Yesway adds value in the convenience store space with Allsup’s deal
Yesway, a convenience store chain founded in 2015 that has since acquired over 150 stores across nine states, is about to triple in size.
Yesway History
Later this month, the four-year-old gas station and convenience store operator will acquire Allsup’s Convenience Stores, a 304-store regional chain in Texas, New Mexico and Oklahoma.
Yesway was founded by Brookwood Financial Partners, a Massachusetts-based real estate private equity firm, to acquire, improve, and operate a portfolio of gas stations and convenience stores in the United States.
Tom Trkla, founder and chief executive officer of Brookwood and Yesway, described the history and ideation of the convenience store strategy. “We had the benefit of creating the Yesway brand from a blank sheet of paper,” Trkla recalls. “We were fortunate to have sold our real estate portfolio in 2008 before the crash. In the years that followed, we deliberately sought out value-add, real estate-adjacent businesses that were not directly correlated to the ups and downs of the real estate cycles.”
After evaluating hundreds of potential industries and narrowing the universe of potential ventures to real estate-related business, Brookwood settled on convenience stores, continued Trkla. Establishing the Yesway brand and strategy was a lengthy, intentional operation that started years before the company bought its first stores in late 2015. Trkla recalls early employees visited hundreds of convenience stores during this process to understand best practices and create a prototype of how a convenience retailer should operate. The industry evaluation included numerous criteria, including geography, competitive landscape, regulatory environment, and the types of stores Trkla wanted to buy. Around the same time, Brookwood teamed up with CBX, a leading New York design agency, to develop all aspects of Yesway’s brand personality, from store design to corporate colours and staff uniforms.
Yesway’s current portfolio of 117 stores stretches from Wyoming, through Iowa, to Texas and New Mexico, an aggregation of “individual stores and small portfolios that have all been integrated into Yesway’s brand identity,” says Trkla. The company tends to avoid major cities and their arterial routes, instead focusing on smaller, growing markets where newly-applied best practices can reliably add value to historically mom-and-pop operations. Plus, these more rural markets are less hampered by heavy competition and real estate constraints often encountered by centre-city stores.
Allsup’s Acquisition and History
The upcoming merger with Allsup’s will be the largest acquisition in Yesway’s history, catapulting the young convenience retailer to 421 stores and bolstering its presence in Texas, New Mexico and Oklahoma.
Allsup’s was founded in 1956 in Roswell, New Mexico by Lonnie and Barbara Allsup and has grown into one of the top destinations for convenience stores in the country under the family’s thoughtful leadership. Over the past sixty-plus years, the Allsup family has built its portfolio into a regional household name brand – the company currently owns and operates 304 stores – known for its friendly service, small-community grocery offer, and its world-famous deep-fried burrito.
Allsup’s is highly regarded in the industry for its authentic brand and innovative history. The company was one of the first convenience retailers to offer 24-hour self-service gasoline and freshly prepared, hot foods onsite. In additional to its renowned foodservice offering, Allsup’s maintains a strong selection of private label staple goods, including milk, butter, eggs, and bread. Since many stores are located in small, rural communities, the brand serves as a quick service restaurant and grocery store in addition to the standard gas and convenience offer.
Growth Ambition
Once the two companies have been fully integrated, Trkla says that the combined company will continue growing both organically and through acquisition. “There are a number of current Yesway stores in the same markets as Allsup’s that we have not remodeled. The possibility of remodeling those Yesway sites and converting them to the Allsup’s brand is very attractive,” says Trkla.
Beyond relatively simple remodels, there are several sites within both companies that are excellent candidates for raze-and-rebuilds, adds Trkla. “Mark [Allsup, president of Allsup’s Convenience Stores] and his team have an excellent track record of increasing performance growth through store remodels and raze-and-rebuild projects. We are excited to work with the Allsup’s team to continue growing the portfolio further.”
The opportunity for future acquisitions is robust, too, Trkla adds. Although Yesway slow-walked other possible transactions to focus on Allsup’s, the company’s pipeline of new stores is still very strong and the potential exists to keep growing the portfolio. Trkla is working to build a chain of 600-plus stores, emphasising that Yesway is still in growth mode.
Thanks to Allsup’s’ clustered geography, Yesway has a more centralised target for future acquisitions. “The centre of our universe now changes to Texas, New Mexico and Oklahoma,” Trkla explains. “In terms of future acquisitions, we will primarily focus on growing in those three states.”
Best-in-class Technology Platform
Once the acquisition closes, Yesway plans create a strong, cohesive entity ingrained with convenience retailing’s best-in-class operating principles and technological platform. Yesway prides itself on its data-driven decision-making, with its state-of-the-art infrastructure, accounting and point-of sale systems, cloud-hosted databases, and pricing and back-office platforms, which will be integrated into the Allsup’s portfolio. “Data is already integral to our decision-making process,” Trkla affirms, adding that Yesway’s technology platform helps to increase operational efficiency without disrupting the consumer experience. New technology not only lets managers focus on more important operational challenges, it also provides customers “an entirely upgraded convenience store experience.”
A refreshed technology suite also means that Allsup’s customers are poised to benefit from Yesway’s award-winning loyalty and fleet card programmes, as well as an expanded foodservice offering. Yesway Rewards offers promotions and discounts to customers and “gamifies” purchase rewards, which is an especially popular feature, Trkla explains. Built on the Paytronix platform, Yesway’s loyalty programme is available as a mobile app and will soon include a mobile wallet offering further discounts and rebates, which Trkla anticipates will drive membership into the hundreds of thousands. Many of the promotions and discounts offered by the programme are funded directly by suppliers and will soon benefit Allsup’s shoppers, saving them money and expanding the brand’s fiercely loyal customer base.
Foodservice
Along with new technology comes upgraded equipment and an expanded foodservice offer. Trkla is confident that Yesway’s foodservice platform will benefit from the unbelievably popular Allsup’s fried burrito. He expects the burrito’s popularity to carry over to Yesway’s existing stores, strengthening the foodservice platform Yesway has developed in-house over the past four years. “Allsup’s have things that work incredibly well that we do not want to change. We are already starting to look at a blended offer that expands Allsup’s platform into our stores in other states,” Trkla says.
Local Community Focus
Yesway’s support for local communities, a foundational part of the company’s identity, will continue to flourish following the merger with Allsup’s, Trkla reports. At the national level, Yesway supports various charitable organisations, including Operation Homefront, a nonprofit dedicated to helping military service members and their families. For example, the company recently donated a portion of profits from sales of its Yesway-branded water to the charity, beyond its normal monetary contributions. Locally, promotional activity with Dr. Pepper has helped to donate sporting equipment to the YMCA in Hutchinson, Kansas, one of the company’s more concentrated markets.
Trkla firmly believes that Yesway is more than just a gas and convenience retailer. “In many of the rural communities we serve, we are not simply a place to get a fountain soda or a sandwich. We are there to support all aspects of the local community, as well as veterans and first responders,” Trkla revealed. Allsup’s stores are located in similar markets and the company shares Yesway’s values surrounding community support.
The Future
After just four short years, Yesway is already the 48th-largest convenience store chain by store count, per a 2019 Convenience Store News Top 100 ranking. Recently crowned the fastest-growing company (by store count percentage) in a 2019 Convenience Store News ranking, it is hard to imagine Yesway standing still for long. However, the 18 months after acquiring Allsup’s will be primarily focused on integrating the two companies. Yesway is collaborating with AlixPartners, a consulting firm specialising in post-merger integration, to combine the two companies.
“This transaction is a major milestone for Yesway,” Trkla affirms. “Our priority is to make sure this integration goes as smoothly as possible, so we will hold off on any major acquisitions until the two companies are fully incorporated.”
The similarities in company culture should make for a relatively smooth transition. “It’s one of the reasons the Allsup family chose us to be the buyers. We are now the caretakers of a brand legacy was created and grown by Mr. and Mrs. Allsup,” Trkla says.
Even though the Allsup’s brand has considerable heritage and strength, Yesway will continue growing its brand as well. “Yesway is a strong brand in the states in which we operate. Where we overlap with Allsup’s, the possibility of changing Yesway-branded stores to Allsup’s is attractive, but in other markets, Yesway is the better-recognised brand. We have invested heavily in developing the Yesway brand and we expect to see both brands operating in concert across our portfolio.”
According to Trkla, the combined company will benefit from the strengths and opportunities currently found in Yesway and Allsup’s individually. Beyond the operating synergies typically found in large mergers, the management structure of the two companies lines up well, explains Trkla. Mark Allsup will serve as president of the combined chain and the company will retain several other key Allsup’s executives.
“There are tremendous synergies between the two brands, and Allsup’s phenomenal foodservice offer and Yesway’s technology expertise are only the beginning. Our private equity real estate experience is helping us create value in the convenience store space, and we have strong management teams within both organisations to help us execute on our vision,” Trkla added.
The future looks bright for this young, fast-growing convenience retailer as it tackles its largest acquisition to date. Once it acquires Allsup’s, Yesway will be one of the 15 largest convenience retail chains in the United States, a far cry from its humble beginnings just four short years ago. Expect the company to keep saying yes to convenience for years to come.
