Outsourcing Pays Off for Flyers Energy

AUBURN, Calif. – Flyers Energy LLC, operator of 54 convenience stores throughout central and northern California and fuel distributor to a couple hundred dealer operations in California and Nevada, recently completed a 10-month test of a new outsourcing program that handled all store operations, from customer service to merchandising to human resources.

Flyers, which changed its name from Nella Oil Co. in 2011 to align with its recognizable Flyers retail brand, operates a wide range of store types, from 3,000-square-foot convenience stores to kiosks as small as 9 square feet, according to Rick Teske, general manager for the company, based just northwest of Sacramento.

Teske told CSNews Online that the test program, developed with Temple, Texas-based Convenience Management Systems Inc. (CMSI), “did a great job in guest service, inventory control and housekeeping, while maintaining in-store sales at the two test stores.”

Roy Strasburger, proprietor of CMSI, has long been involved in the business of operating retail store sites for convenience and fuel retailers, jobbers and financial institutions holding foreclosed assets. Prior to 2012, his company also operated its own stores under the Quix banner, but sold those units to 7-Eleven Inc. The number of contract-managed stores fluctuates as locations are sold and new contracts taken on, but at any given time over the past few years, Strasburger has operated as many as 2,000 locations or more in the United States and internationally.

Dubbed the operator of “America’s Largest Invisible C-store” company in a Convenience Store News article in 2010, CMSI’s core business provides contracted operations for companies that “want to be in the convenience store business, but don’t want to run the stores,” said Strasburger. Services include all back-office accounting (such as managing payables, profit and loss statements, etc.) and managing all marketing relationships.

The new service provides both store staffing and field supervision under CMSI’s management. CMSI takes on most of the operational liability for the owner. It is financially responsible for excessive cash and inventory loss, as well as legally responsible for the sale of restrictive products such as tobacco and alcoholic beverages.

“We are responsible for restrictive product sales, cash loss, the majority of general liability issues like slip and falls, workers’ compensation, hiring and firing, employee training, etc.,” Strasburger explained.

Store staff members become employees of CMSI in such a scenario and Strasburger provides professional management and field supervision.

The new program also benefits companies that are dealing with the employer mandate of the Affordable Care Act (ACA). With CMSI taking on their store employees, mid-sized retailers may be able to get under the 50 employee threshold of the ACA, providing flexibility for the store owner.

“We take over responsibility for ACA registration, managing it [and] the cost of insurance. It leaves the company with the flexibility to do what they feel is best regarding health care coverage for their remaining employees,” said Strasburger.

Flyers chose to use a hybrid of the CSMI service in two of its mid-sized stores, said Teske. When it came to merchandising, Strasburger’s team handled most of the buying, but Flyers maintained the flexibility to inject new items into the store mix.

“The CSMI program is great for companies that don’t have the depth of trained employees. They have great synergy with our HR department and we were very happy with the test program,” said Teske.

The general manager noted, however, that Flyers “is going back to retailing ourselves” as part of its expansion plan. In May, the company purchased the commercial fueling, wholesale contracts and two convenience stores from Redding Oil Co. in northern California. Flyers is now actively looking for additional acquisitions throughout California, Oregon, Washington, Idaho, Nevada and Arizona.

In addition to its convenience store operations, Flyers Energy also owns two fuel terminals in Nevada and pulls from 34 terminals in four states. It is a branded distributor of Valero, Shell and Chevron motor fuels, as well as its own Flyers proprietary brand of fuel.