At the end of the day, the content of the Shell lunch was pretty much what was in the email (see initial lunch post.) The rep thought the stores were shitty and the volumes were worse. Its was a pretty informative meeting, as it was.
The rep, AW, was candid in his remarks. He more than appreciated that I had a full grasp of the business and how to make money. He thought the planes approach was right but the assets were horrible. What I could also sense was that he didn’t like the sellers. He’s meet them before. I think they tried to get a marketing agreement directly with Shell and were turned down. Because some of the stores were branded Shelp via a wholesaler, he had volumes in those stores. It ain’t pretty
For one of the stores that I considered a prize store, I had the volume protected at 200,000 gallons per month; he said the store was doing 10,000 gallons per month. Not per week, per month. That is fucked up, almost unbelievable. I don’t doubt what he was telling me. It says more about how the store is being operated more than my over-optimistic view of future performance. The gap between the historical volume and my pro forma volume is too big to reconcile with an independent market/site study. We will get the deal done but my initial reaction is, fuck me.
Here is the good news. I can get a supply contract or wholesaler deal with Shell but not with these assets. His suggestion was for me to buy a couple of sites and build 2 stores. My thought was, fuck that! I told him, ‘naw, I didn’t want to do that for a couple of reasons.’
First, it cost more to build a store than the buy an existing store, unless the existing store is well run and has been recently updated, then you will pay a premium for that store.
Second, you’re going to have to go through the same site/market analysis to determine what the pro forma volume will be. The patience to get to that projected volume for a new store can be painfully expensive. You can create an initial splash like we did with the Conoco stores but getting to level, sustainable volume can take a while, a year or 2. That’s no! Our financing plan, both the bank financing and the equity financing won’t be that patient, neither will I.
Finally, the operational pain in the ass of startup is a nightmare, and that’s just with staffing. If you have ever managed retail or worked retail you understand.
He got it. He knew I was telling the truth.
We ended the lunch by agreeing to stay in touch. He offered to brand some of the stores with the ‘76’ brand but I rejected that. ‘76’ is a recognized brand but I don’t think it would be good for the markets we’re looking at. Also, the wholesale price would be higher than what I would pay for the Shell brand. It’s complicated and not worth the time to explain. I’m just not going to do that, period.
There is a deal there, just not right now and probably not with this group of stores.
I had a thought 24-48 hours after the lunch, ‘what is this mutha fucka was lying to me? What if I got caught up in wholesaler politics and the real deal is that his existing accounts wanted the stores and he couldn’t tell me yes after he had told them no?’ That’s basically what he said in his email anyway. No biggie. Shit will work out. Since I have a meeting with Chevron within a week, I’ll have a better feel.