Can Kwik Trip/Kwik Star Become The Next Love's And Compete?

I didn’t know that Kwik Trip opened a location in Illinois. I guess they called Kwik Star because there are Quik Trips in the STL area. It would be nice to see them expand. I enjoyed stopping at their locations when I drove for Crete. I liked the food and it was nice change of pace from what the major truck stops offer.

 

Here in west Texas, Pilot/FJ are on a building boom.

 

First thing Coffee Cup and Town Pump aren't owned by TA or Pilot, respectively. They merely have branding agreements with the bigger chain.

Secondly, I saddens me to see Love's follow the same path as Flying J. At one time, they were usually the best option for O/O looking for quality, cheap fuel. Now, since they started chasing the fleets I rarely stop at either for fuel.

Of course I'm an old joker who remembers when Morgan Rd in OKC was the "Big" Love's.

My fear is that if Kwik Trip expands much beyond their current geographic footprint, they too would lose their identity.

 

I'm guessing you have not read some of the other threads on here about the big 3. Because if you had. You'd know that love's is actually building quite a few NEW TS. So are the other two.

Sure they're buying up other properties as well.

That being said. There's always room for others to get in the game. However, most are going to be regional. Not national. Think of fuel city and QT. For examples.

It's kinda like fast food. McDonald's, BK, and Taco Bell are your national franchises. All the others are regional. Dunkin donuts national. Tom Horton regional...etc.

 

I doubt it but hear me out on why. It cost approximately 4.5 million dollars to build a suitable truck stop. That includes the building with showers, restaurant, mechanic bay, fuel island, parking lot and scales. Kwik trip has annual sales at its combined stores of 7 billion dollars. That’s before operation costs and tax. In contrast flying j/ pilot has over 23 billion annually, with loves very close to that. We’ll leave petro/ T.A out of this because I do not consider them actual competition as the annual revenue is much less than the prior two and the majority of sales are non fuel related. From my research kwik trip actually has more locations than pilot/flying j. Kwik trip recently hit the 800 mark where pilot/ flying j is around 750. However the majority of kwik trip locations are not truck stops but rather extremely nice convenience stores. It would be extremely difficult to refit existing locations to accommodate a large influx of commercial traffic as the land simply is not there. The number one issue that I see with kwik trip becoming a viable contender is that most fleets partner with the big boys for fuel. Additionally although kwik trip is planning on growth via new locations, the majority from what I’ve read are typical to what we see today. Now, from a business perspective if I were in charge of operations of loves or pilot/ flying j, if the numbers indicated that kwik trips fuel sales for commercial vehicles grew at a strong rate OR if they began construction on actual large truck stops that can handle serious commercial traffic, than I would immediately make moves to strangle them out of contention. I would have the buying power to lower fuel prices for fleets and the financial power to build tit for tat. Not because I’m a bad guy and do not want to see others succeed but because that’s my job. Although kwik trip has announced plans to build a very large number of stores per year the cost of construction alone compared to over all annual earnings indicates a minor shift to large scale commercial operations. These costs do not include operating expenses such as fuel costs, up keep, merchandise, utilities, insurance, tax and of course labor burdens. Additionally if I as a driver have the choice of parking in a huge lot that sits directly off of the interstate with easy in and out access and my showers are free because that’s my company’s fuel partner than that’s where I’m parking, and my dollars will be spent there on food and the like. Where I live in Texas the grocery store is called HEB, I’m sure you’ve seen them in your travels. Hy-vee is a MASSIVE company that dominates in 8 states with expansion planned for three additional states. Annual profits are over 12 billion dollars. The CEO recently said that they would never try to infiltrate Texas due to HEB having a massive foot hold there, it would be financially unviable. The same logic applies here because of the massive footprint that loves and flying/j already have in this country. These are just a few of my thoughts on why I personally do not see it happening. I actually hope I’m dead wrong though, because competition is one of the things that make this country the best chunk of land in the world and because I like nice, clean things and kwik trips from what I’ve seen are very nice. They just simply are a different animal than large truck stops and that’s ok.

 

The big boys don't have a massive footprint in KwikTrips area though. And KT does have a few large scale truck stops.

I wonder if climate plays a part? Most KT have #1, and their #2 is treated in the winter, and clearly marked as such. I trust their fuel far more than the majors in that part of the world. (Petro in Fargo and Clearwater are exceptions to that as they are franchises.) I'm not buying PFJ or TA fuel when it's double digit below zero.

 

Absolutely they have a few truck stops, you are 100 percent right. I think that the point that I’m trying to convey is exactly that, they have a few. The majority though are not truck stops that are on small parcels of land surrounded by strip centers, restaurants, residential property and so on, making expansions impossible. To shift into larger scale operations they will be required to construct brick and mortar from the ground up. This requires MASSIVE investment, if they plan on building more than a few a year. Otherwise they would have to use a considerable amount of annual revenue that simply at this point is not there. They would need to be in the 20 percent range to have an impact. My point is that with loves and flying/ j already in place and already in partnership with fleets and having massive backing to combat kwik trip being successful in COMMERCIAL vehicle expansion, if I were on the board it would not make sense to me to take immediate loss on a risky at best return. Kwik trip is wildly successful in their current business model, and I doubt they will fluctuate on a scale that could possibly dramatically impact their bottom line. Totally just my take away and I am in no way claiming that their though process is in line with mine and I’m certainly not on the board.

 

Very good points, I don’t really have the option to fuel at stops other than loves and pilot/ flying j unless my trip planning went terribly awry. But those folks up north, my God it gets crazy cold up there. Wisconsin in the winter is the coldest I’ve ever been.

 

I would say they will stay a regional operation with some expansion on the periphery of their current market.