In many family convenience stores, next-generation leaders are helping forge their companies’ futures.
By David Bennett, Senior Editor
In the U.S., 97% of family businesses don’t survive past the third generation, according to the Family Business Institute.
No doubt that among those elevated statistics are convenience store entrepreneurs who had a succession plan, but determined his or her children weren’t up to the task. As a result, family businesses withered away or were sold to a hungry competitor.
Other c-store casualties included founders who failed to nurture and help their children to become strong, resourceful leaders. In some instances, children might have had career plans that didn’t include the family business.
In other cases, a portion of those family failures could probably be attributed to bad luck.
Terry Monroe, president and chief operating officer of American Business Brokers, is a consultant to convenience retailers seeking to acquire or sell real property. Monroe has encountered many family-owned c-store chains that have thrived and grown because of solid decisions by the patriarch or matriarch of the company. He has also seen them fail because next generation leaders who were charged with ensuring the company’s future just weren’t up to the task.
“I know a guy—third generation—who has 35 stores and 10 of the stores are losing money and he doesn’t have the guts to close them; that retailer is dying the death of a thousand cuts,” Monroe said.
On the other hand, there are plenty of next-generation c-store leaders who have been groomed for success and understand fully that the business challenges they face today are significant. The face of society is becoming younger, and older. The U.S. economy is a melding, global juggernaut; governmental rules that apply to businesses are stunningly more complex than ever before; and social trends are moving at a speed not seen five years ago.
It’s no secret that competition for qualified workers in U.S. retail today is intense. Moreover, the workforce climate is sodden by recent living-wage issues that many retailers fear will drive down profits, if not drive them out of business entirely. That wasn’t such a concern when Weigel’s Stores Inc. opened its doors 85 years ago.
Weigel’s began as a modest dairy enterprise in 1931 and operated as such for more than a quarter of a century under the direction of brothers William Weigel, Jr. and Lynn Weigel. Next generation heir, William Browder Weigel (Bill), helped lead the transition of the family dairy into a new era after the first Weigel’s drive-in dairy store opened in Knoxville, Tenn. in December 1958.
He opened the first Weigel’s walk-in convenience store in 1964. Today, Bill Weigel is company chairman.
He met Carol Ann Rector, whom he married in 1968. Bill and Ann have two daughters and a son. Kurt Weigel, who joined the company 12 years ago, is the fourth generation representative and now serves as director of recruiting for Weigel’s. Aside from his primary duties, he is charged with fortifying the company’s most important asset: its workforce.
In 1967, when the company introduced its first ICEE machine, the pay structure in the company was straightforward—hourly wages were fixed; the range of salaries were based on positions within the organization. At the time, Weigel’s mirrored the wage structure in the retail industry, which was far less convoluted than today.
But, times have changed.
For example, at least 20 states or local jurisdictions in the U.S. are discussing mandatory wage laws. Legislators in the state of New York and the city of Cleveland this year have discussed adopting a $15-per-hour minimum wage. So far Los Angeles, San Francisco, Oakland and Berkeley in California, and Seattle have approved phased-in minimum wage increases that will increase the hourly rates for residents to $15.
However, while states such as California have been making headlines, Tennessee’s minimum wage has remained $7.25 per hour. Though the federal minimum wage is at $7.25, Weigel’s has operated above that minimum wage threshold for a number of years.
In addition, the company encourages employees to take personal ownership of their slice of the business in a variety of ways. For the last 35 years, for example, the company has boasted a successful incentive program that pays managers and assistant managers a bonus focused on sales.
Now, President Obama is pushing a federal mandate that would boost wages for managers and assistant managers nationwide, while limiting bonuses and virtually undoing 35 years of entrepreneurial ingenuity at Weigel’s, which now employs about 800 people at 63 stores.
Federal law already requires most workers to get paid 1.5 times his or her hourly wage for any hours worked beyond 40 hours. But certain salaried employees such as managers and some in administrative jobs can be exempted.
If a manager or assistant manager makes more than $23,660 a year, for example, the company generally need not pay overtime, depending on a few other factors. The $23,660 level was set in 2004. President Obama wants to raise the bottom level to $47,476, and let it rise with inflation each year after that. People making less would earn overtime if they worked the necessary hours.
This is an issue that c-stores nationwide will have to address if the proposal becomes law. Kurt Weigel knows that such a federal policy will undoubtedly change how the family company does business from a workforce perspective, to include rewriting Weigel’s managerial bonus program.
“If they approve this, it’s going to change the whole landscape,” Weigel said.
The changing face of the local workforce is also something the company is contending with. Not only is the c-store developing new programs through social media and other means to reach Millennials, Weigel’s must also contend with how these younger employees fit into the organization. Just as he has experienced a host of changes since he joined the company, Kurt Weigel is adapting his hiring approach to a new generation of employees with new-age work values.
“Retail is a tough business, with all the hours we operate and the holidays we work,” Weigel said. “We are finding that expectations from employees and their work habits are different from prior generations.”
Aside from revamping its hiring and training programs, the c-store does use its legacy to sell the company to job applicants, especially a legacy that dates back 85 years.
“People like to work for a family-owned company. It represents stability,” Weigel said. “We’re locally owned and it’s a big draw. People love that.”
GOING TO COGO’S
Often next generation leaders are born into a company, then at the right time, groomed to ascend the company ladder.
John Eby lll married into the family c-store business, but the family is grateful because his business acumen and technical savviness was just what CoGo’s Co. needed in its president and CEO. Less than four months ago, Eby, who most recently was group leader of global information technology at Kraft Heinz Co., succeeded CoGo’s founder, Carl Colteryahn Jr.
CoGo’s, based in Belle Vernon, Pa., has 52 stores in Pennsylvania, Maryland and West Virginia. Of those total locations, 13 are franchises.
It was when Colteryahn, Eby’s father-in-law, began to suffer Alzheimer’s that Eby was asked to head the company. The opportunity arose at the same time that legacy H.J. Heinz Co. and Kraft Foods, was merging in 2015. Since his job was expected to migrate to Chicago in a year or so, Eby opted to stay close to home.
“Nobody else in the family had any involvement in the operation,” Eby said. “The board, which was basically family, wasn’t a practicing board. It was kind of going through the motions of being a c-store chain without a vision and a strategy per se, except for what (chief operating officer) Dave Heisler and his team were implementing.”
The origin of CoGo’s dates back to the turn of the 20th century and a dairyman named William Colteryahn. In 1917, Colteryahn’s son, Carl opened the Colteryahn Dairy on its present site in Carrick, a Pittsburgh neighborhood. In 1962, through a franchise arrangement with Stop-N-Go Food Stores, the first convenience store was opened on South Park Road in Bethel Park, and the unit remains open today.
The retail company later adopted the CoGo’s name.
CoGo’s board of directors was recently reconfigured, and while still made of family members, has changed to a body with more corporate knowhow. Besides Eby, new board members include Thomas Rafferty, another son-in-law of Colteryahn and until recently, a senior planning and operations executive with Levi Strauss & Co.
With the new board in place, Eby has been busy putting his background in technology and operational analytics to use by making some changes to the c-store chain’s foodservice program, in-store operations—including a new POS system—and looking hard at individual store performance. After taking over, Eby soon decided to close CoGo’s newest store that was built close to the main campus of West Virginia University.
“It was absolutely gorgeous, but there was zero traffic,” Eby said. “It was operating at a very large loss.”
Five more stores are slated to fall off CoGo’s portfolio because of leases that aren’t due for renewal.
Even with the number of stores dwindling this year, the new president has two goals in the next three years: increasing CoGo’s operating footprint and improving its foodservice expertise.
Having spent 13 years at a major food corporation, Eby has ideas about how to hone the c-store’s foodservice operations in terms of streamlining supply and distribution channels, while maintaining quality.
He likes where the company was headed before he came on board, including its “CoGo’s 2 Go Café” fresh offerings, ranging from breakfast sandwiches to salads and appetizers. Grab-and-go items that were once purchased from a commissary are now made on-site daily.
In addition, select stores also offer patrons custom pizza through the branded concept deVinci’s, developed by wholesale distributor Liberty USA.
Eby is now evaluating different offerings at different stores, experimenting with price points and product blends and then measuring the data.
When it comes to store selection by customers, price-related attributes fall below others, according to a new Nielsen report, “Think Small for Bigger Growth,” which breaks down the evolving retail landscape. For study participants high quality produce (57%), convenient location (56%) and product availability (54%) were rated as highly influential.
Eby is aware that “food deserts” exist in some urban communities that CoGo’s serves. In downtown Pittsburgh, he recently targeted three locations and changed the product mix to a larger grocery format to see how customers would respond. Using operational analytics and measurement tools, he found that by offering more produce and grocery items such as big boxes of cereal, diapers and other items—all at lower prices than area groceries were offering—in-store sales jumped significantly.
Going forward, Eby is excited to launch his three-year plan in earnest to see the direction CoGo’s is headed.
“These are very tactical things that we’re doing now, so they’re not really strategic,” Eby said. “Right now, we’re just gathering low-hanging fruit.”
In the last few years, Millennials have been assuming leadership positions, and more are being groomed to assume leadership positions going forward. They are increasingly becoming the backbone of U.S. organizations, including convenience store companies.
Millennials seem a good match for leading the c-store industry because of their awareness, creativity and propensity to achieve what they want now, Monroe said.
“The next generation understands that this is a ‘c’-store; it’s a box that sells items for convenience,” Monroe said. “They embrace technology and social media, which is important.”
Even in the small c-store chains nationwide, next generation leaders are taking charge.
After returning from World War II, family man Jack Frawley resumed his job as a fuel truck driver in Whitewater, Wis. In 1948, Jack purchased a fueling business from Cities Service Oil Co. and changed the name to Frawley Oil. In 1974, Jack’s son Mike Frawley, now company president, began working for the family business while in college.
Frawley Oil Co., based in Whitewater, Wis., today operates six Frawley’s-branded stores, extending the family-owned and operated chain link-by-link. Mike Frawley’s mother remains active as secretary/treasurer.
The third generation family business is perpetuated by Mike Frawley’s daughter, Paula and two sons, Phil and Brian—all vice presidents in the company.
Brian Frawley agrees that next generation executives will be instrumental in shaping the fabric of the c-store industry.
Besides awareness, creativity and desire, good communication skills are also a key tool, he said.
“As our family business grows into the third generation, patience and communication become paramount to our success,” said Brian Frawley. “In our particular situation, there are three siblings trying to work together towards a common goal, which can be difficult at times. We all have different areas of the retail and wholesale industry, but we have to work together to get the job done.”
The c-store chain not only seeks to engage Millennial-age customers through social media and all its patrons through Frawley Smart Rewards 4U loyalty program, but also instills a tone of quality customer service that has been carefully designed to pervade the entire organization.
“The key to growth and success of our business can be directly attributed to the quality, attitude and devotion of the people we work side by side with every day,” said Mike Frawley. “Every employee, whether they be a c-store clerk, car wash attendant, office employee, service mechanic, truck driver, store manager or store supervisor, all play a vital role in perpetuating our business. These are the people our customers see every day, and these are the people who allow Frawley Oil to still be an effective choice for our customers in the communities we serve.”
Davis Oil, based in Battle Creek, Mich., is a family-owned company founded by Richard Davis and Lew Katz. Davis eventually became sole proprietor and Davis Oil was born. In 1974 Richard’s son, James Davis, joined the company and this started what would be a father-son tradition in the family-owned business. Soon after, Davis Oil launched its first convenience store brand called “C-Store.”
Richard retired in 1990 and James’s sons Benjamin and Jonathon took over operations of both the wholesale fuel division and the C-Store chain of 19 stores, respectively. The company’s newest store opened late last year near the Grand River in Portland, Mich.
Jon Davis, president of C-Store, knows that big or small, next-generation companies still hold a special place within the industry. How they fare in the future, however, is up to each organization.
“While working alongside family, it’s of the utmost importance to keep in mind how decisions affect each person and that it’s a give-and-take relationship. Ultimately, both sides want the business to continue and to be profitable, so it’s all about finding that sweet spot that makes everyone feel like they are getting what they need,” Jon Davis said.
Back in Knoxville, Weigel’s still has its own dairy operations. More recently, it opened a 6,000-square-foot bakery, which produces fresh doughnuts, cookies and muffins for the stores daily. Weigel’s also expanded into a fresh made-to-order, kiosk-food program.
But the c-store can’t rest on its laurels. Kurt Weigel eventually will be responsible for guiding the company into its next phase of its corporate future—ultimately determining the direction for the next generation.
Like many other convenience store retailers, Weigel’s faces the challenge of expanding its operational footprint—to a much greater geographic radius of its corporate office in Powell, Tenn. Like most things that Weigel’s does, the steps leading up to such an expansion have to be measured.
“We are preparing now by purchasing sites for the next three years of our expansion,” Weigel said.
Expansion, workforce issues and operation analytics are all parts of the big picture for the foreseeable future.
One can argue that next-generation leaders are the final piece for success.
“I would love to someday see my boys and/or nephews working with us, but I would never want them to plan on it,” Jon Davis said. “There’s a lot that can happen in the meantime, so I’d rather them plan for the future by finding their own path first. If we are still going strong when they are adults, it would be a dream come true to work with them.”