Quicktrip Case study

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estate, construction, and inventory costs, was roughly $2.8 million dollars in urban markets and slightly under $2 million in rural areas.5

Convenience stores differed from grocery and drug stores in that they were smaller, carried fewer products, and stayed open longer. Stores averaged about 2,700 square feet of selling space6 and offered a range of items including hot and prepackaged foods, fountain and bottled drinks, grocery items, coffee, snacks, beer, tobacco products, and lottery tickets; some of the larger chains also offered private-label foods and drinks. Convenience stores offered customers a quick shopping experience; the average customer spent only three to four minutes from arrival to departure.7

There was a great variety in the scope of operations and range of products. U.S.-based 7-Eleven operated 32,000 stores in North America, Asia, Europe, Australia, and Mexico8 while Sheetz operated 365 stores across six states in the eastern U.S. and specialized in made-to-order fresh food items.9 Some convenience stores offered dining areas; some shared retail space with fast-food restaurants, banks, and other retailers.10

e and serving three years in the U.S Air Force, Cadieux wanted to start his own retail business and found a partner in Burt Holmes. The two decided to open a convenience store. Their first location was in their hometown of Tulsa and sold only groceries. In the early years, Cadieux worked the night shift alone, which, he later joked, earned him the right to be president and CEO. He held both positions for over 40 years until succeeded by his son Chet in 2002. (See Exhibit 1

rge Midwestern metropolitan areas in the late 1960s and then into other large U.S. cities. Init piecemeal in small towns around its major Midwestern markets.11 Cadieux observed that, while this offered employees rapid promotions, it placed inexperienced employees in critical jobs.12 Cadieux scrapped this strategy when he realized that small markets would not generate enough profit for future large-scale growth.13 QT ultimately closed stores in 37 small markets to focus on what Cadieux

ose markets that have populations exceeding a 14

In 1971, QT started selling gasoline and closed stores that could not support pumping stations. It required a large upfront investment to enter this highly competitive business and it was more than two decades before QT had established a reputation for selling high-quality gas at low prices. In the mid-1990s, the company invested millions of dollars in improving the quality of its gas and began a new advertising campaign which involved handing out coupons for free gas, giving away floor mats

15 Chet explained:

My father worked mercilessly to get better supply-chain advantage, quality, branding, and prices to become the best at selling gasoline. Our branded gasoline is now recognized as top- tier by companies like BMW and Audi. Our customers perceive us having both great quality

out the future of our business because our breakeven on gas is lower than any of our competitors. That means that, if, someday, people quit buying gasoline, all of our competitors will go out of business before we do.

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In the 2000s, food industry experts stated that close to one-fifth of all meals in the U.S. were eaten in the car16. QT, observing this trend and hearing from its own customers that they wanted to buy fresh food on the go, decided in 2007 to sell fresh food. Ron Jeffers, vice president of operating

our products home to cook. But now they are very active, constantly going from activity to activity. And they want food they can eat while driving to

Instead of preparing fresh food in the stores, QT decided to invest in developing centralized QuikTrip Kitchens (QTKs), which prepared and de

On entering the fresh-food market, QT set out to become the best gasoline, convenience, and food retailer in the eyes of its customers, competitors, and employees. Chet knew, however, that it would be a while before customers could equate convenience stores with good food.

intentionally built for much higher volume than we run today. That means that we are operating well

mind because I am confident that it will pay off in the long term. Like my father did with gasoline,

QuikTrip in 2011

By January 2011, QT had over 10,000 employees, owned and operated 549 stores in 11 U.S. metropolitan areas (see Exhibit 2 billion in yearly revenues. Gasoline accounted for two-thirds of revenues but only one-third of profits; two-thirds of profits came from store merchandise.

Store merchandise included fresh prepared foods, snacks, tobacco products, beer, grocery items, and bottled, fountain, frozen, and hot beverages. QT also sold private-label food and drink items, including its QT-branded coffee, energy drinks, sports drink, and frozen shakes as well as its Hotzi brand breakfast items and the fresh-food items sent daily from its QT Kitchens. QT kept prices competitive by only offering the core products its customers wanted and selling them in high

da, beer, and gasoline, our prices

QT stores were highly productive. In 2010, merchandise sales per labor hour was $94.67 for the top quartile of convenience and gas stores, $85.50 for the average convenience and gas stores, and $142.30 for QT. QT stores had much higher sales volume than competitor stores. Merchandise sales per square foot for the top quartile of the industry was $13.83 per week, with an average store size of 2454 square feet. Merchandise sales per square foot for the average in the industry was $10.04, with an average store size of 2000 square feet. For QT, merchandise sales per square foot was $15.48 per week, with an average store size of 4343 square feet. Motor fuel sales for the top quartile of the industry was 43,889 gallons per store-week and for the average 29,044 gallons per store-week. The same metric for QT was 91,995.

employees, from part-time store clerks to the CEO. These were: (1) Be the best, (2) never be satisfied, ) do the right thing. Focusing on the long term,

even when it came at the expense of short-term financial losses, drove big investment decisions as well as small operational decisions. For example, recognizing that clean bathrooms would bring more traffic into the stores, QT invested $12 million over three years to renovate its bathrooms. Determined

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pornographic magazines, although some of these were popular and profitable items. Chet provided a long-term loss for the long-term good of its

employees:

When I became the CEO, I realized that there were hundreds of employees who had been working for us for many years and who were working until midnight many days of the week. That made it very difficult to have a normal life with a family. The only way to change that was to add a full-time person in every store. It cost us $10 million a year for the rest of the

do this if we were a public company.

QuikTrip remained privately held and ranked 37th on the 2010 Forbes private companies.17 The Cadieux family owned 65% of QT, upper management owned 13%, outside investors owned 10% and the remaining 12% of st ownership and profit-sharing/401K plans.

Culture

Since its beginnings, QT had focused on finding the best people, paying them well, and promoting from within. However, company culture had changed significantly over time. During its first decades, QT was highly results-oriented and store operations were militaristic. As Jeffers explained,

autocratic system. In the years after, new employees without military experience clashed with our

By the mid-1980s, Cadieux apprec some store managers and supervisors focused more on results than on how they achieved those results. After some employees complained to Cadieux that they felt disrespected and mistreated by their managers, he sent a memo to all managers expressing his anger at how some employees were treated. (See Exhibit 3 standardize store policies and procedures. As he pu

18 QT began recording and standardizing policies regarding disciplinary procedures, sales, performance evaluations, and much else.19

levels of operational excellence across all its regions. (See Exhibit 4 90s, our standards were vague. Basically, who you

worked for was the rule book and managers had a lot of subjective judgment. For example, one

what that meant and each store manager interpreted it differently. So in 1995, we launched a major

, worked with 13 store managers from across the 20 They mapped

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store operations, then timed and standardized them. They each spoke with thousands of customers to anged in their QT experiences. They also created

standards for how employees and stores should appear in an effort to create a consistent shopping rs in this process because that generated huge

the ones mapping the processes, timing them, and talking to customers. And once we were finished, it was the managers who explained what we did

customer service, store appearance and layout, training, employee dress and appearance, the daily activities worksheet (DAW), and the first standardized mystery shopper questionnaire.

As part of this reengineering effort, QT also created processes to involve employees in process improvement. The company created resource groups for every position in the store, from part-time clerk to store manager. Members of a resource group within a divisiona got together and discussed problems and improvement opportunities related to store processes or products. Based on these meetings, managers from each division recommended process or product improvement opportunities to corporate. Store managers in the resource group were chosen by division managers and the other group members were voted on by store managers once a year.

QuikTrip Store Network

QT stores were open 24 hours a day, 365 days a year. All stores had a standard layout and merchandise selection determined by the corporate office to provide a consistent shopping experience across all regions. All stores had unlocked multi-person restrooms. In 2010, QT began experimenting with a new Generation 3 (Gen3) store format. (See Exhibit 5 for store images.) Gen3 stores were 20% larger than standard QT stores and featured coffee bars with premium beverages as well as a broader range of fresh products. Both customers and employees were enthusiastic. On average, these stores sold twice as much as a regular QT store and the coffee, ice cream, and smoothie sales actually exceeded cigarette sales. It was expected that most new stores would be Gen3.

Because most customers drove to QT, the stores were in stand-alone locations with ample parking and enough fueling terminals to ensure quick servic are great at, but there are two things we are the be

internally designed statistical model that took into account the demographics, crime rates, and vehicle traffic of any given location and estimated total market sales volume and how much revenue the new store could expect to draw from nearby competitors.

About 70% of store merchandise came directly from QT distribution centers (in Atlanta, Kansas City, and Phoenix) or QT Kitchens (in Atlanta, Kansas City, Phoenix, and Tulsa), while 30% came directly from vendors such as Coca-Cola and Frito-Lay. QT Kitchens delivered to each store daily, while QT distribution centers delivered three times a week. Typically, a truck from a QT distribution center served 12 stores and one from QT Kitchens served nine stores. Stores did their own ordering from QT distribution centers, but ordering from QTKs was decided centrally by each division.

a QT stores were divided into nine divisions based on geography.

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Customer Service at QuikTrip

QT found it hard to describe its typical customer. Many customers shopped daily for their morning coffee, paper, or doughnut. Others visited several times a day. About half of transactions came from customers who shopped at QT at least once a day. For some, QT was the neighborhood convenience and gasoline retailer, while others sto

st other retailers to find a QT (see Exhibit 6 for customer

QT differed from other convenience stores by offering fast and friendly customer service and meticulously clean stores and facilities. Kevin Th sion manager, explained

Coke and Pepsi. But we serve the customer faster,

fferentiation in the convenience store market. Customers came to QT to get in and out as quickly as possible and would not come in if the parking lot or store were full. Store layout was designed to help customers find products as quickly as possible. All stores had the same layout and the same merchandise, so no matter what QT store customers visited, they could find the same products in the same places.

Employees shared cash registers; any employee could use any cash register at any time. Rather than scan high-volume items, employees used speed keys to speed up the checkout. Chet elaborated:

to go through the trouble of taking the drink, scanning it, and having the register calculate how much with experience. Patty Donovan, a store manager

with over 15 years of experience, found that she had memorized some of patterns and would begin ringing up their purchases before they finished shopping. The company had strict customer-service policie more than three customers per employee waiting at a cash register and customers should never have to stand in line for more than one minute. Available employees were expected to drop everything and help at the registers if more than three customers were in line.

Consistency in speed, friendliness, product offerings, and cleanliness was another source of

s and safeguards to ensure consistency; two of the most effective were its daily activities worksheet (DAW) and its mystery shopper program.

Daily Activity Worksheet

The DAW was a tool that helped managers in each shift ensure that everything got done. The DAW was divided into three sections: register time, tasks (such as stocking merchandise), and upkeeps (such as cleaning bathrooms and emptying trash). For each shift, the manager would print and post the DAW, which told all employees what needed to be done and when. When an employee completed a task or upkeep, he or she initialed the worksheet, allowing everyone to see which tasks had been completed. Managers could assign jobs to specific employees or simply post the DAW and trust that employees would complete all jobs at th

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The DAW also helped with staffing. QT tracked how long each type of register transaction (cash, credit card, or check), upkeep, and task took and combined these data with forecasted traffic and sales data to determine staffing requirements in hourly increments. For example, QT knew that each cup of coffee sold took five seconds of labor to ring up when paid for with cash and ten seconds of labor to keep the coffee area stocked and clean. Based on these estimates, store managers knew how much labor was needed on each shift and constructed schedules for part-time and full-time clerks accordingly.

Mystery Shopper Visits

QT invested in developing its own mystery sho rporate office, with their identities kept secret

from all store employees; they visited each QT store once a week. QT mystery shoppers were paid twice the industry average and could be terminated if discovered. Periodically, a second mystery shopper would visit a store to make sure the first mystery shopper had evaluated it accurately. Mystery shoppers evaluated every element of

rds developed from customer feedback. An

ore received a 100% score, the employee at the register when the mystery shopper visited was awarded an additional $50 above and beyond his or her regular mystery shop bonus. Every week, about 20% of the stores received a full score.

Jeffers explained how important it was that the mystery-shopper questionnaire had been based on ce standards were really set in the boardroom by

a board of directors. But now, the standards are based on what thousands of our customers tell us. I think this is still one of the things our competitors miss out on. They want to tell people how to do it from up here. But nobody goes and talks to the real consumer. They want to set a standard based on their beliefs from their day and time and, in many

The questionnaire changed every two to five years or when the stores went through a major change, such as altering the layout. (See Exhibit 7 for criteria used in the questionnaire.) The questionnaire update process was intensive; two store managers from each division interviewed 1,000 customers (500 from urban and 500 from suburban settings) in their division. Interviews lasted 15 to 20 minutes and the customers received five-dollar gas cards for their help. QT also conducted Web surveys that netted an average of 50,000 customer responses each time the questionnaire was updated.

In 2010, the average mystery shopper score for QT stores was 94%, with a very small standard deviation. If the score for a store fell below 85%-

competitive set across many channels. The

grocery stores, Walgreens and CVS pharmacies, Wal-Mart, and several convenience and gas stores including Shell, Chevron, Exxon, RaceTrac, Case composite average score for the competitive set was 76.1%. The best score in the competitive set was

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Managing the Store Network

Each store was led by a store manager who was assisted by four other managers: first assistant, second assistant, night assistant, and relief assistant. Each of the three shifts was covered by at least one manager. (See Exhibit 8 hedule.) A single manager often covered much of the night shift, when traffic was low. Managers were assisted by both part- and full- time clerks, the number of which varied from store to store and within each store according to customer traffic. An average store employed 7.2 full-time employees and 8 part-time clerks. The security systems at QuikTrip stores were state-of-the-art and generally considered on par with those of most banks.

Store managers reported to area supervisors, each responsible for 13 to 16 stores. Area supervisors visited stores weekly to walk the sales floor and to meet with the manager to review financials, inventory, employee management, and sales information such as gallons of gas sold and cash imbalances. Area supervisors in turn reported to their division manager, the highest regional executive. In evaluating store performance, QT paid close attention to customer service and

were considered less important in employee evaluations because corporate decided what products to sell and how to promote, arrange, and sell them and therefore did not want to hold store employees accountable on these points.

QT measured inventory shrink and cash imbalance frequently. Auditors took a full inventory at each store every 90 days and an inventory of major items every 45 days. In 2010, inventory shrink in convenience stores and natural and specialty food stores in the U.S. was 1.52%,21 while at QT it was 0.6%. A manager beginning a shift performed a cash audit before taking over. If there was an unexplained difference of more than 0.3% of sa

repancies greater than $100, the manager would be reprimanded; for $300, he or she would receive a written warning; $500 would trigger automatic termination. Three cameras were trained on the registers; store and division managers could compare the video with register transactions.

However, even inventory took a secondary role

rather they take care of that child, give them a free drink, and make a positive impression on our customer. We drive people to take care of th

Managing Store Employees

Working at a QT store was not for everyone. Employees were expected to perform their tasks accurately and in the allotted time. Jeffers explained: and they exit quick. And the morale of the team really runs them off. I mean the peer pressure. If

typically, before we even get involved from the management level to have to terminate someone, th

rnover for employees with over a year of service

Employees who stayed with QT saw it as a career. Atlanta-area store manager Jay Fuston, for

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of how well the company treats us and because of

The average tenure was fourteen years for store managers, nine years for first assistants, six years for second assistants, four years for relief assistants, three years for night assistants, and two years for part-timers. Full-time employee turnover at QT was 13%, compared to 59% in the top quartile of the industry and 109% in the industry overall. Part-time employee turnover for QT was 36%, compared to 84% in the top quartile of the industry and 157% in the industry overallb.

QT had been named one of Fortune 22 QT was unusual among retailers in that it invested in developing its employees because it expected them to lead QT.

Hiring

The entry-level positions at QT were part-time and full-time clerk, night assistant, and relief assistant. All other store positions were filled by people who had moved up through the ranks from an entry-level position. QT invested in a rigorous hiring and training process to ensure that the firm brought on only those who would deliver the high-quality customer service it expected. Hiring was done centrally by the division office; store managers had no role in interviewing and selecting entry- level candidates.

In the Atlanta region alone, QT received 1,200 applications a week for part-time work and 500 to 600 for full-time positions. Applications spiked in the summer; the Atlanta division received a record

manager for the Atlanta division, noted that 90% of all applicants were eliminated before reaching an interview; QT ended up interviewing five people for each position.

To make it more likely that the right type of person applied in the first place, QT studied predictors of high performance among its employees, such as level of education, retail experience, and military service. Finding that 40% of its best employees were referrals from other employees, QT increased its referral bonus; an employee received a $100 bonus each time a referral reached a

ugh three months, six months, and one year of

When a candidate was invited for an interview, he or she first had to pass a 15- to 20-question math test, ranging from mentally calculating a cu certain product to order from the distribution center for the following week based on the previous

uding the most demanding and unsavory elements of the job, such as cleaning the toilets and fueling stations. This was an opportunity for some candidates to take themselves out of the running.

Then came the actual interview, which lasted ce while walking to see if you keep up. Are you

talking? Are you making eye contact and smiling? asked about previous retail experience and also posed hypothetical questions about hypothetical b These turnover statistics do not include departure of employees during training.

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For part-time candidates, QT asked if they would be able to live on reduced hours during slow seasons. QT had a natural advantage, given that many of its part-timers were students looking for 40- hour weeks in the summer and reduced hours in the winter. However, part-timers were often able to pick up as many extra hours as they wanted in other local QTs when employees went on vacation or called in sick.

Training

Once hired, part-timers received 40 hours of training and full-timers approximately two full weeks. For part-timers, the 40 hours consisted of a six-hour training session at the division office and 34 hours of in-store training from training clerks ically selected for their knowledge, experience, enthusiasm, and promotion potential. (See Exhibit 9 for a quiz a training clerk prepared for her trainees.) Full-time clerks and entry-level managers were trained by initial

w employees and who received bonuses based on the retention of their trainees. For full-time employees, the first week focused on upkeeps and register training, the second week on their assigned tasks.

QT practiced just-in-time training, giving only enough information for an employee to do his or do or know something if they are not going to

was difficult, with graduation rates of 72% for part-timers and 82% for full-timers and assistants. Many quit once they realized what would be expected of them.

When a night or relief assistant was promoted to second or first assistant, the store manager trained and worked with him or her over two to five shifts. When a first assistant was promoted to store manager, QT flew him or her to Tulsa to spend one week at the corporate office for intensive training. A new manager also received six weeks of additional training from a training manager (a promoted store manager whose only job was to train new managers), who spent two to three weeks full time in-store with the new manager and then a few days a week afterwards. Ten percent of new store managers did not make it through training often with increased pay.

Compensation and Benefits

Assistant and store managers were salaried, whil paid hourly. Store employees were paid almost double the industry average. Within the company, store managers were among the top 10% in terms of salary, making between $60,000 and $80,000 a

shopper reviews of customer service. The other half came from operating profit; most store employees, except part-timers, rece

companywide operating profit from gas sales. The operating profit bonus averaged approximately 10% of total employee salary.

QT offered other tangible benefits (see Exhibit 10 for employee benefits) as well as such intangible benefits as job stability and a deep commitment to employee appreciation, development, and well- being. Employees who reached important milestones were rewarded with bonuses and personal recognition. After five years of service, an employee was taken out to dinner with the senior-level division staff. At ten years, Chet would come to town to have dinner with the employee and his or

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her spouse or guest. Chet also spent roughly 50 days per year on the road visiting approximately 275 stores, where he would hold employee meetings. Employees were encouraged to speak to Chet or e- mail him with suggestions or questions and a good to these communications. Chet saw his relationship

ect them. It would be disrespectful to not come and

Job stability was another frequently reasons our employees come to us and plan to stay with us is because they or their family have lived through the layoff process elsewhere and they want to noted.

Job Design and Support

Each store manager and assistant had his or her own responsibilities (such as ordering products and scheduling employees), but all employees were trained to perform all upkeeps and some tasks. (See Exhibit 11 for a sample of tasks a part-time clerk might be expected to do in a typical day.) Store managers and assistants spent approximately 70% of their time at the register, but also helped with upkeeps and other tasks. Jeffers note stay with QuikTrip is not the

will do the same jobs they do. They have never worked anywhere else where the management will do the worst parts of the job such as clean the bathroom, empty the trash, work in the freezers, and clean the gas is were primarily motivated by pride in a job well done and (b) saw the continuous feedback they received as evidence that the company cared about their personal development.

To ensure that employees had sufficient time and resources to do all their jobs and do them well, QT made sure that stores were staffed properly and that all equipment functioned well. When regular employees were sick, had emergencies, or took vacations, relief employees filled in. In 2010, QT had over 150 relief employees just in the Atlanta market. In addition, part-time employees who wanted more hours could fill in when a store needed help. To ensure that all equipment was in working order, QuikTrip had its own facility support for machines and gas pumps. If there was a

an electronic request and a deadline for when they needed the equipment to be fixed. A technician assigned to that store (each technician served about five stores) would fix the problem.

Employees were expected to help manage themselves and to work without substantial

afford to have immediate supervision on each em do that and functionally work. Our people feel em

Internal Promotion

Internal advancement was a major driver of employee performance and QT worked hard to develop its employees. Store managers worked with their area supervisors to develop a promotion list of qualified workers. When a store position became available, the store manager would travel to the division office to interview candidates from the promotion list and decide whom to hire. Promotion could be within a store with more responsibility (for example, from second assistant to first assistant) or to a new store that had higher customer traffic and sales and therefore the opportunity for a larger operating-profit bonus.

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In established markets, it was not uncommon to find stores whose managers had been in that position for 15 or 20 years and whose first assistants had been in that position close to 10 years. QT found that these were some of their best-performing stores because they were run by proven managers who personally knew most of their customers. Turnover for these positions was low because store managers and first assistants received high pay, weekends off, and longevity-based bonuses and perks. However, such stability also created a pool of experienced employees who could become frustrated by the lack of advancement opportunities. Frustration could be especially high for relief and night assistants, who spent several nights a week in the store alone. One solution was to transfer qualified employees from saturated markets to growing ones.

Once an employee became a store manager, promotions became more difficult. The specialist sion personnel manager, area supervisors, and

executive positions (including the president/CEO, the chief operations officer, the chief financial officer, the vice presidents of sales, marketing, operations, and store development, the director of construction, and the senior network analyst) with former entry-level store employees, the firm kept its top corporate management lean, so advancement opportunities were rare.

Performance Reviews

Employees received frequent feedback, most commonly through anonymous electronic

by those directly above and below them to ensure fair and accurate evaluations. Store managers were evaluated semi-annually while assistants were evaluated quarterly or twice yearly, depending on their length of service. Full-time clerks were evaluated monthly and part-time clerks bimonthly. Store managers met monthly with each employee separately and with the entire team to go over individual and store performance, team morale, and how to help each other succeed.

Evaluations filtered up though each management level in the division and were centrally evaluated at the corporate office to rank store and division performance. Employees could log on to

ores were performing against others stores, both in the division and companywide, in terms of financials, store evaluations, and customer service feedback and reviews. They could see whether thei based on evaluations,

in the highest-performing 20%, the middle 60%, or the bottom 20%. Apart from formal reviews, employees consistently gave one another feedback.

do is to have a conversation to see how we can help. We help through our employee assistance prog

ving problems and their performance continues to

behavior than his or her lack of skill. Employees could be helped or trained to hone skills, but poor behavior and customer service were easy ways to

Growth

For a number of years, QT had been devoting its resources to developing its Dallas/Fort Worth- area and Phoenix-area markets. But the Phoenix market had now been profitable for a number of years and the Dallas market had reached profitability in 2009. Dallas then had an unprofitable year in 2010, due to exceptionally low gas margins, but Chet was not worried, as merchandise sales volume

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had increased dramatically since 2010 and the average store there was now making only slightly less than stores in established markets. Reaching such a healthy sales volume in Dallas in ten years was

ese markets reaching maturity, QT was looking to new growth markets.

QT had been eyeing a move into North Carolina for several reasons. North Carolina had a fast- growing economy and an expanding population. Construction and real estate costs had fallen in the several years prior to 2011 and QT saw this as an optimal time to establish a foothold in the region.

with a QT distribution center and QT Kitchen facilities, was only three hours to the south. In addition, Atlanta was a saturated market with a slow pace of roll-outs and many of its more than 1,000 employees were experienced and eager for development opportunities, which Chet was anxious to provide. There had been previous rounds of expansion in Dallas, Phoenix, and Tucson, but while QT employees were generally willing to relocate for career advancement, these cities had been too far away to expect Atlanta employ

Upon entering a new market, QT filled at least 50% of the new positions with employees from other regions, allowing it to import its culture and values while providing a venue for talented employees to advance. In these markets, it was possible for assistant managers to become store managers in only three to four years. But as a market matured and the pace of store openings declined, so did the percentage of employees brought in from other regions, particularly as local employees hired in the first years of operation gained experience and looked for promotions.

Traditionally, QT opened approximately one store a month when entering a new market. Experience and market research had shown that it took up to five years or about 50 stores to establish a brand presence in a new market and stand out in

Turning a profit took even longer. New stores in existing markets broke even 1.5 years after opening and reached peak performance in 8 to 12 years. Stores in new markets often took seven years to break even. In every new market QT entered, it lost millions of dollars per month for the first

competitors. Since all new stores in North Carolina would be Gen3, they were expected to cost even

our model is a high-investment and high-volume one,

Unfortunately, it takes a while in new markets for our volumes to rise to the level that it takes to justify those costs. As a result, you have to be patient. The question is always: How much patience

2011 North Carolina Roll-Out

As Chet left the meeting in Atlanta and boarded his return flight to Tulsa, his mind was racing. QT would definitely move into North Carolina, but how quickly should he roll out the new stores there? QT invested heavily in developing its people, but if he was unable to keep offering them chances for promotion, his company might begin losing its key asset. At the same time, if the roll-out

611-045 QuikTrip

went too quickly, QT might not be able to find the talent it needed quickly enough to keep up with store construction.

Opening 10 stores per year in a new market was the proven formula that had helped QT develop a loyal customer base while maintaining sustainable growth. But with so few promotion opportunities for QT employees, would it make sense to open stores in North Carolina more quickly? Opening 20 stores would relieve some of that pressure, but was this the best way to develop his people and the QT brand? Would speeding up the old model decrease the time it took for new stores to break even by getting to market saturation sooner?

QuikTrip 611-045

Exhibit 1

Date Event

1958 QuikTrip’s first store opened in Tulsa, Oklahoma.

1968 10th anniversary. QuikTrip operated 43 stores and employed 168 people (125 full- and 43 part-time).

1971 QuikTrip began selling gasoline.

1977 20th anniversary. QuikTrip operated 184 stores and employed 966 people (690 full- and 276 part-time).

1984 Chester Cadieux’s infamous human relations memo.

1987 30th anniversary. QuikTrip operated 248 stores and employed 1,798 people (1,054 full- and 744 part-time).

1995 QuikTrip began its companywide policy and procedure reengineering effort.

1997 40th anniversary. QuikTrip operated 331 stores and employed 3,749 people (2,353 full- and 1,396 part-time).

2002 Chester Cadieux retired as president and CEO, succeeded by his son Chet Cadieux.

2003 QuikTrip first listed on Forbes’s “100 Best Companies to Work For.”

2004 QuikTrip opened its 400th store.

2007 On the eve of its 50th anniversary, QuikTrip operated 475 stores and employed 7610 people (4,004 of them were part-time). Also in 2007, QuikTrip opened its first QuikTrip Kitchen.

2008 QuikTrip celebrated opening its 500th store.

2011 QuikTrip entered North Carolina.

Sources: Chester Cadieux, From Lucky to Smart: Leadership Lessons from QuikTrip (Tulsa, OK: Mullerhaus, 2008), p. 65; casewriter research.

611-045

Exhibit 2

Source: Qu

Market

Tulsa, Okla

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Springfield Atlanta, Ge Dallas-Fort Texas Phoenix, A Tucson, Ar

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Date of Entry Chronologic

September 25,

October 1, 1968

July 30, 1971 September 22, June 6, 1986 September 20,

September 20, September 21, December 3, 19

April 20, 2000 January 14, 20

rom Lucky to Sma s t s.

January 2011

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QuikTrip 611-045

Exhibit 3

TO: All Management Personnel DATE: February 27, 1984 RE: Practicing the Golden Rule

QuikTrip customers expect and deserve well-groomed employees who give them fast, friendly service. They also expect and deserve attractive, clean and well-merchandised stores. Just as there are minimum standards for customer service, appearance and store operation, there are minimum acceptable standards in the management of our employees. QuikTrip employees expect and deserve intelligent, positive, factual supervision. They do not deserve to work for an asshole. I am more tolerant of poor operation than I am of poor treatment of employees.

I am writing this memo not as a threat or because I perceive we have a problem, but as the result of a discussion held in one of our Management Committee meetings. Everybody seemed to understand what the minimum standards of customer service, employee appearance, and operation were, but there was no clear definition of minimum acceptable human relations skills. Some failed to realize that the way we get good results is just as important as the results.

Because of different personalities and experiences, we handle employees differently and I would not try to teach one set method. I would just say we cannot tolerate obnoxious, oppressive, abusive, tyrannical despots (assholes).*

Please be sure that you always treat your employees the way you want to be treated. That is the minimum expected standard of management at QuikTrip.

CC:db

re; depressing to the spirit

te power oppressively or brutally usively, oppressively, or tyrannically

erican vulgarity for all the above

Source: Chester Cadieux, From Lucky to Smart: Leadership Lessons from QuikTrip (Tulsa, OK: Mullerhaus, 2008), p.87.

Exhibit 4a

Provide an opportunity for employees to grow and succeed.

Companywide: Expand into new markets, promote from within, encourage upward mobility of division personnel, fund education opportunities

Division Staff: Provide training and performance feedback, promise only what can be delivered

Store Managers: Provide training and performance feedback, encourage promotion to higher volume stores, create a teamwork environment, promise only what can be delivered

Store Team and Individuals: Provide training and regular, honest feedback, develop skills, provide promotion opportunities, facilitate learning new tasks

Source: Chester Cadieux, From Lucky to Smart: Leadership Lessons from QuikTrip (Tulsa, OK: Mullerhaus, 2008), p.149.

611-045 QuikTrip

Exhibit 4b

Be the Best: Strive for excellence in customer service Hire only the best we see Promote the best based on proven performance Insist on high operating and management standards Stay aware of our competition Be the employer of choice in our industry Achieve quality in performance Work with team to constantly improve

Never Be Satisfied: Facilitate resource groups and annual meetings Constantly improve process Remodel stores to meet the needs of customers and store team

Identify areas for improvement and work to correct them Benchmark against the best in our industry and business in general Encourage continuous self-improvement

Focus Long-Term: Invest in the training and development of people Focus on operating stores as the primary thing we do

Maintain quality while growing the number of stores Drive sales at expense of margin Invest in new markets Set and accomplish challenging strategic goals

Support critical QT strategies with resources

Remain privately owned

Conserve resources

Do the Right Thing Consider how our actions will affect customers, the store, and the community Ensure we have the best store security systems Consider stores first, then corporate plans Sell all products responsibly Support our communities through contributions and partnerships Guarantee everything we sell

Source: Chester Cadieux, From Lucky to Smart: Leadership Lessons from QuikTrip (Tulsa, OK: Mullerhaus, 2008), p.150-153.

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611-045

Exhibit 5

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QuikTrip 611-045

Exhibit 6

Customer Gasoline Market Penetration in 2006* QuikTrip Best Competitor

Most Used Also Used Total Most Used Also Used Total Tulsa 74.3% 12.3% 86.6% 6.7% 8.3% 15.0% Kansas City 46.7% 21.3% 68.0% 13.0% 13.3% 26.3% Wichita 42.7% 29.7% 72.4% 28.7% 18.7% 47.4% Des Moines 37.0% 19.0% 56.0% 15.0% 21.0% 36.0% Phoenix 21.2% 16.9% 38.1% 13.2% 13.2% 26.4% St. Louis 40.5% 25.2% 65.7% 15.9% 13.3% 29.2% Atlanta 34.4% 25.5% 59.9% 16.2% 25.2% 41.4% Dallas-Fort Worth 16.3% 15.0% 31.3% 11.3% 20.0% 31.3%

* 2006 was the last time that QT tracked this information because it was highly correlated with market share data. In 2006, QT had been in Dallas-Fort Worth and Phoenix for six years.

Gasoline Market Share 2011**

QT Best Competitor Tulsa 56.2% 11.9% Kansas City 36.2% 18.6% Wichita 38.0% 18.9% Des Moines 21.7% 25.5% Phoenix 19.0% 24.6% St. Louis 21.0% 23.7% Atlanta 26.3% 12.1% Dallas-Fort Worth 12.3% 14.8%

** On average, the best competitor had four times as many locations as QT.

Source: QuikTrip.

611-045 QuikTrip

Exhibit 7 Mystery Shopper Store Evaluation Criteria

friendly greeting, eye contact, correct prices charged, efficient/ courteous/professional behavior, 3 to 1 standard applied, proper thank you and/or request to return.

visible name tag, proper uniform, neat appearance, no use of cell phones.

restroom, floors, trash containers, front doors, checkstand, pastry case, parking lot, gasoline island, sidewalk, fountain drink/coffee/hot food modules, coolers.

outside displays, candy rack, coolers, hot food products, fountain drink/coffee/hot food modules, general merchandise.

Source: Chester Cadieux, From Lucky to Smart: Leadership Lessons from QuikTrip (Tulsa, OK: Mullerhaus, 2008), p.107.

Exhibit 8

SHIFT Monday Tuesday Wednesday Thursday Friday Saturday Sunday

Morning MGR/1A MGR/1A MGR MGR/2A MGR/2A RA RA Evening 2A RA 1A 1A 1A 2A 2A Night NA RA RA NA NA NA NA

Management Key:

Shift Key:

and Saturday 10:30 p.m. to 8 a.m.)

Sources: Casewriter research rip.com/jobs/schedules.asp, accessed January 2011.

QuikTrip 611-045

Exhibit 9 division

1- After clocking in, one should always do ______________________ unless told otherwise.

2- What comes first: tasks, customers, or upkeeps?

3- What is the maximum time given for an upkeep?

4- How often should an upkeep be done?

5- True or false: When doing an upkeep, we sweep and mop the entire sales floor.

6- True or false: When touching food, we do not use gloves.

7- True or false: Work schedules change weekly.

8- True or false: We chase and throw soda cans at gas drive-offs.

9- What kind of coupons does QT accept?

10- Does QT allow second-hand sale?

11- What is the minimum age to buy alcohol?

12- What is the minimum age to buy tobacco/cigarettes?

13- QT requires its employees to ID anyone who looks under what age?

14- What key on the lottery machine is not to be used?

15- Does QT allow its employees to text/talk on a cell phone while on duty?

16- Does QT accept travelers checks over $100?

17- Is alcohol allowed to be bought with an EBT card?

18- Are smiles part of your uniform?

19- How much money do you get if you hit all of your customer contacts during a mystery shop?

20- Where do you see yourself with QT in the next year?

21- Money orders come in increments of ________.

22- _________ is the maximum amount allowed to be purchased by a customer daily.

23- How much does one 300 dollar money order cost?

24- A money order can be purchased with what form of payment?

25- True or false: Lottery tickets must be paid in cash.

If you score 100%, you will receive a free regular size candy bar or a free donut from your awesome clerk trainer

Source: Casewriter interview with a QuikTrip training clerk.

611-045 QuikTrip

Exhibit 10 Summary of QuikTrip Employee Benefits

Insurance Benefits (Full-Time Employees)

Health: Choose from the QuikTrip self administered plan with a Preferred Provider Organization (PPO) or an HMO (except in Iowa). QuikTrip contributes approximately 80% of the total cost of the plan. Dental: Two free cleanings per year. Annual deductible and $1,250 annual calendar year maximum per covered individual. Life: Coverage at twice the previous year’s earnings. Supplemental term and whole life plans also available. Vision: Covers eye examinations and glasses or contact lenses. Part-Time Employees are eligible for insurance coverage through StarBridge after 30 days of employment. At their second anniversary, they may enroll in the standard QuikTrip Benefits Plan.

Financial Benefits

401(k): Annual maximum amount of $16,500 from each employee’s compensation can be invested in QuikTrip’s 401(k) plan. QuikTrip matches the employee’s contribution at a 50% rate for up to 6% of their annual pay. Profit Sharing: QuikTrip annually contributes a percentage of pretax profit. Employee Stock Option Plan (ESOP): QuikTrip annually contributes company stock equivalent to a percentage of pretax profit.

Vacation Benefits

2 weeks after 1 year of full-time employment 3 weeks after 5 years of full-time employment 4 weeks after 10 years of full-time employment 5 weeks after 15 years (store employees only) of employment Part-time employees accrue vacation after 2 years of employment 1 month paid sabbatical at 25 years and every 5 years thereafter

Other Job Benefits For Both Full and Part Time

Free fountain drinks/coffee while on duty Weekly pay through direct deposit or payroll card and free checking with minimum balance Christmas bonus Credit union Seniority awards Tuition reimbursement Employee assistance program Free stylish shirts for store employees

Additional Benefits For Full Time

Disability, Sick pay Medical reimbursement accounts, child care reimbursement accounts Scholarship program

QuikTrip 611-045

Exhibit 11 Employee Duties

Give fast, friendly customer service Brew coffee, clean fountain area Write orders Read daily store email Sweep the parking lot Give fast, friendly customer service Wipe down gas pumps Check in vendors Restock cooler and freezer Sweep and mop floor Stock hot dog and taquito roller grills Put up warehouse order Give fast, friendly customer service Clean and stock fountain drink module Clean restrooms Attend store team and 1-on-1 meetings Bag ice Cook Hotzi breakfast/lunch sandwiches Empty trash containers Move and build pop display Give fast, friendly customer service Check in gas delivery Pick up outside trash Give fast, friendly customer service Clean sidewalk and parking lot

611-045 QuikTrip

Endnotes

January 24, 2011, http://www.nacsonline.com/NACS/NEWS/FACTSHEETS/SCOPEOFINDUSTRY/Pages/ IndustryStoreCount.aspx, accessed June 2011.

2 Ibid.

3 NACS, The Association for Convenience and Fuel http://www.nacsonline.com/NACS/News/FactSheets/Motor%20Fuels/Pages/MotorFuelSales.aspx, accessed January 2011.

ttp://www.nacsonline.com/NACS/ News/FactSheets/ScopeofIndustry/Pages/Convenience.aspx, accessed January 2011.

5 NACS, The Association for Convenience an http://www.nacsonline.com/NACS/News/FactSheets/MerchandiseandServices/Pages/Technology.aspx, accessed June 2011.

ttp://www.nacsonline.com/NACS/ News/FactSheets/ScopeofIndustry/Pages/Convenience.aspx, accessed June 2011.

7 Ibid.

8 /RealEstate/tabid/180/Default.aspx, accessed January 2011.

9 eetz.com/main/about/history.cfm, accessed January 2011.

ttp://www.nacsonline.com/NACS/ News/FactSheets/ScopeofIndustry/Pages/Convenience.aspx, accessed January 2011.

11 Chester Cadieux, From Lucky to Smart: Leadership Lessons from QuikTrip (Tulsa, OK: Mullerhaus, 2008), p.46- 58.

12 Ibid., p.49.

13 Ibid., p.53.

14 Ibid., p.50.

15 Ibid., p.94-103.

16 Michael Pollan, (New York, NT; Penguin Books, 2006), p. 110.

http://www.forbes.com/lists/2010/21/private-companies-10_land.html, accessed January 2011.

18 Cadieux, From Lucky to Smart, p.86.

19 Ibid., p.75.

20 Ibid., p.105.

21 meter 2010. The Worldwide Shrinkage Survey.

22 com/aboutqt/aboutqt.asp, accessed January 2011.