CENTENNIAL — Ten Firsthand convenience stores in Colorado were converted to 7-Eleven stores last month in what may become a major trend among independents to deal with tough competition and rising costs in the industry.

The announcement was made by Richard Oneslager, president of Firsthand Management, LLC, the retail operating arm of Balmar Petroleum, a petroleum fuels distributor based in Centennial. Oneslager also is the new chairman of the National Association of Convenience Stores.

Oneslager said he hoped the conversion would offer more to his customers and improve his bottom line.

Firsthand is the largest participant so far in 7-Eleven, Inc.'s new Business Conversion Program designed to expand its franchise operation. The Firsthand stores assuming the new label are three each in Greeley and Fort Collins, and one each in Milliken, Windsor, Loveland and Parker.

The 7-Eleven corporation will upgrade the stores, provide new equipment and offer technology and business counseling as part of the agreement.

"With rising prices and credit card fees and gas margins continuing to erode, we see the store offer as increasingly important," Oneslager said. Among the advantages he cited were daily delivery of fresh foods and other time-senstive products, a better supply chain, updated technology, signature products and the ability to leverage cost of goods.

"We believe this is a sound back-court solution for independent retailers in the fuel and convenience retailing business," Oneslager said.

"We have always admired what 7-Eleven has done with its stores. Just as important, we now are better positioned to really grow our store business. All of us in the gasoline sales business are feeling the pinch and increased volatility of gasoline margins. To be successful long term and improve our profitability, we needed a new business format, a well-recognized brand with trademarked products and services the consumer readily appreciates, and a business system with solid marketing plans," said Oneslager. He has been in the convenience store business for more than thirteen years and heads the operation of fourteen company-owned convenience/gasoline facilities in Colorado and sixteen stores in Portland, OR.

His Colorado stores will continue to offer the Shell and Conoco gasoline provided by Balmar.

From the 7-Eleven side, "Adding Firsthand stores to our franchise system meets our goals of growing our operation in key markets, expanding our offering to more people and adding economies of scale to our infrastructure and advertising," said Jeff Schenck, senior vice president of franchising and development.

Branding for the stores will get under way this month.

DENVER — Colorado gasoline prices finally caught up with the rest of the country in November. Gas that had been retailing for $2.79 now is selling for over $3 a gallon.

At some service stations in Colorado Springs, residents were shocked to find that the price jumped thirteen cents between the time they went to work and the time they came home one day.

The average price in the state by early November was $3.02 a gallon. Diesel fuel cost even more. The price hit $3.21, up from $3.05 in October.

DENVER — With the Governor pushing it, more drivers are turning to alternative fuels and gasoline station owners are agonizing over whether to take the plunge.

Drew Bascue, transportation sustainability coordinator for Boulder, said owners fear converting because of cost when the profit margin on gasoline is so small. Adding one E85 pump costs about $120,000.

"They make most of their money on inside sales, so anytime you're putting in fuel that's different you might not sell as much as the different grades of gas you're currently selling," he said.

But he said the word is finally getting out about the state and federal help available.

Colorado offers a tax credit of thirty-five percent of the total cost, up to $400,000 for any project that adds E85 or biodiesel. The federal government kicks in with a tax credit of thirty percent up to $30,000.

Even so, some station owners feel they just can't do it.

"We would love to install E85," said Jim Dooley, manager of PDQ Market. "But E85 is very corrosive — it eats away at the tank and down the road we might have a leak. Our corporate office doesn't want to spend the money on breaking up concrete and replacing the tank."

Replacing the tank, fuel dispensers and lines would run about $100,000 even with help from the government, he said.

There are other obstacles to adding E85 pumps, retailers said. Some oil companies bar any non-branded fuels at their franchises. Some oil suppliers require building new pumps at separate islands at a cost nearing $200,000. And although converting existing tanks and pumps to E85 is the least expensive option, it still is difficult because E85-specific pumps are not manufactured. Bascue said contractors have to disassemble a new or used pump, then switch out the components and rebuild it.

Nevertheless when the Dageenakis family, long-time gasoline retailers in the area, learned there were 4,000 owners of flex fuel vehicles in Boulder County who had to go way out of town to fill up, they decided to "bite the bullet.".

Jeff Dageenakis, co-owner with his brother Tony, of the ShortStop in nearby Gunbarrel, CO., admitted the challenge was great. It took four months to convert one pump.

"It's a big process. The tank lines have to be completely cleaned, all the probes and pumps have to be replaced because ethanol will eat the normal metal away," he said.

He said his dad, John Dageenakis, has been pushing him for two years to add ethanol to the pumps.

The elder Dageenakis is no stranger to taking a chance. He opened his first gasoline station in Boulder in 1957 at the corner of two two-lane roads, Arapahoe and Twenty-eighth Street, one of them a dead end.

He had a going business then. But the town grew and "We got squeezed out," he said.

"They started four-laneing the roads. They put in a shopping center and a bypass." Instead of adding to his revenue the growth hurt. "They took away some of our driveway space and we had to eliminate three of the four islands. It was hard to go in and out of the station," he recalled.

So he looked around and settled on Gunbarrel, six miles away in the county. There were only a few thousand residents. "If memory serves me, there was nothing out here. King Soopers was newly built and the country club was just being put in, but there was no industrial. I was a little apprehensive, wondered what I was getting into, but I figured it had potential, so I went ahead."

Then an IBM plant moved in and the town grew. Business eventually was so good he expanded and recruited his sons, Tony and Jeff. He is pleased at the way things turned out. "Growth in Boulder pushed me out and growth in Gunbarrel brought me here. It was the right move at the right time," he said.

So when Tony and Jeff were able recently to buy the Gunbarrel gasoline station from British Petroleum, it seemed like the right time to make some sweeping changes. Baseball enthusiasts, they decided the name ShortStop was perfect for the venture and have trade-marked it.

And E85 will put them on the cutting edge of the industry, they feel.

COLORADO SPRINGS — But those E85 pumps being installed around the state are so confusing to some they inadvertently fill up with the wrong fuel.

The owners of two Western Convenience stores that added E85 pumps here recently thought they were all prepared to make things easy. They put up bright yellow signs saying, "Stop! Not gasoline."

Nonetheless some went straight to the wrong pump.

"We've seen people with older cars that are not equipped to handle using it," said Michelle McCarville, manager of one of the stores. "We try to catch them and we hand out booklets explaining what E85 is and what kind of cars are able to use it, but the lower cost catches the driver's eye." E85 was selling for $2.09 a gallon at a time when regular unleaded was priced at $2.75.

One fellow wasn't even unhappy when he learned he filled up with the wrong fuel. "He said it didn't do anything to his car and it was a lot cheaper," McCarville said.

But Denny Lauer, owner of Acacia Park Service Center in downtown Colorado Springs, warned it will damage the engine of a vehicle not designed for flex fuel.

It might not hurt the vehicle the first time, he said, but constant use will drastically affect it.

Confusion at the first pump Pester Marketing Co. opened in Aurora prompted management to install plastic attachments on pump nozzles at its Farm Crest 1st Stop stores to alert customers that the product is not gasoline. Some of the Farm Crest 1st Stop stores have separate fuel dispensers bearing pictures of corn, the prime ingredient of ethanol, and are in different islands from gas and diesel.

For years Colorado Springs had only one E85 pump, at the Acorn Food Store on the south side of the city. But with government incentives more have come in. And the profits are there, the pioneers said. At one convenience store sales doubled.

And for those consumers who still don't know what E85 is state officials plan to crank up their publicity wagons.

PENROSE — Alan Drake is celebrating his thirty-year anniversary in the convenience store business, a business he learned from the ground up.

He was in high school when he approached the management of Kwik Stop to get a part-time job. They let him sweep parking lots, then stock shelves, and finally clerk. At the time there was only one Kwik Stop. Now there are six and Drake is director of operations.

He took a short break when he went to college on a basketball scholarship. But the Kwik Stop owner wasn't about to let him get away. He persuaded him to help run his store. In 1984 Drake helped acquire a second store, then a third, and so on, until he made the last acquisition in 2004. By then he was running the whole company. He manages all the merchandising, human resources, distribution and general store functions with assistance from partners such as McLane Co., Inc.

He believes a lean approach and a store customized to the locale are what had made the company such a success.

He keeps the staff large enough to run the stores efficiently, but not so big that he can't keep an eye on them. He praised his managers, many of whom have been with him since 1987.

"It's been a long time since I've had to be a jack of all trades."

To compete with the big boys he makes sure each store is distinctive. "What works in one town may not necessarily translate to another. So it is important to keep each store unique in concept and design."

He cited the last store Kwik Stop acquired. It originally was designed to be a Taj Mahal-like travel center. Halfway through the project, the owner halted construction and Kwik Stop stepped in. Most would have thought such an uptown look too glitzy for a rural convenience store and changed the concept, but Drake had an idea it would work with certain modifications.

He marketed to the large segment of retirees who normally wouldn't shop at an ordinary old convenience store, but who might be attracted to the fantasy element. He kept the full-scale restaurant in the design, but leased it out to a qualified restaurateur. "It has become one of our most successful stores," Drake said.

In all the stores he keeps to some old-fashioned ways of doing business, emphasizing cleanliness and friendliness. He also is committed to branded food service programs. "Subway brings in a lot of business," he said.

Many small convenience stores stock unbranded fuel. Not Drake. The company directly markets for both Shell and Valero's Diamond Shamrock brands.

"We're still the little guys, but I think branded fuels helps us," he said.

Drake is as excited about the future as he was thirty years ago when he started out.

"I think as long as we're in tune with what our customers want and what the industry is doing, and we are willing to change along with them, I don't see any challenges that can'tÊ be overcome."

FRISCO — The local Safeway is renovating to become more of a "lifestyle" store to compete with increased competition from discount department stores and, a short distance away in its parking lot, the Diamond Shamrock station also is undergoing a facelift.

Plans for the station incude a second free-standing canopy on the building's west side with two new fuel-dispensing islands, new sidewalk and curbing and exterior lighting and, to top it off, redesign of the convenience store exterior.

Once construction is completed, the store will carry the name of Valero, the parent company of Diamond Shamrock.

After customers leave the subdued lighting, potted plant ambience of Safeway, where organic and natural foods now abound, they can gas up at the spiffy facility nearby.

"It's going to look really nice,"said Frisco community planner Lina Lesmes.

COLORADO SPRINGS — Not only was he late for Halloween, but the guy's attempted "trick" at the service station went terribly wrong.

The clerk figured out right away that the gun the robber flourished was just a toy.

The hapless robber, wearing an orange Halloween mask, swaggered into a Diamond Shamrock station four days after Halloween and demanded money. He warned if he didn't get it he would shoot.

Clerk Tom Anderson recognized the gun was nothng but a plastic water gun. Unintimidated, he told the masquerader he had better run off. The robber thought it over and did just that.

BASALT — Remember the convenience store clerk who so incensed Latino customers by wearing a hat with the words "US Border Patrol" that someone later fired five shots through the window at the cashier's counter where he worked?

Well, Bruno Kirchenwitz's troubles aren't over. Not only was he later fired by 7-Eleven management, but he can't even get a beer in the town now.

He wrote a letter to the editor of the local newspaper complaining that he was kicked out of a local bar thanks to the tension the publicity stirred up.

Originally published in the December 2007 issue of the O&A Marketing News.
Copyright 2007 by KAL Publications Inc.