Congratulations to Ramona Hood, FedEx’s new President and CEO of FedEx Custom Critical. Hood is the first African American woman to have a lead role at the company. It’s a historic promotion for her and for FedEx. Articles announcing her appointment to the CEO role have been widely shared on social media. We should celebrate her, congratulate her, and appreciate her as a “first.” Be sure to read her story!
When I saw the announcement, there was a moment of pride and a moment of reflection. There will continue to be “first” in every area of life, for different folks, people of color, LBGTQ, women, etc. What’s interesting is that people, those that are “first,” never set out to be first, particularly. Those of us that pursue success, or are pursuing success, the drive will be there irrespective of whether we are first, particularly from a corporate achievement perspective. You’re driven to be the best, similar to those that train for and accomplish athletic feats. If it turns out that the work you put in makes you a first, great. The two most important things that happen with first, in my opinion, are that you create the opportunity for a second and a third but also, you inspire someone else or yourself to achieve another first! That’s going to be a constant theme throughout this post.
I’ve had a couple of first. When somebody tells you, ‘you know you’re the ‘first one’ to do whatever it is that you did, it is a shoulder shrug. You have to be busy doing whatever it is /was that made you “first.” When you stop or slow down to celebrate being the first, you take your eye off the ball. Celebrating the fact that you were first, can come later, much later.
A little reflection and the scenic route to make a point.
In 1997, I became the first African-American Conoco-branded petroleum products wholesaler (or distributor or jobber). I wasn’t trying to be first; “first” never crossed my mind. I had spent 4-5 years trying to get into the convenience store business and a big chunk of that time was spent trying to convince Conoco to sell me 10 ratty-ass stores they owned, primarily in southern Dallas. Trying to convince them to sell to me, raise the money to do the deal, and figure out construction plans and how to operate the new enterprise took all I had, actually more than I had. Neither I nor Conoco spent any energy basking in the fact that this was a first for them or me. We honestly didn’t know until a reporter asked one of the senior guys at Conoco, the guy instrumental in making it happen, how many other African American wholesalers they had in their network. After some thought, he responded, “I don’t know if we have any. Rich might be the first but I’ll confirm and get back to you before you publish your story.” He checked, and I was the first.
This was 23 years ago. It seems like a long time ago and it was. I knew of other African-American branded gasoline dealers for years. My dad was a Gulf dealer in 1972. There were several dealers in my hometown of Tyler back in the day, Thomas’ Gulf, Kirkland’s Diamond Shamrock, Claiborne’s Texaco (later Lewis) and I’m probably missing some more. A conversation about the exodus of African American entrepreneurs is warranted but we will do that another day.
Conoco should have had an African American wholesaler long before 1997 but I understand why it took so long and why there are very few now. Other MOC, Texaco, and Shell had African-American wholesalers but not too long prior to me becoming Conoco’s first. There were a couple of white female distributors operating in the Dallas area at the time. The had been in business a while and were quite successful.
Let me explain why being a petroleum products wholesaler versus a dealer is a big deal and why at the time being first was very important.
Major oil companies distribute their refined products, i.e. branded gasoline, diesel, light oils and the like through wholesalers, to a great extent. The wholesalers or distributors sell these products to retailers, i.e. convenience stores, fleet operators, or industrial users. The retailers, in turn, sell to consumers. Wholesalers are generally business to business, businesses. Being able to meet the volume requirements to become a wholesaler and having the capital to make the business work is a huge deal and keeps not just people of color out but also keeps out most other people.
When I approached Conoco and was assigned an account manager or relationship manager and expressed my desire to not only buy stores from them but also be a wholesaler here is what he told me. He said, “I’ve been doing this for almost 40 years. It is a good business. Most of my clients have had their distributorships for the entire 40 years. Most of them are passed down to their children. You can make a lot of money doing this. Almost all of them are millionaires.”
Nowadays, the wholesalers are huge, billion dollar-businesses. There are still family-owned companies but there conglomerates that are wholesalers. SUNOCO comes to mind, immediately.
You could say the reason that African Americans were not invited to the party sooner was that the other folks didn’t want to share. I don’t think it’s so much that. Until our, the world’s, reliance on carbon fuels changes, there will be enough business to go around and then some. So, it ain’t about the pie is limited. It’s more about people not seeing people of color as either capable of being in this business or not wanting them to have the rewards that come with the opportunity. That’s another story for another day.
Pulling this deal off was a huge accomplishment, not because I was first but because it was a major achievement. The obstacles were many and daunting. Being first meant more to the people that followed me and the people around me than it did to me. Because there was a first, there could be a second and a third and so on and so on, in most cases. That played out in my case much sooner than later which was pretty cool. I’ll explain.
The way I was able to make it work or I should say the way we made it work, we being me and Conoco was to extend a program they already had that supported their existing wholesalers. At the time and in hindsight this pissed me off and still pisses me off. Check this out.
I mentioned that this chase and courtship went on for 4-5 years. It was probably longer than that if you consider that the Conoco transaction wasn’t the start. I’ll have to do another post about Good Luck Oil Company. For you, Dallas peeps, yeah, that Good Luck.
I spent half the time chasing Conoco, trying to find the right person to talk to then trying to convince them to sell, not because they didn’t think I could buy but getting to the decision-maker, then his boss, then his boss. it was a long, long process. The stores weren’t being marketed for sale at the time. They should have been based on appearance alone but they were not. It was a cold-call, cold solicitation by me. There’s a long story there but I’ll save it.
Take a look at the following picture and you would never believe a major oil company-owned and operated 10 of these shitty stores. If you consider that most of them were in minority neighborhoods then the picture gets a little clearer, right? I have a story AND a strong opinion about this!
After they said ok, ok, uncle, we will sell, the ball bounced back to me. I needed all 10 stores because of the volume requirements to get a wholesale contract. Having one store might not have been a bad deal but that would have basically been a job. I had a job, a couple of really good jobs. I didn’t need a retail job.
My big issue after they agreed to sell was, where was I gonna get the money from. I’ve learned a lot since then about capital raising but, at the time, this was a big hurdle to overcome. The bulk of the money, as is the case in most buyouts, is debt or borrowed money. I talked to lots of banks, lots. The terms banks were giving me were ridiculous if not impossible. I looped the Conoco people in on my struggle and we went round and round and round about how to make it work.
The account manager I mentioned above, he and I got pretty close. We would have lunch or meet at least quarterly to discuss my progress on getting it done. For the longest time, it was kind of a one-way conversation, me telling him I was working to make it work and him just saying, “keep me posted and I’ll see if I can think of anything to help.” We got close enough where evidently he was sharing with his wife what I was trying to do as a “black guy.” I know this because when I met her he introduced me and said, “honey, this is our son that I have been telling you about.” She told me, “we included you as a deduction on our tax return.” They were both good people. I will forever be grateful for his help.
At one of our lunches, I brought along a friend that I use to bounce ideas off of so he could, maybe, help us come up with a solution. As we were eating and talking my buddy told the Conoco rep about the term’s banks were asking for. One of those terms was a guarantee of the debt by Conoco. The question specifically was, ‘would Conoco guarantee the debt?’
The rest of what I’m about to tell you should piss you off. It was sweet and sour at the same time for me. As the years have gone by it becomes sourer but the saving grace is that I was able to get the transaction done.
So, when my buddy asked the question, you could see this light bulb go off in the rep’s head. What he said was, “you know, we do guarantee loans for our jobbers.” Jobbers is another term for wholesaler. He said, “we guarantee their debt when they want to buy stores or build new stores. I think we guarantee up to 80% of the debt. I’ll have to check to see how that might work for this deal” His hesitation and the hurdle Conoco had to get around was, I wasn’t an existing wholesaler. I know it seems stupid since I was buying 10 stores or proposing to buy 10 stores, but….
I can’t tell you how incredibly encouraging that was. I mean, the possibility of pulling off the impossible was within reach. This was great news. I’ll get back to that in a minute.
Do you know what was messed up about that news? The sour part? Not that he had been sitting on this information for two-plus years. I would have been cool if it had taken five years. Nothing is ever fast or easy. Like I said, first means little when you are going through the process.
What was messed up is that the white, mostly male club had this secret to creating wealth in this industry segment If you’re in; if you’re out, you’re out.
Just so we’re clear (in my Bernie’s voice) and you don’t start chasing your tail looking for a MOC guarantee to become a wholesaler, that program doesn’t exist anymore, with any MOC.
My guy got back to me and told me, yes they would do the guarantee. The thing was, they already had a program set up through their designated bank. I had to use their bank and agree to the terms of the program. I could not believe it and I was happy as shit. The impossible just became possible. We worked together for a couple of months to create a “minority” loan program.
Can I digress for a moment?
You can’t really get away from the economic disparities of race as much as you want to or try to. It’s systemic and until there are many more “first” it will always be there.
The minority loan program didn’t really need to be framed as a “minority” loan program. The truth is this was a negotiated business deal. There were mutual benefits to both parties, the same as the benefit for their “regular” loan program. Here’s the deal. You know what was in it for me. For Conoco, they got to put the Conoco flag on stores that carried an alternate Conoco brand, “Jet.” Jet was used for lower volume stores, mostly in minority communities. It was a brand they acquired many years before and never converted most of the stores to Conoco. My acquisition of those stores provided Conoco the opportunity to retain that fuel volume and increase their name recognition across a neglected area in southern Dallas. Framing the loan program as a “minority” loan program also benefited them from a PR perspective.
Every commercial loan comes with “covenants,” the things you can and can’t do as long as a loan is outstanding. There may be a restriction on how much you can borrower in addition to the loan you’re being granted. There may be a requirement to deposit money in the lending entity’s institution. There may be a requirement to use additional services of the lender. How much you can borrow relative to what you are buying (constructing, repairing, etc.) is a function of the lending institutions policy AND what you can negotiate. Exceptions to the policy are made based, in many times, on who the customer is. The loan guarantee really made Conoco a joint customer. So, was it that unusual for the bank or Conoco to grant an exception to extend the guarantee to 100%? It was probably not that big of a deal, probably? Nobody had probably asked before, particularly that was purchasing 10 stores, in southern Dallas!
I get it and trust me, I’m appreciative of the opportunity. People have wrongly assumed that Conoco did a “special deal” for me because I’m black, neglecting the fact that I put in the work. I negotiated a business deal with a Fortune 10 company that was mutually beneficial and cost them very little.
Done with that soapbox. Back to the story.
A little bit of finance shit. Some businesses are what you call, “capital-intensive” simply meaning it costs a lot to get in. The financial costs of entry are high. The barrier to entry is high. Unlike, say the mortgage business, where the financial barrier to entry is low. There is a net worth requirement that can be problematic but you basically gotta get a license and invest in office space and supplies. I mean there’s other stuff but not millions of dollars or even thousands of dollars.
The barrier to entry to be a wholesaler, particularly a stores-owning wholesaler is extremely high. But, it’s not insurmountable when you’re being carried or supported by a major oil company, a Fortune 10 company. People of color were locked out, for years and continue to be locked out. To hear that I might get a debt guarantee was both encouraging and frustrating but trust me, it was much more encouraging.
But wait, there’s more, Alex. Tell them what they’ve won.
To make the transaction easier for me, Conoco was going to help me structure the loan, the overall buy transaction, as well as the initial operating setup. These are the things they did:
Remember I said I was buying 10 stores? Remember I said they were all raggedy? Remember I said there are volume requirements to become a wholesaler? They help structure the deal so some of the stores were sold to dealers that would be my wholesale customers. I identified some of the customers and they identified others. That allowed me to get the wholesale contract and not have to be responsible for millions and millions of dollars’ worth of construction to rebuild the stores. This allowed me to have the volume needed for the contract and for them to get me the contract because I had committed volume. Now, I could participate in the loan guarantee program.
The other thing they/we did which is the primary reason for the long-ass story is, we restructured the loan guarantee program. We extended the guarantee from 80% to 100% and created what was known as the “minority loan program.” That 20% increased made the barrier to entry significantly easier. You still had to meet the volume, character, viable business plan and other requirements but the capital needed to make it work was made easier.
Let me wrap this up and reiterate a point.
Almost immediately after we created the program and I purchased my stores and begin operations, I know of two other wholesalers that were able to participate in it, one in Chattanooga TN, and a guy in Naples FL. I knew the guy in Chattanooga and met the guy in Naples at a Conoco conference later.
Me being first meant more to them than it did to me. The barrier was broken and others were able to penetrate. I was just happy to get my deal done but really happy to see them get their deals done too.
So, first really means now there can be a second and a third or inspiration for the next first. Congratulations Ramona Hood, et. al. You inspire us all.