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May 01, 2009
With the acquisition of 43 ExxonMobil On the Run stores in the Greater Phoenix market, coupled with the assumption of franchise contracts covering some 450 On the Run stores, Alimentation Couche-Tard Inc., North America's second largest c-store chain, has further strengthened its positioning in the convenience store market. This acquisition of On the Run, by the owner of Circle K reminds me of the White Hen Pantry acquisition by 7-Eleven a few years ago.
White Hen Pantry operated about 250 stores, all franchise owned and in Chicago and Boston. 7-Eleven acquired WHP Holdings in 2006. Today most Chicagoland White Hen's have been converted to 7-Eleven's. A few White Hen's remain, but will be converted as leases expire. This was a bold move by 7-Eleven, and it has made 7-Eleven the convenience store in Chicago.
Ask a Chicago resident to name a convenience store, they will more then likely name 7-Eleven, and could probably give you an exact store location which they visit regularly. I shop at the 7-Eleven on Taylor Street, just east of Ashland. It is a converted White Hen Pantry. This was a crafty move by 7-Eleven, as they bought the only other significant c-store brand in the Chicago market, and now dominate this enormous market.
Couche-Tard operates over 5,000 stores, and most of these are company owned. They have a significant franchising division as well. Couche-Tard is a Canadian company which acquired Circle K in 2003, and they are headquartered in the province of Quebec. Though they tried to bring Mac's to the US, the 2003 acquisition of Circle K was done for the specific purpose of owning and operating a recognizable brand. Canadians are familiar with Couche-Tard, Mac's and Becker's.
Couche-Tard has been growing through acquisition,and if the chain they acquire has a significant market presence, they have enhanced the chain, rather then convert it. Is this done from necessity, as Couche-Tard is a French Canadian company? Maybe. Regardless, they have done a wonderful job of analyzing the market needs prior to making changes that could create a negative impact on store sales or customer retention.
It makes sense that these 43 Phoenix On the Run locations will be rebranded as Circle K's, and it should happen pretty quickly. Phoenix is the original headquarters of Circle K. The other 400+ On the Run's are primarily found East, which is not as significant a market for the Circle K convenience chain as the West, South, and Southwest. Strategically, are they going to start acquiring or building out stores, and brand them Circle K, or will they operate On the Run as an East Coast c-store chain? Will On the Run franchise owners prefer to be Circle K franchisees?
We have seen Circle K start to move into the Midwest, and we have a few here in the Chicagoland area. With the 7-Eleven acquisition of White Hen, our city has become a 7-Eleven town, and effectively removed any established acquisition target's from our market. Couche-Tard understands how to operate locally relevant store brands. I don't think it is a certainty that these East Coast On the Run's will be converted to Circle K c-stores. It will be interesting to see what happens.
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