7-Eleven targets Denver for growth

January 20, 2012

Those who work or live in downtown Denver can’t help but notice the recent proliferation of 7-Eleven stores.
In an effort to grow market share and boost sales, 7-Eleven Inc. — owned by the private Seven & i Holdings Co. Ltd., based in Tokyo — has opened 54 stores in the Denver market over the last three years with plans to open 20 to 25 more in 2012. It plans to sustain that growth pattern for at least the next five years.

“We’re very aggressive and interested in finding new sites in the Denver area,” said spokeswoman Margaret Chabris from 7-Eleven’s headquarters in Dallas.

Out of the 146,000 U.S. convenience stores, 7-Eleven has about 7,100, a 5 percent market share, according to the National Association of Convenience Stores. There are now about 288 7-Eleven stores in Colorado, 202 of which are in metro Denver. The company has closed 15 stores in the state in the past three years, for various reasons, Chabris said.

“We’ve got a nice store base in Denver today,” said Dan Porter, vice president of development. “And Denver offers an opportunity to grow more stores. ....We’re looking at all areas there, suburban and urban.”
Company officials like the state’s growing population and strong business environment.
The stores are growing via ground-up leasing, acquisitions of other convenience stores and converting other businesses to the 7-Eleven model.

The company continues to aggressively court franchisees, who own about 80 percent of the stores companywide.
And even though it appears 7-Eleven might over-saturate the downtown market — four stores have recently opened in the five-by-four block area around 17th Avenue and Logan Street — Porter said that won’t happen.
“We do extensive research on all the sites and stores before developing them or acquiring them,” Porter said. “In an urban environment, we might be able to put a store two to three blocks from another ... It’s like a $1 million investment for those stores, so we take it very seriously.”

“We want every single store to be profitable,” Chabris said.

Porter said downtown Denver’s growing residential base, coupled with the fact there are no full-service grocers in the central business district, is a formula for profitable stores.
“We feel like we’re filling a void there,” he said, adding the urban 7-Eleven stores in other markets are some of the company’s highest-volume stores.

Joe Beck, state director for the International Council of Shopping Centers and vice president of Denver’s SRS Real Estate Partners, said establishing market share here squeezes out the competition.
“Every retailer tries to do it, so they’re not alone,” Beck said.
Expansion creates relationships with land and building owners so that 7-Eleven is the only convenience-store brand they use, Beck said.

Analyst Robb Brown, principal with the Denver Retail Group, said those building and land owners welcome the expansion.

“In a lot of ways, 7-Eleven is in the driver’s seat. There aren’t a lot of nationally based, creditworthy tenants a landlord can go to,” Brown said. “If 7-Eleven comes knocking, they want to do the deal ... They still have debt service, and this company is a known entity.”

Franchise owners like the business model 7-Eleven offers. They have to split the gross profits 50/50 in most cases, but the company builds the store, provides all the equipment, maintains it and handles much of the bookkeeping.

“Once I’m in the store, I pretty much just pay for inventory and labor,” said franchisee Xavier Castanon, who in the last year bought two 7-Eleven stores. “They do all the accounting and billing, so it frees me up from having to do all that. They’re probably taking a greater share of the profit, but they’re also taking care of a lot of other costs business owners incur.”

Castanon owns the stores at 303 N. Santa Fe Blvd. and 495 N. Sheridan Blvd.
He said the Sheridan store’s sales are up 20 percent since he took over.
Castanon doesn’t worry about too many stores opening near his existing locations.

“I know about the growth potential of having a certain number of stores and density in a marketplace,” said Castanon, a former corporate executive with McDonald’s Corp. “Initially there could be a cannibalization of sales, especially with some downtown stores. But with the population moving downtown, there’s room for a higher density of units.”

The brand recognition, and corporate marketing efforts, benefit his stores. Plus, as Castanon wants to own five or six stores, there’s more opportunities for him to grow.
“For long-term growth, it’s the right thing to do,” he said. “If 7-Eleven doesn’t take that corner, or dominate certain areas, someone else will.”

He also appreciates the company’s efforts to stock fresh food, delivered from local distribution centers and bakeries.

Having more stores to use those centers is good for them, too, Chabris said.
“There’s so much more efficiency for a company to have more stores,” she said. “When there’s more volume going through these support organizations ... they have a better chance of making more money and being profitable, too.”

The fresh foods, coupled with the company’s own brand “7-select,” have been good changes for the 85-year-old brand.

Said Beck: “7-Eleven has done a masterful job of evolving the convenience store.”

Starbucks to launch juice chain next year

Starbucks plans to do for juice what it did for coffee. The company will launch a new health and wellness-focused retail chain next year after acquiring Evolution Fresh, a maker of premium juice products, for $30 million.

Starbucks will start expanding Evolution Fresh by putting in its existing Starbucks locations, the company said. And as consumers become increasingly aware of the brand, Starbucks will launch a new health and wellness retail concept based on it in early-to-mid calendar year 2012. Evolution Fresh Inc. will be a wholly-owned subsidiary of Starbucks Corp.

In recent years, Starbucks has seen success with expanded healthier menu items in its stores. With this acquisition, “Starbucks will reinvent the $1.6 billion super-premium juice segment, its significant next step in entering the larger $50 billion Health and Wellness sector,” the retailer said in a press release.
“Our intent is to build a national Health and Wellness brand leveraging our scale, resources and premium product expertise,” said Howard Schultz, Starbucks chairman, president and CEO, in a press release. Evolution Fresh stands out among other juice brands because it cracks, peels, presses, and squeezes its own raw fruits and vegetables, Starbucks said.

Using a technology new to juice called High Pressure Pasteurization (HPP), Evolution Fresh is able to deliver one of the only “never heated” juice products for an increasingly larger number of its offerings, ensuring fresh tasting and nutritious juices, Starbucks said.

Compiled by the staff of Shopping Centers Today. © November 10, 2011 International Council of Shopping Centers.

Wal-Mart on 3-month win streak

A revenue boost over the year before reverses a two-year sales slump.

 

By Anne D’Innocenzio    The Associated Press

 
Wal-Mart’s effort to reverse a two-year sales slump at its U.S. namesake stores is beginning to work.    The world’s largest retailer said Wednesday during a meeting with analysts that revenue at its namesake stores in the U.S. that have been open at least a year rose three months in a row in July, August and September after more than two years of quarterly declines.    Wal-Mart had promised a quarterly increase by the end of this year, and Wednesday’s news indicates it could make good on that vow in the current quarter, which ends Oct. 28.    “We have had very positive momentum in the back half, especially in the U.S,” said Charles Holley, Wal-Mart’s executive vice president and   chief financial officer. “We have more opportunities to grow more sales in the U.S. and around the world. But we will be deliberate.”    Wal-Mart also said it expects its expenses to increase more slowly than its sales for the second   year in a row. The last time that happened was 1992, Holley noted. Wal-Mart has vowed to reduce expenses even more aggressively over the next five years and put those savings into reducing the prices its customers pay.    The weak U.S. job market and other economic woes have strained the core low-income shoppers at Wal-Mart’s namesake stores in the U.S., while the somewhat higher-income clientele of the company’s Sam’s Club warehouse stores has been more resilient.    Wal-Mart’s namesake stores in the U.S. also stumbled in recent years because of mistakes the company made in merchandising and pricing.      The chain, based in Bentonville, Ark., now has restocked thousands of products it scrapped in an overzealous bid to clean up its stores. It’s also stopped using gimmicks such as slashing prices temporarily on select items and returned to its “everyday low price” strategy, the bedrock philosophy of founder Sam Walton.    Analysts have been closely watching for an end to the sales declines at Wal-Mart’s namesake U.S. stores, which account for 62 percent of the company’s total revenue. On Nov. 15, Wal-Mart will report its results for the current quarter.

Sizzler tries comeback, makes plans for Denver

by Ed Sealover
September 16, 2011

Sizzler, the once-iconic steak restaurant chain that filed for bankruptcy protection and closed the majority of its restaurants in the mid-1990s, is looking to make a comeback — and it wants to start its expansion in Colorado.

Kerry Kramp, president/CEO of Sizzler USA Sizzler USA Latest from The Business Journals Brinker CEO wins 'The Norman’ Judge adds to Sizzler USA award in E. coli caseQuaker Steak & Lube hires CEO Follow this company , said the Culver City, Calif.-based private restaurant chain has begun talking to potential franchisees and looking at vacant restaurant properties in the Denver area, and it plans to open eight restaurants in this market within five years.

The majority of Sizzler restaurants are sprinkled throughout the West Coast, Utah and Idaho, and Colorado would be a logical next location for an eastward expansion, he said.

If all goes well, the first new Sizzler in Colorado in 15 years could open in mid- to late 2012, Kramp said.

“Outside of the California marketplace, Colorado is our first look,” Kramp said. “If we can find a city that is really excited about having a Sizzler back in the community or if we could find a franchisee that is really excited, it could happen quicker.”

Sizzler became well-known in the 1980s for offering steaks as well as buffets for cost-conscious diners. At its peak, the company had more than 700 locations and was worth more than $1 billion.

But several buffet chains that came with more space in their restaurants and more offerings on their menus moved in on its market in the early 1990s, and Sizzler quickly ran into financial trouble. After its 1996 bankruptcy filing, it closed its three Denver-area locations in Arvada, Lakewood and Littleton. There are now 175 Sizzler locations across the country.

Kramp, a former executive with competitor HomeTown Buffet, took over as Sizzler CEO in 2008, and said the company needed to get back to its roots of fresh-made food and a big salad bar. The company stopped franchising while it looked at how it could improve. Two months ago, the newly formed management group Sizzler USA purchased the restaurant chain from Australian firm Pacific Equity Partners.

Sizzler officials have phased out the buffets and concentrated on hand-cut steaks and fresh seafood. They also have begun updating the look of the facilities, adding poplar woods and more contemporary fabrics. And they’ve added interactive kiosks and put the restaurant on Facebook in order to appeal to a younger demographic, Kramp said.

“It’s no longer just a place where seniors come looking for an incredible value,” Kramp said. “We’ve broadened the menu to include blue- and white-collar families, younger people.”

Sizzler has reported three consecutive years of same-store sales growth. Its annual sales are about $340 million.

The interest in Denver stems back to Kramp’s days with HomeTown Buffet, when he noticed that Denver’s population and demographics fit perfectly with a moderately priced steak restaurant’s target audience. Plus, he’s familiar with the Denver market, he said.

Sizzler is looking at buildings vacated by other restaurants for possible Denver-area locations, Kramp said. They hope to identify the first location in six to nine months, he said.

Though Sizzler is largely a memory to most people in the Denver area, Kramp believes it carries a certain value that still keeps it fresh in their minds. He noted that the cast of the reality TV show “Jersey Shore” had a party at a Sizzler not long ago, and an episode of the animated show “South Park” also mentioned the chain recently.

“The iconicness of the brand is special,” Kramp said, adding that he believes that will help with its future success.

Big-Box Vacancies Are Bountiful

August 26, 2011

The death of big-box retailers such as Ultimate Electronics, Circuit City and Linens & Things, along with Albertsons closing most stores in the Denver market, has left 78 large vacancies dotting metro Denver’s landscape.

That’s 4 percent of the gross leasable area for the retail market, and almost half of all vacant retail square footage, said Matthew DeBartolomeis, senior managing director for CB Richard Ellis CB Richard Ellis Latest from The Business Journals Durham lands new restaurants, retail locationsMiami Beach's Blackstone Apartments get M refinancingAqua-Tots Swim School signs lease at Dallas shopping center Follow this company Inc. (CBRE).

And there’s more to come, with Borders Borders Latest from The Business Journals Books-A-Million gets OK to buy 14 BordersBorders' Edwardsville lease sold to Books-A-MillionBooks-A-Million names new president Follow this company stores closing, adding about 175,000 square feet of retail space.

But the good news — according to retail brokers, building owners and an analyst — is that the Denver retail market seems to be improving. Owners and city officials are working with prospective tenants who want to occupy those big-box spaces, defined as 20,000 square feet or larger.

“I’ve been quite surprised how many have been absorbed in some form or fashion,” said David Larson, a partner with Denver’s Legend Retail Group Legend Retail Group Latest from The Business Journals Real Estate Review: Dick's Sporting Goods/Chipotle/SimonPanel: Denver commercial real estate poised for reboundAustin real estate round-up: Oct. 13 Follow this company LLC.

Some recent examples:

• Murdoch’s Ranch & Home Supply is taking most of a 96,000-square-foot vacancy left by Target and Circuit City on the northwest corner of Parker Road and Lincoln Avenue in Parker. In April, Parker’s Town Council approved a zoning change to allow a 23,604-square-foot accessory outdoor commercial display in the parking lot, where customers can load the fencing supplies they bought in the store.

That space had been vacant since December 2008.

• Big Time Trampoline Fun Center will fill a 26,744-square-foot big box with an indoor family entertainment center at 7330 W. 52nd Ave., in Arvada, near Wadsworth Boulevard and I-70. The former Appliance World had been vacant for more than a year.

• A new gourmet grocer, Two Mile Ranch Market, will be open in less than a month at a big box left vacant by a Wild Oats Market at Orchard Road and University Boulevard, in Greenwood Village.

• Restaurant/bar Toby Keith’s I Love This Bar and Grill filled a big vacancy left by a closed Borders at 8260 Northfield Blvd., at the Shops at Northfield Stapleton in Denver.

Big Time’s lease was an example of landlords being flexible.

Allen Ginsborg, managing director and principal for Newmark Merrill Mountain States of Fort Collins, said it worked with Big Time to get it into the vacancy at the Arvada Marketplace East, which Newmark owns.

“To get the credit on this building was very challenging for them,” Ginsborg said. “But we supported what they were doing and took a flier on them. It was a structured transaction that was really a partnership.”

Newmark even is doing the marketing for Big Time’s grand opening, he said.

While the Border’s spaces, and those of similar size from 25,000 to 35,000 square feet, will be easier to fill, the larger vacancies reaching 100,000 square feet will remain a challenge, one analyst said.

“The ones 20,000 to 30,000 square feet are the perfect size for other tenants to use the entire space,” said Mary Beth Jenkins, president of the Laramie Co. Laramie Co. Latest from The Business Journals The North Face coming to NorthCreek0M NorthCreek project breaks groundForest City buys Westminster land Follow this company of Denver. But there are few single-purpose users that can take a 100,000-square-foot space, she said.

Since many of the Borders stores are in or near malls, they have a better chance of being filled more quickly, she said.

“Within the next six months to a year, every Borders space will be taken,” Jenkins said. “They chose great locations.”

Many times, it’s too expensive to divide the boxes. That can cost $1 million or more, DeBartolomeis said.

“When you add $1 million to the bottom line, most of the time you can’t get the returns on the rents to justify a deal,” he said.

But the vacancies have created an opportunity for “regional retailers seeking an opportunity to expand and get a better position in the market,” said Jon Weisiger, senior vice president for CBRE and DeBartolomeis’ partner.

Ginsborg said that opportunity also exists for “open market-entry retailers that may not have been able to penetrate these areas.”

The CBRE brokers said more than half of the big-box vacancies are class C properties, which aren’t being looked at or rented as much as class A and B properties.

“The City of Louisville had a former Safeway that’s gone through a rezoning process that’s going to create some residential and retail,” DeBartolomeis said. “You’re going to get some situational uses like that, and more developers will buy it for the land value and take out the building ...

“When you look at ‘C’ boxes selling for less than $2 million, some sit on four to five acres of prime real estate with improvements to the street, plumbing and sewer already there. We’ll see more creative uses on those ‘C’ properties.”

That creativity also extends to landlords leasing to “pop up” stores, often seasonal retailers who sell Halloween or Christmas goods.

“The pop-up guys are loving it — they get grade A sites to choose from,” Larson said.

Jenkins predicts many of the spaces will be snapped up by grocers, frugal fashion stores such as Forever 21 or H&M, or even health clubs.

Churches or schools also could use the vacant spaces, she said.

“We’re still coming out of a big recession,” Jenkins said. “But the key is that Denver is still a dynamic market.”

Bad publicity hasn’t hurt Sunflower’s expansion

Premium content from Denver Business Journal - by Dennis Huspeni

August 12, 2011

Despite a public relations nightmare this year, Boulder-based Sunflower Farmers Market continues to break into new markets and hasn’t strayed from an aggressive growth plan to hit $1 billion in sales within five years.

The private natural-food chain opened its first California store in Roseville in May. Its first Oklahoma store opens in Oklahoma City this month, and a second California location opens in Modesto in October. That will raise the number of chain stores to 36 in eight states by year’s end. Colorado has 12 of those stores.

“We’re really starting to hit our stride in branding the company, and we’ve set ourselves up well for the future,” said Chris Sherrell, president and CEO.

Sunflower prefers to place new stores in existing retail spaces of between 25,000 and 30,000 square feet, rather than build them from the ground up, and also to keep frills to a minimum. That enables the chain to offer natural and organic foods for about 20 percent cheaper than its competitors, Sherrell said.

“We’re trying to be reasonable and value-oriented,” he said. “There’s really not many bells or whistles.”

Michael C. Gilliland, founder and former CEO, was arrested in February in Arizona on suspicion of soliciting sex from a police officer posing as a 17-year-old. He quickly resigned from the company and is awaiting trial.

Sherrell, then president and chief operating officer, was named acting CEO. In May, the company’s board of directors made the appointment permanent.

“Honestly, I thought all hell was going to break loose, and we were bracing for losses of 2, 3 or 5 percent,” Sherrell said. “But surprisingly, business was not affected that much. Yes, it was flat for a couple of weeks while the news was hot, but other than that, there’s been no change.”

Marv Rockford, principal with Denver-based Rockford Gray Rockford Gray Latest from The Business Journals PR pros assess Series ticket fiasco Follow this company LLC., said a couple of things happened to work in Sunflower’s favor. His firm specializes in crisis communication for businesses.

“As long as the damage to reputation attaches itself to a person ... and they quickly exit and have no more relationship to the brand, the consumer, if they value that brand, will continue to purchase it,” Rockford said.

He added that it also helps if the alleged wrongdoing had nothing to do with the sales or operation of the company.

“People will make that distinction,” Rock­ford said. “If the business has a product selection the consumer values, they have a reason to forgive and forget.”

Sherrell agreed.

“One person’s [alleged] actions doesn’t represent that of the 2,600 others in the company,” he said. “We continue to be family-oriented and a socially responsible company.”

The recent merger of Sunflower competitors Sprouts Farmers Market and Henry’s Farmers Market created a chain of more than 100 stores with 7,000 employees in four states. But Sunflower officials believe the natural-foods sector has plenty of room for growth for everyone.

“Look, the health kick is going crazy,” Sherrell said. “It’s going to continue to do so, whether it’s for obesity, dietary restrictions or whatever it may be. It’s bubbling up faster than it ever has in that natural-foods space.”

Sherrell said Sunflower has deals signed for eight stores to open next year and “huge plans going forward,” including nine more stores in 2013 and 10 in 2014.

“We’ve got the infrastructure to do it,” he said. “And this concept is very successful.”