Arkansas Business

Banks in Convenience Stores a Smart Idea, Owners Say

One National Bank's Layton "Scooter" Stuart apparently plans to open some bank branches in the 30 Rivercity Energy Co. stores he bought in January.

"What I find interesting about what [Stuart] is doing is that banks are supposed to merge and the big oil companies who supply all of us are merging, but a small-town banker in Arkansas merging with a small oil company in Arkansas isn't supposed to happen," says Mike Coulson, president of Coulson Oil Inc. "He's just saying, 'If a convenience store can lease space to a full-service bank, like Fina [at Amboy] did with National Bank of Arkansas, why can't a bank do the reverse?' Well, they can. They are.

"If they can have a bank branch cheaper and still serve their customer base and not have to have the [land and building] investment on a street corner, that's OK."

Neither Stuart nor Barksdale McKay, the former Rivercity owner who still manages the stores, returned several telephone calls to comment for this story.

Steve Griffin, owner and managing member of Griffin Express in Jonesboro, says Stuart's strategy is "very smart."

"There's no question there is plenty of opportunities to do that," Griffin says. "If you have the right real estate where the traffic can comfortably come in, purchase their gasoline, a gallon of milk and cash their payroll check, why not?"

Griffin says Union Planters Corp. of Memphis approached him a year ago and put four automated teller machines in his stores.

"They came to us and said, 'It makes a lot of sense to put a location in your stores. We don't want to spend the money to put a full-service branch in your stores, but we'll put an ATM in,'" Griffin says.

"There will be a lot of people who do full-service branches, but you have to rebuild the whole structure. Banks want very comfortable, inviting, beautiful facilities."

- David Smith

Headline: E-Z Mart Acquisitions Since 1983

No. of

Chain Sites Location Year

Handy Hut 9 Lubbock, Texas, area 1983

Terrible Willies 6 Beaumont, Texas, area 1985

Bell's 8 Beaumont, Texas, area 1986

Marr's Short Stop 16 Central Texas 1986

Jif-E J 7 Eastern Arkansas 1988

Majik Market 11 Little Rock area 1988

Dandy Dan's 8 Southwest Louisiana 1988

Mapco Petroleum 14 San Antonio, Little Rock 1988

Thirsty's 3 Brownwood, Texas 1990

Spe-Dee Mart 35 Northwest Arkansas 1991

Southland Corp. 17 Longview, Texas, area 1992

Southland Corp. 8 Bryan-College Station, Texas 1993

Mr. M 41 Dallas-Fort Worth area 1995

Mr. Quick 28 Eastern Oklahoma 1996

Shur Pak 7 Texarkana 1996

Mr. O 9 Eastern Oklahoma, south Missouri 1997

Evett's Oil 4 Mount Pleasant, Texas 1997

Lone Star Ice 37 San Antonio 1999

Tab Chart: Stuart's Rivercity Stores

In January, Layton "Scooter" Stuart, chairman of One National Bank in Little Rock, paid about $25 million for 30 Rivercity Energy Inc. convenience stores from Cabot to Benton. Here are the Pulaski County locations, most of which are Texaco stores:

Little Rock

1200 S. University Ave.

3200 S. University Ave.

16700 Cantrell Road

7601 Cantrell Road

Highway 10 and Chenal Parkway

10801 W. Markham St.

9001 W. Markham St.

4100 W. Markham St.

10100 Rodney Parham Road

2620 W. 65th St.

8900 Stagecoach Road

8701 Fourche Dam Pike

700 E. Roosevelt Road

North Little Rock

4400 McCain Blvd.

6915 JFK Blvd.

4800 MacArthur Drive

5919 Crystal Hill Road

2522 Highway 161

Sherwood

2428 Wildwood Ave.

Jacksonville

1527 Main St.

Morgan

20515 Highway 365 N.

Headline: E-Z, Convenient Solution: Consolidation

By David Smith

E -Z Mart Stores Inc. is negotiating to purchase 87 Stax convenience stores in Arkansas and Oklahoma, marking the biggest acquisition in the Texarkana, Texas, firm's 29-year history.

If the deal is completed, the 87 Stax stores would give E-Z Mart 517 locations in Arkansas, Texas, Oklahoma, Missouri and Louisiana.

The purchase, which could total $100 million, highlights a continuing trend of convenience-store consolidation sweeping through the country and beginning to spread through Arkansas.

Layton "Scooter" Stuart, chairman of One National Bank of North Little Rock, bought 30 convenience stores in Pulaski and Saline counties from Rivercity Energy Co. in January. And mom-and-pop stores all over Arkansas are selling or closing because of an inability to meet federal environmental regulations.

The reason for consolidation is three-fold, says Mike Coulson, president of Coulson Oil Inc. in Little Rock: technology, competition and cost of new stores.

"I would say within five years there will be half the number of convenience-store companies [in Arkansas] than there are today," Coulson says.

Customers are practically requiring new stores to have pay-at-the-pump technology because of its convenience. Those pumps cost $15,000 each, Coulson says. It's also costly to introduce scanning technology at the checkout counter, but many operators soon will be doing it.

Fighting Wal-Mart

Convenience stores are facing significant competition from Wal-Mart Stores Inc. and Sam's Clubs. Both Sam's Clubs in Pulaski County have gasoline pumps.

"Wal-Mart is a driving force in our business," says Coulson, whose firm supplies gasoline to 120 stores and operates 30 in Arkansas. "They don't want to buy us out; they just want to steal our customers."

Actually, Coulson says, almost every big-box retailer is selling or test-marketing gasoline. Harvest Foods already sells gasoline in Arkansas. Target Stores, Kroger Co. and even The Home Depot Inc. are testing gasoline "somewhere in the country, although I'm not sure where," Coulson says.

"They all have that empty asphalt out in front of their stores," Coulson says. "Just slap a canopy and [put in] some pumps, and with the pay-at-the-pump technology, nobody has got to be there."

To compete with the giant retailers, convenience store operators have to have bigger stores, more pumps and enter the food-service business.

"Food service may be the future of my business," Coulson says. He has three co-branded agreements in Little Rock: Popeye's Chicken & Biscuits, Burger King and Blimpie Subs & Salads.

The cost of new stores is maybe three times what it was 10 years ago. Coulson says he has $1.5 million in any new store he builds today, whereas it was about $500,000 in 1989. A big percentage of that is related to complying with the federal government's underground storage tank regulations.

Steve Griffin, owner and managing member of Griffin Express in Jonesboro, expects convenience store acquisitions to increase in Arkansas in the near future, basically because of the large oil company mergers.

"The big guys are consolidating to reduce their cost of operation," Griffin says. "The same thing is going to occur in a small way with guys like us. It's a trickle-down theory."

The environmental regulations about safe underground tanks put a lot of small operators out of business late last year because they couldn't afford to upgrade, Griffin says.

"With all this transition with the large oil companies, we all have to get a lot smarter now," he says. "The way we get smarter is to eliminate costs. Getting bigger helps us do that."

Good Fit

Most of E-Z Mart's growth has come through acquisition. Tom Coleman, president of E-Z Mart, says he expects the company to grow by 25 percent this year. It has grown by 41 percent since 1995, from 304 stores to 430. The Stax purchase would give E-Z Mart 70 percent growth since 1995.

If the deal goes through, Coleman says, E-Z Mart likely won't have to close any Stax stores because there are no conflicts with E-Z Mart stores.

"This will put us in two large markets we're not in now, which is Oklahoma City and Tulsa," Coleman says of the possible purchase of the Stax stores.

The coordination of the Arkansas Stax stores should be easy, Coleman says, because E-Z Mart is already in the markets where Stax stores are found: Little Rock, North Little Rock, Hot Springs, Hope and Texarkana.

Coleman wouldn't disclose any details of the purchase since it is still in negotiations. But at a price of around $1 million a store, E-Z Mart could be paying $75 million-$100 million for the 87 stores.

Griffin's Growth

Two years ago Griffin had 15 convenience stores. At that point, he says, he had to decide whether to get out or get bigger. He chose to get bigger. Griffin Express owns and operates about 60 convenience stores in northeast Arkansas, the Memphis area, the northwest corner of Mississippi and the bootheel of Missouri.

Convenience stores in Arkansas haven't reached the point where banks are, with large companies willing to pay high prices, like two or three times book value.

"I don't know why it won't be that way [in the future]," Griffin says. "We're experiencing what the banks did in the late '80s and early '90s. We will have a lot of big chain operators [in the future] as you see in the banks now."