E-Z Serve Corporation

views updated

E-Z Serve Corporation

2550 North Loop West, Suite 600
Houston, Texas 77092
U.S.A.
(713) 684-4300
Fax: (713) 684-4367

Public Company
Incorporated: 1986 as E-Z Serve Inc.
Employees: 5,156
Sales: $748 million (1995)
Stock Exchanges: American

SICs: 5541 Gasoline Service Stations; 5411 Grocery Stores; 6719 Holding Companies, Not Elsewhere Classified

As the seventh largest convenience store operator in the United States, E-Z Serve Corporation owns and operates 737 stores and 13 franchised stores in 15 states, with the majority of the company’s stores located in the southeastern United States. During the mid-1990s, E-Z Serve operated its convenience stores, mini-marts, and gas marts under the names “E-Z Serve,” “Jr. Food Stores,” “Majik Market,” “Taylor Food Mart,” and “Time Saver.” At 681 of the company’s convenience stores and at 204 noncompany-operated retail outlets, E-Z Serve also retailed gasoline under its proprietary “E-Z Serve” brand name and a number of major brands, such as CITGO, Texaco, Conoco, and Chevron. For much of its history, E-Z Serve was primarily concerned with marketing gasoline, but in 1991, when new management developed a new business strategy for the company, its business focus was dramatically altered. From 1991 onward, the company’s chief aim was to develop into a major convenience store operator and to derive the majority of its profits from the retail merchandising of traditional grocery and nongrocery lines typically found in convenience stores, rather than continuing to generate the bulk of its revenues and profits from the more volatile and less profitable business of marketing gasoline. Through a series of acquisitions completed during the early and mid-1990s, E-Z Serve transformed itself into one of the largest convenience store operators in the nation.

Origins

E-Z Serve achieved its greatest prominence as an operator of convenience stores, quickly becoming the seventh largest independent convenience store company in the country. For the first 20 years of the company’s history, however, it was involved in a distinctly different business. The two periods encompassed two eras in the company’s history: one spent as a privately owned petroleum marketing company and the other spent as a publicly traded operator of convenience stores. The first chapter in E-Z Serve’s history began in 1971 when the company was organized in Houston, Texas, just as the Texas oil boom period of the 1970s was about to usher in a decade of prolific growth for all those associated in the production and marketing of petroleum products.

Initially, E-Z Serve operated a motor fuels wholesale business and a motor fuels supply and trading business, making a name for itself by marketing gasoline to service stations and convenience stores located in a large territory surrounding its corporate headquarters in Houston. E-Z Serve, which operated as E-Z Serve Inc. for the first 15 years of its existence, grew steadily during its first decade and a half of existence, eventually extending its service territory to include 20 states and roughly 800 retail locations by the mid-1980s, the bulk of which were situated in rural areas. It was at this juncture in the company’s history that the first signs of the changes to come became apparent.

Ironically, the developments that precipitated E-Z Serve’s exit from petroleum marketing as its primary business arose from its prowess as a marketer of petroleum. During its first decade and a half of business, E-Z Serve had developed renowned marketing expertise, a skill that made the company an attractive entity to independent oil and gas exploration companies looking to diversify their operations to include the marketing side of the petroleum business. One such company was Harken Energy Corporation, a publicly held, Dallas-based exploration and production company that acquired E-Z Serve on

units located primarily in southern Texas. Considering that the company operated 750 stores in 15 states four years later, the quantity of E-Z Serve’s convenience store holdings in 1991 represented only a fraction of the size the company would soon become. To make the leap from 54 stores to 750 stores in four years, much of the growth had to come through the acquisition of existing stores. The company did this, beginning in 1992.

the last day of 1986. At the time of the acquisition, E-Z Serve had offices in Abilene and Houston and supplied roughly 900 service stations and convenience stores in 24 Sunbelt states and Hawaii. The deal, which cost Harken $36.3 million, was executed through E-Z Serve Holding Co., a subsidiary formed by Harken to complete the transaction.

Under the corporate umbrella of Harken, E-Z Serve continued to conduct the same type of marketing work as it had before the acquisition, but under the stewardship of new management. Led by this new leadership, in 1988 and 1989 E-Z Serve acquired 49 convenience stores—the foundation upon which the company’s future chain of convenience stores would be built. In September 1988, E-Z Serve paid $10 million for control of Allen’s Convenience Stores, Inc. and in March 1989 acquired 17 retail gasoline outlets, including six convenience stores, and supply agreements at 25 branded locations from Harris Oil Company.

1991: New Plan for the Future

Following these acquisitions, E-Z Serve entered a decade of dramatic transformation, one that would chart the brisk rise of the company as a convenience store operator and mark the beginning of the second chapter of its corporate history. This second phase of development was touched off by E-Z Serve’s return to operating as an independent company. In 1991, following a rights offering, E-Z Serve was cut free from Harken, once again gained new management, and began to develop a new business plan. As discussions were held about the future course of the company, a new business strategy was adopted that steered E-Z Serve in a different direction and set the stage for the development of one of the country’s largest convenience store operators. E-Z Serve’s executives resolved to increase per store profitability and corporate growth through the acquisition of convenience stores, opting to forgo the years of marketing gasoline as the exclusive engine driving the company’s growth. Instead, E-Z Serve officials decided to concentrate their efforts on merchandise sales in company-owned retail units. Though E-Z Serve would continue to market gasoline as the 1990s progressed, the primary focus of the company during the decade would be to increase the profits derived from convenience store merchandise, thereby avoiding the cyclical nature of gasoline sales and the various economic and political influences that made marketing gasoline a decidedly capricious business and moving the company into a business that, as a rule, yielded higher profit margins.

As the new cadre of E-Z Serve’s management plotted its course, there was much to be done to transform the company into a major player in the convenience store industry. First and foremost, the company needed to acquire additional store units. When E-Z Serve was formulating its plans to become a prominent convenience store operator, the company owned 54 retail

Acquisitions in the 1990s

In 1992, E-Z Serve completed two acquisitions, purchasing Taylor Petroleum, Inc. and TOC Retail Inc. from Tenacqco Bridge Partnership and renaming the properties E-Z Serve Convenience Stores, Inc. (EZCON). The acquisitions raised the number of company-operated convenience stores to a total of 523 and dramatically increased E-Z Serve’s presence in metropolitan markets. In the space of a few short months, E-Z Serve had fashioned a substantial foundation to support its bid toward becoming a convenience store powerhouse. Further prodigious growth was in the offing as the company assimilated its 1992 acquisitions into its network of retail units, but it would be another three years before any deals were completed that rivaled the magnitude of 1992’s achievements.

E-Z Serve’s next pivotal acquisition was completed in early 1995, when the company purchased Time Saver Stores, Inc., a chain of 116 convenience stores located primarily in the New Orleans, Louisiana area. Six months later, in July, the company completed another significant acquisition when it purchased Sunshine Jr. Stores, Inc., a chain of 205 convenience stores situated primarily in the Florida Panhandle. Together, the two acquisitions nearly doubled the size of E-Z Serve, adding 321 store units to its fold for a total of 750 and giving it a major presence in key market areas along the Gulf Coast from New Orleans to Tallahassee, Florida. Separately, the two acquisitions strengthened E-Z Serve’s geographic stance in their own particular way. The addition of the Sunshine Jr. chain, which was based in Panama City, Florida, gave E-Z Serve 120 stores in the Florida Panhandle, with the remainder—all full-sized food stores—located in Alabama, Mississippi, Georgia, and Louisiana. The acquisition of the Time Saver chain, meanwhile, positioned E-Z Serve as the dominant convenience store operator in the New Orleans market. There were 148 Time Saver retail units located in and around New Orleans, the absorption of which immediately ranked E-Z Serve as the market leader, by far eclipsing the store count of any of the company’s competitors.

The financial totals recorded by E-Z Serve in 1995 reflected the positive strides the company had achieved toward becoming a leading convenience store operator. Sales, which had amounted to $563.1 million in 1994, rose by 33 percent in 1995, reaching $748 million. Equally as encouraging to company executives in Houston as the robust jump in total sales was the increase in E-Z Serve’s general merchandise sales. For the year, merchandise sales swelled by 47 percent, increasing from $181.1 million in 1994 to $266.7 million in 1995.

Company Perspectives:

We at E-Z Serve are totally committed to becoming the most customer-driven company in our markets.

Once the store units gained through the acquisitions completed in 1995 had been added to the company’s network, E-Z Serve stood positioned as a convenience store operator with outlets spread across a broad geographic base. Although the company was supported by operations in 20 states, the majority of its stores were located in Texas, Louisiana, Georgia, and Florida, where 505 of the company’s stores were situated. Of the company’s total of 750 stores, 13 of which were franchised, nearly 260 were operated under the E-Z Serve banner. Majik Market represented the second most widely used name for the company’s stores, with 150 units bearing the Majik Market name. Taylor Food Mart was used as the name for 66 stores, Jr. Food Store as the name for 200 locations, and Time Saver as the name for 46 stores. Merchandise sales collected from all of the company’s units accounted for 36 percent of E-Z Serve’s total annual revenues, and gasoline sales accounted for 51 percent of the company’s revenue total.

Plans for the Mid-1990s and Beyond

In the wake of the great strides achieved in 1995, E-Z Serve assimilated the retail units it acquired during the year into its network. By early 1996, most of the Sunshine Jr. stores had been converted to E-Z Serve stores. Aside from the acquisitions completed in 1995, the company also made a number of significant changes within its stores that were expected to attract more customers and lift the percentage of merchandises sales in relation to total sales. Cappucino and breakfast rolls were added to the merchandise lines in many of the company’s stores and Blimpie was signed on as a provider of fast foods to the company’s stores, bolstering the list of branded food items offered by E-Z Serve. In addition, Baskin-Robbins ice cream was introduced at E-Z Serve stores during 1995, and the number of stores outfitted with automated teller machines (ATMs) increased to more than 200, adding the opportunity to conduct rudimentary banking services as a customer draw.

With further acquisitions in the offing as E-Z Serve charted its course for the late 1990s, the company’s continued expansion appeared inevitable. Aside from increasing the number of retail units composing its chain, E-Z Serve’s management was also determined to flesh out the merchandise lines at its stores. For 1996, a new pastry merchandising program was slated to begin and the number of fast food facilities at company stores was expected to increase. In 1995, E-Z Serve opened eight branded fast food facilities, including national brands such as Subway, Baskin-Robbins, Hot Stuff Pizza, and Blimpie. In 1996, the company planned to increase its branded food lines by adding ten fast food facilities. Other plans for 1996 called for the expansion of its ATM program by installing an additional 277 ATMs in its chain of stores and the expenditure of $10 million to remodel some of the company’s retail outlets. With this work under way, E-Z Serve headed into the late 1990s, its frenetic yet successful years of growth during the first half of the 1990s providing a valuable blueprint for the company’s expansion during the second half of the 1990s and the beginning of the 21st century.