAPCO Marts conduct extensive sampling at the gasoline pumps during peak dining times, such as lunch.

The goal, according to Weiner, is to peel away fast food customers. His opinion is that fast food has lost some of its charm now that the big players have expanded their menus to the point where they're losing consistency and speed and there's no longer much of a price advantage.

MAPCO Mart is also targeting another customer — the person who wants to go to a fast casual restaurant like Chili's but doesn't have time for a 50-minute lunch. "I can see them coming to us once they realize our food quality," Weiner told CSNews.

A Growing Brand

While MAPCO Mart is a herald for the future of the entire chain, which as of July 1, stood at 349 stores, including 140 in the Nashville market, MAPCO isn't abandoning its other store trademarks that include MAPCO Express, Discount Food Mart and East Coast. But, company executives are evaluating each existing location to determine its long-term viability, said Pierce.

If a store can accommodate the full Grille Marx program, and it's in a growth area, it will likely become a full-scale MAPCO Mart. If a store doesn't have the necessary lot size, but is still in a good location in a growth area, it will likely be retrofitted to look like a MAPCO Mart and have a grab-and-go Grille Marx Express offering.

Meanwhile, stores that are profitable but not in the best growth areas could be re-imaged, meaning the exterior signage and interior graphics would be converted. However, there would be no changes to their basic operations.

"We feel like MAPCO Mart is the name we're moving toward for the future, so if a store fits our future vision, we'll re-image it as a MAPCO Mart," Pierce explained. "But there will still be some MAPCO Express stores."

Since December 2005, four MAPCO Marts have been opened. By the end of this year, a total of 10 new MAPCO Marts will be in operation, four through ground-up construction and six raze and rebuilds. Additionally, 10 existing MAPCO Express stores will be retrofitted to the new concept, said real estate chief Young.

Nine new MAPCO Marts and 10 retrofits are planned for 2007, as are at least 15 re-images.

For 2006, all MAPCO Marts are being placed in the Nashville market. After that, though, MAPCO has its eyes trained on other territories for expansion, including Kentucky, Alabama, Florida, Georgia, Arkansas, Mississippi and Louisiana. It is the most aggressive expansion MAPCO has undertaken, according to Young.

He told CSNews that MAPCO's real estate strategy is two-fold. First, the company is identifying cities that have higher growth rates and moving into those areas either by buying land or through acquisitions. The company is also trying to anticipate where the future growth is going to be, so the chain can get there first.

"We are buying land-banked sites in the areas where we anticipate the best growth," Young said. "It may not be there yet, but we get the best locations at the best prices early and then hold them until the market comes to that area."

By moving into an area and building multiple stores, Young said the chain is able to bid the projects as a package and, therefore, get better pricing.

Just The Beginning

MAPCO's work is far from finished, according to its executives. This is an evolving process and in their minds, this is only the beginning of the evolution.

"We're evolving from a typical c-store to something in our minds that is more futuristic and something that is going to allow us to survive and thrive further into the future," said Pierce. "I don't think the evolving will ever stop."