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“You can never have too much goodstuff.”

That’s the catchphrase for BP’sampm convenience-store brand. Theslogan refers to the targeted 18- to 35-year-old male who walks into a con-venience store and finds everything to

satisfy his guilty-pleasure center.As played out in one of its commer-

cials, a male customer ferrets throughan ampmgathering stuff.After search-ing through the store for some time, a

cashier asks if he needs help. The manreplies,“Where’s the cart?”

In thedivestmentof about 700prop-erties and the turnaround franchisingof 500 to 600, somewould say London-basedBP couldpossibly have toomuchgood stuff in downstream retail.But as

Selloff puts retail strategy in hands of ampm brandBy Angel Abcedeaabcede@cspnet.com

attractive as the potential appears forc-store chains, jobbers and independ-ent retailers to fatten their respectiveportfolios, one key question remains:

Will BP’s discontinuation of BPConnect in favor of nationalizing itsWest Coast ampm franchise model—along with the accompanying set ofongoing fees—capture retailer interest?

Whatmakes BP’s divestment differ-ent from those of majors such as ShellandConocoPhillips is that BP remainsvery interested in the retail future.And,perhaps more important, after invest-ingmillions of dollars in building a hipBP Connect brand east of the Rockies,BP is once again reworkingbrands,con-fident the popularity of itsWest Coastbanner will spread across the country.

“We did an extreme amount ofbenchmarkingandbelievewehaveaverycompetitive offer,”says FionaMacLeod,president of BPU.S. convenience retail.“Wehavea strong fuel-supplybrandandahistoryof [c-store franchising]with900existing ampmfranchisees.

“But at the end of the day,” sheacknowledges,“it has to be awin-win.”

There’s no question that the poten-tial exists. The planned sell-off, guidedbyNRCRealtyAdvisorsLLCofChicagoandexpected tooccurover thenext yearand a half to two years, in many casesmeans the land itself and properties insignificant markets including Atlanta;Chicago;Cincinnati;Cleveland;Colum-bus, Ohio; Indianapolis; Orlando, Fla.;Pittsburgh; and scattered company-opsin fivewestern states.

For some, it’s a no-brainer.“Thebestpart about this is you know what thesales volumes are,”saysRuss Scaramellaof Arizona Oil Holdings LLC, Scotts-dale, Ariz., who currently runs 16ampm locations.“When you build orrebrand, you don’t have an idea whatvolumes are going to be.With a corpo-rate store, you have existing volumes.”

Scaramella, like many other retail-ers researching the BP selloff, hopes tocapitalize on what could possibly be aonce-in-a-lifetime opportunity.As oneSoutheastern retailer who requestedanonymity says, “If you’re looking to

grow in certain markets, what otheropportunities do you have but … sitesthat already exist?”

For skeptics, the list of concernslooks like this:

� Brand Recognition. Will theampm brand score with customersoutside its West Coast comfort zone?And will BP successfully build brandawareness in these new markets?

� TheMoney. Is BP offering a fairprice after all is said and done, consid-ering the ongoing ampm royalties and20-year fuel-branding contracts? Andjust what allowances will be made ifcertain properties won’t sustain abranded product or if historic volumesshow that other locations,possibly evenones on premium corners, have notlived up to potential?

� Class of Trade. Just who in theend will be considered viable bidders?Will independents have a fair shot, ordo jobbers and industry consolidatorshold a favored position?

MacLeod and others at BP are stak-ing their reputations on ampm’sgrowth appeal.But evenMacLeod con-cedes that part of the “magic” lies infinding the right operators.

“We’re looking for the right fran-chisees, people who want to execute[the program],”MacLeod says.“We’rebuilding relationships.… It isn’t a date;it’s a marriage.”

The OfferInmanyways,ampmsymbolizes a kindof continental divide,with people westof theRockies having seen the light andeveryoneeast still in thedark.Customersin theWest hold a strong affinity for thebrand, having a tangible history andidentification with the fun, indulgentnature of the ampmexperience.Those

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Fiona MacLeodpresident of BP U.S.convenience retail

and Andrew Bairdvice president of marketingand merchandising for ampm

34 C S P A p r i l 2 0 0 8

east of the Rockies have yet to under-standwhatdifferentiates thebrand fromevery other c-store in themarket.

“We are very excited,” says BP’sMacLeod.“All early indicationsaremorethan positive with a 20%‘aided brand’awareness already registering with veryfewconverted stores east of theRockies.”

In addition, she says they’ve seenstrong anecdotal evidence that cus-tomers recognize ampm as a distinctbrand.The sentiments are summedup,she says, in a quote from a recent cus-tomer focus group: “The ampm peo-ple know more about food and thestore; BP knows about the gas.”

Andrew Baird, vice president ofmarketing and merchandising for theampm franchise, says the ampmbrandbuilds on a sense of fun and edginessthat appeals again to that youthful,indulgent consumer.

One of the more inventive com-mercials shows a group of guys build-ing a house out of corn-dog sticks, forinstance.Another promotional mani-festation comes with the company’s“Too Much Good Stuff” truck, filledwith life-sizedballoonsdepicting ampmsnacks and stocked with giveaways.Inside the store, vibrant and action-themed point-of-purchase materialsalso extend a sense of fun.

“Askanyonewho’s our customer,our18- to 35-year-old male,where they goto indulge—they come to our stores,sometimes five or six times a day,”MacLeod says.“They come to us for acorn dog and then go home for saladwith the wife and kids. This is who wego after.We target single-mindedly [thedemographic] at the site.Beer,chips, fastfood … and advertising that holds amirror up to the customer.This is whothey are; let’s celebrate it.”

The franchise agreement com-mits BP to spend funds onnational, regional and local adver-tising; public relations and pro-motional campaigns; and otherprograms designed to enhanceboth image and patronage at fran-chise sites. “Our advertising, inaddition to winning several awards,also rates very highly in pretestingthat we run with sample audiences,”she says.

For franchiseeBob Juckniess of RWJManagement Co. Inc.,Oak Brook, Ill.,who currently directs seven ampmsitesin theChicago area, finding a franchisethat can survive in a competitive envi-

ronmentwas significant.In addition to the strength of the

BP and Amoco gasoline brands, hefelt the c-store offer was better thanthat of the competition. “It has aunique blend of hot and cold food,coffee, fountain and a promotional

1) AndrewBaird sinks his teeth into one ofampm’s food offerings.

2) A full gourmet coffee bar stimulatesfoodservice sales.

3) Energy drinks add kick to ampm’sproprietary-label program.

4) Fountain fun is part of the ampm culture.

5) Brand transition should be complete bysummer of this year.

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2)

A p r i l 2 0 0 8 C S P 35

calendar that’s attractive to the con-sumer,” says Juckniess, a veteran oper-ator of Big Oil brands.“If you look atthe franchise—safety, support, train-ing and ethical conduct—that’s whereI [see ampm] has put all these thingstogether.”

TheWhyMarriage, even in the business sensethatMacLeod refers to, comes downto trust. Figuring out where BP iscoming from may allow retailers tobetter assess the ampmoffer and justhow committed the oil company isto supporting the franchise format.

Formany observers, the oil com-pany’s development and eventualdissolution of BP Connect, its ownc-store brand housing its now-defunctWild BeanCafé foodserviceconcept, is testimony to amore localapproach.

Localized strategies may eventu-ally befall all the majors, an immi-nent evolution brought on by the

completionof themerger frenzyof 1998to 2002, according to PMAA presidentDan Gilligan.That’s when the impetusbegan for major oil companies to easeoutof direct storemanagement,he says.

“The majors saw how hard it wasto sit in Houston and decide what salty

snacks to carry in New Jersey,” Gilli-gan says.“Management of a c-store isreally a local business, and the deci-sion was made that the closer man-agement is to the store, the moresuccessful the business.”

MacLeod agrees with the validity ofthe localized strategy, pointing to repli-cation of execution at the street level asbeing the most difficult part of thecompany-op model.

“Whenpeople saywe’re getting out,I say we are in consumer retail to stay,”MacLeod says,pointing out that futuregrowthwill bewith franchiseeswho arebetter connected to their local com-munities. “The company-op workedwell for our customer offer, but what’shard to replicate is that link to the com-munity that someonewho’s a local busi-ness [person] has.”

In the end, she says the decision toopt for one c-store brand in ampmandone support structure in the franchis-ing paradigm boiled down to simplic-ity.“We hadmultiple channels, brandsand offers that meant cost and com-plexity,” she says.“Itmeanswewere notas efficient as we could be. From thatperspective it was easy to say,‘Let’s focuson a single brand and a single offer.’”

How ampmWon OutAt the same time,BP felt internally thatampm and the BP Connect conceptswere beginning to have more similar-ities than differences. Hot food, foun-tain, coffee, core categories in beverages,snacks and tobacco existed in bothwithlittle to distinguish one from the other.

The main difference centered onmade-to-order foods. Rolled out in2001, theWildBean concept had a spe-cialized, upscale menu that targetedboth the breakfast and lunchtime

3)

4)

5)

A p r i l 2 0 0 8 C S P 37

crowds. The options included bakedgoods, paninis, chicken wraps anddesign-your-own sandwicheswithmul-tiple types of breads.

Consuming roughly 40% of thecompany’s larger, 4,200-square-footstores,Wild Bean stood as a formida-ble step by BP into foodservice—atone point the company even installedfood-ordering kiosks as a way to facil-itate the wait in line.

But as time passed,BP officials wereseeing that individually prepared sand-wiches stood as the final differentiatorbetween ampm and BP Connect and,unfortunately, one that couldn’t standas the linchpinof anentire c-storebrand.After conducting what MacLeod sayswerenumerous customer-segmentationstudies and even test siteswith elementsof both Wild Bean and ampm foodassortments, ampm appeared to hituponanessential piece thatBPConnectandWild Bean did not.

“What became more obvious to uswas the desire to have hot food 24hours a day,”MacLeod says, pointingout that customers used condimentbars“as if it was their own kitchens.”

Feedback showed that the 24-hour,hot-food and condiment-bar format,with its relaxed, quick experience, iswhat the targeted segment wanted. So

what about the customer base thatWild Bean drew?

“We did exit surveys and the feed-backwas that even thoughwemight losetheWild Bean Café itself, we were stillgetting thatWildBean customer plus awhole new customer base,”MacLeodsays.“WildBean, thougha goodoffer in

andof itself,didnotmeetour target cus-tomerprofile as fully as ampm.Plus, theWild Bean offer had limited hours asopposed to ampm’s expanded ones,which allowed us to broaden our cus-tomer reach.We also needed an offerthat was simple for our franchisees toimplement,aswell as simple forour cus-tomers to recognize.”

In the rebrandingprocess, a numberof componentsofWildBeanwere trans-formed to ampm, including gourmetcoffee, itemsbakedon-site and“chilled-to-go”offers.“The more complex andcostly elements of Wild Bean, such asmade-to-order sandwiches, were dis-continued. These sandwiches did selland were popular with a certain seg-ment, but our target customer wants ahot snack offer all day.Many of them

Building Winning ProposalsFor retailers interested in writing successful proposals for the ampm franchises offered upby London-based BP, officials with NRC Realty Advisors, Chicago, have a few suggestions:

� Visit www.nrc.com/bp, which will have links to receiving property-specific packets,customer-service numbers and a list of cities hosting proposal seminars—at whichattendance is strongly recommended.

� Reviewallmaterial carefully and thoroughly. In otherwords, do the homework neededprior to submitting a proposal.

� Attend proposal seminars if at all possible. These sessions answer key questions andwalk potential buyers through the process.

� Line up financing early. Again, much of the work occurs prior to submitting an offer.� Formulate a solid business plan. It’s what any prudent business person would do.

Franchisors are looking for people who want to grow the business—people who areinterested in and capable, for instance, of building new sites.

“We’re looking for the rightfranchisees, people who want toexecute [the program]. “We’rebuilding relationships … It isn’t adate; it’s a marriage.”

FIONAMACLEOD BP

want toget in andout ...andquickly.Weare still offering our customers sand-wiches that are made fresh to stock orcome from a quality supplier.”

At the endof the day,MacLeod says,“As long as you keep the [foodservicearea] clean, it tastes good andhas qual-ity, you’ll keep those customers.”

Selloff StrategyWith the transition toa franchisemodelinmotion, the next steps have includedtheeliminationof its company-operatedinfrastructure (a decision thatwill closeitsNaperville, Ill., retail headquarters infavor of its franchise digs in La Palma,

Calif.), leaving the rehiringof store-levelpersonnelup to the incoming franchiseeand setting up a series of in-field fran-chise-support representatives.

This ongoing phase ispart of an announced cutof 9,500 jobs tied to thefranchisemove. In a relateddecision announced lastFebruary, BP said it wouldcut an additional 5,000 jobsto trimmanagement costs.

With regards to the sale of U.S.prop-erties, each affectedmarketwill undergoa series of bid seminars to identify andinform potential franchisees of the BP

offer (see sidebar, p. 37). In the mean-time, the differentmarketswill undergoresets and signage changes to reflect theampm brand. That timeframe hasChicago scheduled for completion bylate winter, Atlanta by this spring,Orlando and Indiana transitioned byJune and the stations in the Ohio andPittsburgh markets done by July. BP islooking at both jobber and direct-sup-plied markets, with the common linkbeing the ampm franchise.

“Primarily,we are looking for some-one who we can get married to,”MacLeod emphasizes.“In California,wherewehave amixof company-oper-ated and franchised, for instance, we’llbe entirely franchise-focused.”

With many but not all properties toinclude land, buildings, the brand androyalties,much is at stake,she says:“[Thefranchisee] is really getting ownership.That’s why it’s a 20-year contract.”

Franchisees SpeakCurrent ampm franchisees such asJuckniess and Scaramella view theopportunity optimistically. “One ofthe things that excites me is it’s anever-changing model,” says Juckniess,who started in the business 22 yearsago with Houston-based Shell.“BP iscoming to the site level, to people like

me, and is willing to [listen].”After a less-than-stellar experience

with Shell as amultisite operator,wherehe had grown to operating 50 sites that

38 C S P A p r i l 2 0 0 8

Driving FunAbrand that actually encourages mayhem? For Andrew Baird, the essence of the ampm

brand lies in its focus on fun.To that end, the company drives around a “TooMuch Good Stuff” truck that promotes,

among other things, the act ofmixing different fountain-drink flavors, encouraging customersto create their own recipes.

“We introduce ampm as an edgy brand with point-of-sale material, samplings of newproducts aswell as TVand radio,” saysBaird, vice president ofmarketing andmerchandisingfor the ampm franchise. The brand elicits a sense of ownership from customers, he says:“The ampm franchise is a unique phenomenon. It’s a loyal customer base. I’ve walked intoa store where [a customer] would come up to me and ask if I needed anything.”

In states that have yet to understandwhat the brand stands for, Baird says, “The ampmname intuitively gives a sense of a store that’s open early and has convenient hours,whereasthe BP Connect name has less of that sense and retained a tie to the gasoline brand. Wewanted the convenience store to stand on its own.”

PROMOTION IN MOTION:A truckwith “TooMuch Good Stuff” extends the ampmbrand’s offbeat persona.

“The majors saw how hard it was tosit in Houston and decide what saltysnacks to carry in New Jersey.”

DANGILLIGAN PMAA

were ultimately shifted to Montreal-basedAlimentationCouche-Tard’sCir-cle K chain, Juckniess looks forward togrowing his seven-store network.

“A clear sign of my enthusiasm forthe offer is how I’m actively participat-ing in bids as BP continues to relin-quish its company-operated stores,”hesays.“If I wasn’t satisfiedwith the expe-rience, I wouldn’t be putting myselfthrough the process [again].”

Juckniess, who is based in theChicago area, says the strength of theBP brand, the enthusiasm he feelsfrom the franchising staff and the ele-ments of the program itself make it acompelling offer.

Scaramella in Arizona is equallyexcited as he seeks to expand on hisSouthwest holdings. Having operatedin a multistate format in a previousbusiness life, Scaramella sees potentialin further involvement with the fran-chise, especially with existing sites.

“With building locations you canrun into constraints that can put youbehind,”he says.“With these sites you…can take advantage of a staff of peo-ple already working there instead ofstarting from scratch.”

For retailers such as Scaramella,going forward means entering into along-term agreement in return for aknown business formula.

“It’s a 20-year relationship, not onlyfor the ampm franchise but also a 20-year BP gasoline-supply arrangement,”says Evan Gladstone, executive man-aging director for NRC Realty Advi-sors. “And a good formula is a goodformula.You wouldn’t go out and buya McDonald’s franchise and expect toserve crab cakes.The ampmoffering iswhat is attractive.”

Inside ampmAndrew Baird, vice president of marketing and

merchandising for ampm, outlines key conceptsbeyond advertising that make up the conveniencefranchise:

� Bakery. Freshly baked pastries, bagels andcroissants are part of themorning offer, with ovensfrom the formerWildBeanconcept being put to use.

� Hot foods, 24 hours. A snack-meal menu ofhot dogs, burgers, chicken sandwiches, corn dogs,barbecue ribs and nachos.

� Condiment bar.Accompanying the hotmealsis a condiment bar designed to allow for customercustomization that’s also operationally easy tomaintain.

� Coffee. An expansive range of gourmetcoffee options.

� Fountain. Up to 24 flavors, colorful graphicsand the choice of either crushed or cubed ice.

� Proprietary products. The ampm franchisehas developed its own proprietary line of water,energy drinks and sports water. Baird says soon-to-be-introduced products include meat snacksand nuts.

� Training. The franchise supports an eight-week training program for employees, focusing onthe operational processes necessary for success.

� Marketing. A 60-day marketing programincludes TV, radio, Internet, sampling and localevents (see sidebar, p. 38).

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Will the NumbersWork?For traditional retailers eyeing the potential of the BP fran-chise, central to the final calculations will be baseline mar-gins, according to several observers.

In states east of the Rockies, the ampmbrand is untested.“You’re givingupapercentage to the franchisor,butwhatper-centage is the consumerwilling to pay?”asksMichael Zielin-ski, president andCEO,RoyalBuyingGroup,Lisle, Ill.,whosecompanyworkswithmajors such as Shell and itsmultichan-nel network.“It hasn’t been played out yet.

“In certain areaswhere c-storemarket share has yet to be

harnessed by a particular brand, a newfranchise may have a chance. But inareas where you have a Sheetz or aWawa, you may be throwing goodmoney after bad,”Zielinski says.“Con-venience retailinghas always been aboutstore-level execution. Franchises offerthe retailer tools to assist in creating apleasant buying experience for the con-

sumer. Other more established brands, companies andorganizations already have these systems in place.”

Looking at the potential with a critical eye, Zielinski isoptimistic.“The key is not to overpay,”he says.“When peo-ple pay the right amount, it all works out. In fact, I knowsome current BP franchisees who are very happy with theprogram and see potential for growth with the franchise.”

Getting to that win-win placemay have just gottenmoredifficult due to, of all things, a recent streak of healthy gaso-linemargins, according to oneMidwest retailer.“We believethis robust environment has led to a disconnect betweenbuyers’ and sellers’ expectations,” said Bill Walljasper, CFOfor Ankeny, Iowa-based Casey’s General Stores, during thecompany’s second-quarter investor’s call lastmonth.“Aswestarted to see the gasoline environment become what it isright now,and it started in the late fourth quarter,we startedto see the disconnect becoming increasingly more chal-lenging because of the higher gasoline margins.”

Back in BusinessDuring the bid process, retailers might be well advised tonote the favor they are doing the majors, some believe.The majors, in this case BP, are intent on transition. In thehistoric love-hate cycle major oil has had with retail, thecost of doing business today is simply making street-leveloperations less appealing.

“Retail gasoline is so competitive,and it’s so tough tomakea penny andbeprofitable,”Gilliganof PMAAsays.“[Certainmarkets] have just too many stations, too many c-stores, somuchcompetition that they’re just beating eachother’s brainsout.Then youhave other areaswhere competition is gettingto where you might be able to make a profit.Until the retailgasoline business somehow gets profitable, I just don’t seewhy anyonewouldwant to come back.”

Back in the 1970s it was easier to get into the business, hesays.Today,with the average store bringing in $37,000 a year

The RoadmapLaying out the time frame and steps in BP’s transition to turn over its company-operatedsites to a franchisedmodel, FionaMacLeod, president of BPU.S. convenience retail, says

the entire process should be complete by 2009.

Step I:Brand transition to ampm� Chicago: Scheduled for February 2008� Atlanta:May 2008� Orlando, Indianapolis: June 2008� Ohio, Pittsburgh: July 2008Step II: Property sale� Entire portfolio: Sale projected to complete at the end of 2009.

(according to NACS) on a $2-millioninvestment in tanks,dispensers, liability,training and real estate,“not many seethat as great,plus all thework involved,”Gilligan says.“And remember, just 10years ago,crudewasunder $10 abarrel.Marketerswere charging 89 cents a gal-lon andmaking10 cents.Now it’s $3.50

and they’remaking 5 cents.”And yet, interest in the properties

seems high.“There are a lot of peoplelooking at these stations or else [BP]wouldn’t be selling them,especiallynowwith theway the economy[is slowing],”says Jay McKeeman, vice president ofgovernment relations,California Inde-

pendent Oil Marketers Association,Sacramento,Calif.“It’s apparent that ascompanies continue toput resourcesonthe block, they wouldn’t do so if theyweren’t getting some action.”

Jobbers’ GrowthWith the metrics of the business hav-ing flip-flopped, Gilligan says the go-to class of trade these days has becomethe jobber.

“Jobbers are set up to deal with 40,50, 60 stores and have the credit stand-ing to support that,”Gilligan says.“Cer-tainly the majors would gain little ifthey sold off these sites one at a time,because the [single-store operators]would have significant credit andman-agement issues. It’s a natural fit to startselling them off to jobbers.”

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“If I wasn’t satisfied with theexperience, I wouldn’t be puttingmyself through the process [again].”

BOB JUCKNIESS RWJ Management

In the larger scheme of things, themajors are on one hand diluting con-trol of retail. But on the other, he saysthe end result is a“stronger, decentral-ized industry involving companiescloser to the [local] business.”

Gilligan even sees the power shiftpolitically, where traditionally themajors have participated heavily inretail legislation.With PMAA being afederationof state associations,he’s seenthe majors ease back on retail issues,letting the responsibility fall to PMAAand its coalition.

Zielinski of Royal Buying Groupagrees, pointing out that the majors ingeneral will probably move to the job-ber-run paradigm.“It takes the grayarea out of the pricingmodel,”he says,referring to the tiered pricing that sep-

arates the jobber and dealer classes oftrade.“[The system]won’t support thelayers of cost. It did years ago,when fuelwas cheaper.”

Decentralization is a natural step,Gilligan says.“Big companies eventu-ally reach a point where they focus ondoing what they do best, and that’swhat’s happening with the oil compa-nies,” he says.“In terms of energy pro-duction, we’re facing an enormouschallenge in the global race for energy.Oil companies feel it’s their best profit

option to explore,develop,produce andrefine, and ease away from retail.”

With regards to BP specifically, fewindustry voices oppose themove,withthe majority focusing mostly on thepotential it brings.

“It’s a smart move, [one that] givesme an opportunity for growth,” saysScaramella of Arizona Oil. “Any timeyou have people investing their ownmoney, work ethic and hours, you’regoing to get a better product at the endof the day.” �

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MORE ON BPDon’tmiss exclusive interviewswith FionaMacLeodandAndrewBaird onCSPTV:www.cspnet.com/ampmtv.