After aggressive acquisition growth over the past decade, ARKO Corp., through its wholly owned subsidiary GPM Investments LLC, is embarking on a major remodel initiative, with plans to invest approximately $360 million over three to five years to bring 360 of its nearly 1,330 company-operated convenience stores across the U.S. under one unified design, while maintaining the individual banners known and loved in their local communities.
Meanwhile, the Richmond, Va.-based chain is continuing its focus on growth through acquisitions.
Arko Holdings Ltd., under the leadership of Chairman, President and CEO Arie Kotler, purchased control of GPM in 2011, when it directly operated and supplied fuel to 320 stores and had revenues of approximately $1.2 billion.
“Arie’s strategy was to continue to acquire companies, brand after brand after brand,” said Michael Bloom, EVP, chief merchandising and marketing officer for GPM. “It’s been his strategy for the last decade, and it’s been an incredible strategy.”
Over the past eight years, GPM has acquired its way to becoming the seventh-largest c-store chain in the U.S. Today, it operates or supplies stores in 33 states and the District of Columbia, including both its company-operated stores and approximately 1,600 dealer sites.
But Kotler and GPM are just getting started. In the past six months alone, the chain has made several strategic moves.
In December, GPM’s majority owner Arko Holdings Ltd., along with the remaining minority owners, merged with Haymaker Acquisition Corp. II, which resulted in ARKO Corp., a publicly traded company on the Nasdaq Stock Market, owning 100% of GPM. The move positions GPM to continue its expansion plans while also ramping up its store remodel plans.
In October 2020, GPM acquired Empire Petroleum Partners’ fuel distribution business and c-stores, adding 1,453 sites to GPM’s fuel distribution network as well as 84 company-operated stores.
And just last month, GPM announced a deal to acquire 61 ExpressStop c-stores in Michigan and Ohio, which is anticipated to close in the first half of 2021.
“Our model of growing through acquisition while keeping the local banners in place has delivered significant value for all of ARKO’s stakeholders,” said Kotler in a statement.
Today, ARKO Corp.’s family of community brands includes fas mart, shore stop, Scotchman, BreadBox, Young’s, Li’l Cricket, Next Door Store, Village Pantry, Apple Market, Jiffi Stop, Admiral Petroleum, Roadrunner Markets, Jiffy Stop Food Marts, E-Z Mart, 1-Stop, Town Star, Jetz, R Store and fastmarket.
“We operate them as one company, and everything’s centralized,” noted Bloom, who joined the company in 2019 after a long career at CVS Pharmacy, which also grew via acquisitions.
Now, GPM is turning its attention to an extensive store remodel initiative. The chain anticipates investing roughly $1 million per store for a total of $360 million over the 360 locations, Bloom said.
“We believe this remodel program will generate over $70+ million of incremental EBITDA over the next three to five years,” noted Kolter in a statement.
GPM typically acquires what Bloom calls “regional, usually family-owned, c-store chains that range in size. At the time of acquisition, the stores are often operating at a competitive disadvantage.”
“We’re at a level of scale,” Bloom said. “It’s time to go back and reinvest in these stores and turn on what I would call the true potential of sales and profitability in these stores.”
Bloom calls the new design,“evolutionary, not revolutionary.”
It will begin in the forecourt, with upgraded curb appeal — fresh blacktop in the parking lot and driveway, new sidewalks and revamped fuel canopies.
The exterior of each store will get an upgrade, as well.
“The only difference is going to be how we treat the brand itself,” Bloom explained. “So whether it’s fas mart, E-Z Mart or Scotchman — when you drive by these stores, they will look identical with the exception of the brand.”
The exterior refresh includes large windows and a stone or brick façade — depending on the rules of each municipality — that extends halfway up the building. “It could be stone in one market and brick in another, but the colors will appear similar,” Bloom said.
Because GPM grew via acquisitions, the stores feature various footprints, so the redesign was created to fit the existing store footprints, which range on average from approximately 1,800 to 2,800 square feet.
The interior design will also tie the brands together under a united appearance.
“When you walk inside one of our stores — no matter what the brand is — you will not know that you’re in a different store,” Bloom said.
Inside, each store will feature an open format. Where possible, the ceilings are being opened up to reveal exposed beams and to help the stores feel more spacious.
“We’re being much more efficient with space,” Bloom said.
Where stores used to have six to 10 cooler doors, they will now feature a minimum of 14 doors and a beer cave where space allows. All stores are also receiving freezers for a frozen food section. Due to the pandemic, customers are seeking quick, easy and convenient food, which includes stocking up on frozen selections.
“You will clearly see a food-dominant area of the store and a non-food-dominant area of the store,” Bloom said.
About 150 of the sites include full kitchens, but regardless, all upgraded stores will include an expanded grab-and-go area — that will include pre-made sandwiches, salads, fruit cups, parfaits and more — as well as a prepared food offering where space allows, including fried chicken, pizza and breakfast sandwiches.
The fountain area will include a minimum of 16 beverage options per fountain. In addition to a broad assortment of carbonated and non-carbonated fountain drinks and chewy ice, stores will feature iced coffee and include a minimum of two bean-to-cup coffee dispensers per store.
Each location will also feature a bakery program and at least two roller grills.
Originally, GPM was scheduled to launch its remodels in the first half of 2020, when COVID-19 halted plans, giving the chain an opportunity to rethink its strategy in light of how the pandemic has changed customer needs.
“We thought, ‘What if we remodeled 50 stores, and the pandemic changes the way people shop?’ And, guess what? As you know, it has clearly changed the way people shop,” Bloom said. “The foodservice that we’re focusing on is the pre-made, ready-to-go, grab-and-go service. That’s what customers are migrating to now (due to COVID-19), and we believe for the foreseeable future.”
With more emphasis on contactless transactions today, GPM is also working on a way for customers to order their bean-to-cup coffee via the GPM app on their phone, as well as expanding delivery services through DoorDash from 20 stores to more than 600 sites this year.
Each remodeled store will feature a new checkout experience, with a more spacious customer area offering new impulse shopping opportunities and an open merchandising concept. This includes a more visible backbar for tobacco and e-vape, allowing customers to better see each brand. Customers will also have the opportunity for mobile checkout via Apple Pay.
Each newly remodeled store will showcase a community wall welcoming customers and spotlighting things for which the town is known.
“The reason that we’re not going to consolidate our brands is because we believe it’s a point of differentiation for us. We believe that the local brand that’s been there for 50 years has meaning to the community (vs. a national brand). Now it’s our responsibility to make sure that we hold up the expectations,” Bloom said.
The first remodeled location recently opened its doors in February 2021 in Collinsville, Va., and 10 locations are currently scheduled for remodel, with the second site opening in June. After the first 10 locations are redesigned, GPM plans to evaluate all aspects of the design in action, making tweaks where necessary before scaling the design.
“We are completely agnostic to geography,” Bloom explained. “It does not matter where we go to remodel the store; it matters whether the convenience store is right and will generate the appropriate return on investment. So that will likely cross over just about every brand we have.”
The first 360 sites are expected to take about three to five years to complete. Eventually, most stores are expected to convert to the new design.
Last year, GPM partnered with Paytronix to relaunch its fas REWARDS loyalty program, which debuted on Nov. 4, 2020.
Historically, fas REWARDS was a cigarette discount program used to provide data to cigarette companies and offer tobacco discounts to customers.
Through the relaunched fas REWARDS program, customers earn up to 4% in loyalty points, and
ongoing communication and relationship building is
a key strategy.
“Our focus right now is 100% on getting people to enroll in the program, getting them to download the app or go online,” Bloom said.
Since the November launch, GPM has signed up more than 50,000 new loyalty members, Bloom noted.
As enrollment grows, GPM is nurturing its customers. “Customers will receive various offers to entice them to visit the store, spend more and increase their frequency.
“We know that our customers who have signed up visit us significantly more times during the month than those that don’t,” he said. “And that’s because we’re changing their behavior.”
GPM is analyzing what customers buy in order to offer deals on items that might go with the products they’re already buying.
“It’s a complex algorithm that helps change customers’ behavior by increasing their trips, by giving them offers and getting them in the store more often. We’re willing to invest and spend money on these offers because we know that loyal customers are much more valuable than non-loyal customers,” Bloom said.
The loyalty program is now available at most GPM locations, and the fas REWARDS logo and brand will be visible on the interior and exterior of all redesigned convenience stores.
“I don’t think anybody puts their loyalty brand on the outside of their stores. So that’s going to be recognizable because we’re going deep in loyalty and customer relationship marketing,” he said.
Today, ARKO Corp. is working to become a more customer-centric company from the marketing department to the visual merchandising department, which will help attract and retain c-store customers.
“That is our strategy today. It will be our strategy in the future,” Bloom said. “When you put the customer at the center of every decision you make, you always will land in the right spot.”
“For example, when you do planograms, if you find you’re missing the No. 1 item in the category, why don’t you have the No. 1 item in the category? Because you weren’t customer centric. If you were customer centric, you wouldn’t miss those things,” Bloom explained.
Heading into 2021 and beyond, GPM intends to continue growing its fleet of stores via more mergers and acquisitions (M&A).
“M&A is in our blood. We expect to continue to acquire stores and to be part of the consolidation of the industry,” he said. “It’s our model. We’re good at it. And we want to continue doing that.”
While M&A is what Bloom call’s GPM’s “core competency and a core strategy,” the company hasn’t ruled out new builds in the correct situation. For example, GPM recently broke ground on a new truck stop in Rock Hill, S.C.
GPM will also be testing drive-throughs at its convenience stores. The chain operates 73 quick-service restaurant (QSR) franchises at its convenience stores. During COVID-19, customers began gravitating toward using drive-through service.
“Our QSRs that had drive-throughs didn’t miss a beat when COVID hit,” Bloom said.
The expectation is that many of the habits customers have adopted during the pandemic, such as using a drive-through, will be ingrained in their behavior post-pandemic.
“If I had a crystal ball,” Bloom said, “I would say the convenience store industry in 25 years will be where the drug store industry is today — vastly consolidated, updated stores (with) technology and services, and entry into the game is going to be a drive-through.”