The Shifting Culture of Convenience

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The Shifting Culture of Convenience

Like many before him, Dinesh Gandhi came to the United States with the desire to create a better life for himself and the family he left behind in India. With an entrepreneurial spirit ingrained in him from his native country, he always knew that he would someday own his own business. He just didn't know it would be a convenience store.

"That's the way it is in my culture. That's the nature we have," Gandhi told Convenience Store News. "You always are the entrepreneur. You always want to have your own business."

He entered the industry in 1993 when a friend told him of a convenience store for sale in Florida. Back in India, Gandhi had run his father's business, a retail operation similar to a c-store, so he had the necessary experience. He also had capital to invest — money earned from three years of working as the general manager of a Los Angeles hotel — and getting into the convenience business was not that expensive or difficult, he recalled.

Still, Gandhi recognized it was a huge risk, but it was one he was willing to take. His gamble has since paid off as he now owns two profitable Florida c-stores. He bought the second location from the same owner just a year after the first.

"Convenience stores — it's a real good industry," he said. "The beauty of this country is that if you're working hard, there's always more opportunity to grow."

An increasing number of immigrants like Gandhi — often referred to as New Americans — are finding opportunity in the convenience store industry. New American is a term used to describe recent immigrants to the U.S., usually of Asian or Middle Eastern descent. While New American ownership of c-stores is certainly not a new trend, industry insiders agree that this segment continues to grow in both numbers and influence.

"New Americans are still mostly smaller players. Five to 10 years from now, though, the larger regional jobbers and convenience store operators are going to be New American-owned," said Tom Kelso, a managing director of Matrix Capital Markets Group Inc. in Richmond, Va. "The interest is as strong as it ever was, if not stronger."

C-store ownership is appealing to New Americans for several reasons. Foremost is that it's an easy and affordable entry point into a growing business.

Immigrants from places like India have two choices when they arrive in this country: find a job or own a business, said Satya Shaw, president of the Asian American Convenience Stores Association (AACSA), which represents 10,000 members with 50,000 stores, that as a group has purchasing power of more than $50 million.

Many New Americans who take a job often find work difficult because of communication barriers, said Shaw, so they work long enough to earn enough money to start or buy their own business. Some venture into the hotel/motel industry, but since that requires a larger investment, others choose to operate convenience stores.

"In convenience and gas, the entry into the business is at its lowest level. The English-speaking skills don't have to be that great, and someone willing to work 7 days a week, 12 hours a day, can make a nice living for themselves," said Evan Gladstone, executive managing director of Chicago-based NRC Realty Advisors LLC.

Another attraction, noted by National Association of Convenience Stores (NACS) director of communications Jeff Lenard, is that in other countries, retail is considered one of — if not, the most — honorable professions, above the level of how doctors or lawyers are esteemed in the U.S. Retailers in these areas are perceived as the people who most help their communities.

Given this background, many New Americans come to the states with considerable expertise in how to sell, and these skills seem to transfer well into the c-store industry, Lenard added.

Strength In Numbers

It's difficult to determine just how significant the industry's New American population is since neither NACS, nor the U.S. Small Business Administration, keeps such figures.

The U.S. Census Bureau, through its Survey of Business Owners, does provide statistics on the composition of the nation's retail businesses by race, but doesn't specify between American-born versus immigrant owners. According to its most recent report, of nearly 2.9 million retail businesses — including c-stores and gas stations — the ownership was 5.3 percent Hispanic/Latino; 83.8 percent non-Hispanic/Latino white; 3.6 percent Black/ African American; 5.3 percent Asian; 0.7 percent American Indian and Alaska Native; 0.1 percent Native Hawaiian/Other Pacific Islander; and 1.2 percent Other.

Perhaps, a better measure of New Americans' reach into the convenience channel is to look at who's buying today's available c-stores. As Big Oil chains, such as BP plc and Shell, continue to shed their company-operated sites, there are abundant opportunities for easy entry into the business, and New Americans are seizing them.

Kelso said every sale that his company conducts, to one degree or another, has New American participation, ranging from single-store buyers to New American-owned companies that operate several stores.

Assets in certain areas of the country tend to draw a higher interest from New Americans than others, he said, adding that those garnering the greatest interest, not surprisingly, are in areas where there's a heavy New American population, such as along the East Coast, the Southeast, the Gulf Coast, the state of Texas, the industrialized cities in the Midwest like Detroit and Chicago, and the West Coast.

NRC Realty also reports that 80 to 90 percent of the bidders and successful buyers in its typical sales are New Americans, mostly of South Asian or Middle Eastern descent, said Gladstone. When selling individual sites or a group of "buy one, some or all," he said the majority are first-time buyers. In the distributor arena, there are more multi-operators.

Big Oil is targeting New Americans as potential franchisees, as well. BP has named a national franchise manager to recruit for BP America, with a special emphasis on attracting minority franchisees — among both new and established Americans.

With the minority population — and its buying power — swelling, the company wants to have sites that better represent the communities they serve, according to Michael Carr, who assumed the dual role of franchise development manager and diversity inclusion manager this April. Between 2003 and 2008, Carr said Latino buying power is expected to rise from $652 billion to $1.2 trillion; Asian-American from $344 billion to $530 billion; and African-American from $690 billion to $920 billion.

BP already has many "diversity dealers" in its retail network west of the Rockies, and Carr said the chain wants to mirror that east of the Rockies, where BP is now bringing its am/pm franchise model for the first time. "It's something we're looking at very strongly in all aspects and all communities. It just makes great business sense," he explained.

To recruit minority candidates, Carr has been racking up a great deal of miles visiting such ethnic organizations as the Hispanic Chamber of Commerce and the National Urban League, and setting up outreach programs with local community organizations.

The company has also set up a hotline (888) 894-2676 – and is advertising for qualified candidates in USA Today and The Wall Street Journal. The company is looking to lock in franchisees for a 20-year agreement under which they'd own the land and the site.

So far, BP's efforts are generating a lot of interest. "We have some good candidates that are in the pike, and we'll have a lot more to talk about down the road," Carr said. "We think this is going to have a really positive impact."

From Struggle To Success

Successful new American owners have an economic model that's more efficient than that of a company operating 25 stores, according to Kelso.

"They are able to focus their attention on a handful of sites. They are employing relatives and family members, or other members of the New American community, so their cost of labor is more efficient, as well as their cost of operation. They don't steal from themselves. This is why they are able to take properties that were previously company-operated and make them profitable, he explained.

Their closeness to the operation is the biggest plus, said Gladstone. Whereas major oil companies will have not only the store management and a field operation, but then another layer above that, New American stores are almost invariably self-managed. "The buyer is going to be at that store 24/7 to make sure that it succeeds," he noted.

Florida c-store owner, Gandhi, recalls working 60 to 100 hours most weeks. In fact, for the first three to four years, he and his wife ran both stores completely on their own. Now, they have hired two employees at each.

Survival wasn't easy, he said. In the beginning, it was a constant struggle until they slowly built up business. Their initial strategy was to sell cheaper than anyone else, which meant markups of barely 10 to 12 percent across all product categories.

"We used to beat any franchise store," Gandhi said. "It's not as [easy] as it used to be. Nowadays, you have to depend on location to stay competitive to your market. [The big players'] buying volume is so high that they're getting much cheaper prices."

His biggest challenge, he said, was the lack of capital. For almost a year, he was in a constant cash crisis, as any money made was reinvested right back into the store.

To purchase the site, Gandhi used a combination of his own money and financing from friends and other members of the Indian community. At least eight people, including the man from whom he bought the store, contributed close to $25,000.

Gandhi, who was the first in his family to immigrate to the United States, has since contributed to help others open their own stores. "My hand is always out to help other people. That's how I grew up, so I'm always ready to help the right person — someone who wants to grow and work hard," he said.

Borrowing money from friends and relatives is a common practice, according to Shaw, who added that obtaining credit loans is the No. 1 challenge that faces New Americans trying to step into the convenience store industry. The association is making good progress in trying to form alliances with banks and the Small Business Administration to assist its members in getting loans, he said.

New Americans have proven that their business models work, that they're successful, and that they can pay off their debts, so traditional lenders like the commercial banks and the SBA are more willing to lend to them today, said Kelso. "They are lending to New Americans equal to or even more than other buyers," he noted.

Like all c-store retailers, however, New Americans have room to improve their stores and increase their profit margins. And not all are successful in their endeavors.

Since many do not have strong industry connections, it's often a challenge for them to get the best ideas and best practices in their stores, NACS' Lenard pointed out. Because of this, they've become on occasion the butt of jokes and unflattering stereotypes like the character, Apu Nahasapeemapetilon, Kwik-E-Mart owner, on "The Simpsons."

"As an industry, we are only as good as we are perceived to be by consumers," Lenard said. "If we can all talk together, we can avoid the cheap-shot jokes you hear on late-night TV."

Additionally, cultural differences sometimes arise in what certain parts of the world expect from the buying experience. In many cultures, things like appearance, attention to detail and compliance to programs and contracts may not be as important as they are in the U.S., said Mike Zielinski, president and CEO of Hinsdale, Ill.-based Royal Buying Group Inc., which partners with AACSA to offer merchandising and marketing services. Of Royal Buying Group's 5,300 members, 60 percent are of Asian-American descent.

Zielinski added that New Americans have to be very cognizant of cost control, and sometimes that means being creative in their operations in order to accomplish their personal financial goals, while providing a great customer experience. "The thing we're helping them with is understanding what's needed from the manufacturer side," he said.

New Americans are already a very important part of the convenience store industry, Zielinski said, and they are going to play an important role in its future.

"The more they can work together and the more the manufacturing community works with them will dictate how successful they, and in turn our industry, becomes."