Gas Station Wars: What one stretch of road says about future of filling up

Credit: Jeremy Markovich

Gas Station Wars: What one stretch of road says about future of filling up

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by JEREMY MARKOVICH / NBC Charlotte

WCNC.com

Posted on June 13, 2014 at 4:42 PM

Updated Saturday, Jun 14 at 6:12 AM

CHARLOTTE, N.C. – The first thing you see when you pull into the Sunoco on E. Woodlawn Road is a gas pump that’s been knocked over, the victim of an 18-wheeler that misjudged a U-turn. A hose lays, listlessly. Someone spread kitty litter to soak up any spilled gasoline. The rest of the pumps have been boarded up with plywood.

The Sunoco went out of business a few months ago. So did two BP stations on the same street, which sit surrounded by chain link fences and tall weeds.

Charles Shah owned all three stations. “Everybody will be out of business,” he told NBC Charlotte in 2012.

Turns out, the only person out of business was him.

The stretch of E. Woodlawn Road between Interstate 77 and South Boulevard is a half-mile long stretch of four-lane asphalt lined with an IHOP, a Bojangles, a strip club, a hotel, a light rail crossing and, up until recently, six gas stations. It’s a busy stretch of road for cars and a prime location for a gas station.

In 1994, Shah bought up a BP-branded gas station at the corner of South and Woodlawn. By 2000, he ran three stations on Woodlawn: Two BPs and a Sunoco.

In February 2013, a QuikTrip gas station opened up next to the Sunoco, near the corner of Nations Crossing Road. Soon, Shah says his three stations on Woodlawn were losing a combined $10,000 to $15,000 a month. “It killed us,” he says.

Shah said he couldn’t upgrade his small stations, because he didn’t have room on the small pieces of property he owned. “Upgrading was not going to help,” he says. “They make a $6 million gas station. We’re not going to compete with that. We have a small space, small store. They have a 6,000 square foot store.”

QuikTrip has plans to open up two more stores: One, at South Boulevard and Arrowood Road, is expected to open next week. Another, on Albemarle Road, could be up and running by mid-July. Shah says individual owners in those areas are worried that what happened to him will happen to them. He describes it as a David vs. Goliath situation, of big business forcing out small business. Shah said he had to lay off 15 to 20 employees when his stations shut down, and had to explain to friends that his business dried up when QuikTrip opened. “They could not believe it,” he says. “But there’s nothing you can do, if you don’t make money.”

QuikTrip, which is based in Tulsa, Oklahoma, opened its first store in 1958. By 1967, it had 43 stores. In 2008, it opened its 500th store. The company is privately owned, has been lauded for paying employees more than the minimum wage, and was named by Fortune magazine as one of the best companies to work for ten years in a row.

QuikTrip opened a Carolinas division office in late 2011. Now, only two-and-a-half years later, the chain is about to open its 50th location here.

“In regards to other stores, I honestly don’t have any idea what kind of management they have, or whether they’ve done any other updates, or what their customer service is like,” says Mike Thornbrugh, QuikTrip’s manager of public and government affairs. “That puts you out of business more so than I will.”

Thornbrugh says convenience store versus convenience store competition is over, and it’s been that way for years. QuikTrip doesn’t rely on gasoline and tobacco sales to drive its business, and hasn’t for more than a decade. “If convenience stores haven’t figured that out by now, it’s too late,” he says.

The real competition is with bigger stores like WalMart, along with grocery stores and pharmacies. The focus at QuikTrip, he says, is on food, along with making the store itself appealing. Its stores are big and spacious with an emphasis on being clean and modern.

Still, just like in the gasoline business, QuikTrip has to sell a lot of stuff to make a little bit of money. The company says it made $11.2 billion during the last fiscal year in sales revenue, but only turned a profit of $128 million. The company’s not public, Thornbrugh says, because it wouldn’t provide enough of a return to shareholders.

Thornbrugh won’t talk about exact performance numbers at QuikTrip’s store on Woodlawn Road, but says it’s doing well. But Shah says the store’s success isn’t what it seems. He claims that QuikTrip is selling gas and other items below cost to get people into the store, and the result put him out of business. QuikTrip denies it.

Still, that’s a common complaint from gas station owners says Gary Harris, president of the North Carolina Petroleum & Convenience Marketers in Raleigh. “I get that complaint all the time, that they’re running us out of business,” he says. “That’s a hard thing to prove.”

Harris says there is a North Carolina law that prevents gas stations from selling gas for lower than the wholesale price, unless it’s during a two-week period after a grand opening, during a court-ordered sale, or because of competition. The attorney general gets complaints but rarely investigates, Harris says. You can get an injunction, but those rarely hold up, since it’s hard to prove who lowered their prices first. “Basically, it’s a toothless law,” Harris says.

QuikTrip has another advantage over smaller gas station operators, Harris says. Because it’s a bigger company, and because it doesn’t have to buy specific types of gasoline from BP, Citgo or Shell, it can buy gas on the open market, and buy it in bulk. That can often lead to lower prices that smaller stations can’t get.

That leads to a lot of complaints against QuikTrip by small gas station owners. “They are a tough operation to compete with,” Harris says. “In my opinion, that means they’ve got a good business model.”

North Carolina has more than 6,600 gas stations and convenience stores, and that number has remained about the same for years, leading Harris to believe that the market is saturated. Still, QuikTrip is used to going into markets where others have been dominant. In Atlanta, QuikTrip is now so big, it’s responsible for a third of all gas sold in that metro area. Analysts say their business model pushed down the price of gas region-wide.

That’s not much comfort to Shah, who says QT’s expansion came at the expense of dozens of smaller gas stations, which closed as a result. Now, Shah is left with just two or three gas stations, and he’s worried about what’ll happen to them. “If you talk, it’s not going to help,” he says. “They’re not going to stop building QTs.”

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