When Arie Kotler became CEO of GPM Investments, then a convenience-store chain of roughly 200 stores across seven states, in 2011, he saw an industry that mostly consisted of mom and pop shops. Because of rising inflation and technology, many of those businesses — some of which were founded in the 1950s and 60s — were starting to put themselves up for sale, since they could not keep up with the big players.
“That’s what I saw when I joined — a fragmented industry,” said Kotler, who became the chairman, president and CEO of Arko, parent company for GPM, in 2020.
Today, Arko operates nearly 1,400 GPM c-stores in 35 states, making it one of the largest c-store chains in the country by size. Arko has made 21 acquisitions since 2013 and runs under a variety of banners, such as Fas Mart, Scotchman, Roadrunner Markets, E-Z Mart and others.
On the heels of a record-breaking second quarter in 2022, Arko doesn’t plan on slowing down anytime soon, Kotler said. Earlier this month, the company agreed to acquire 350 wholesale and retail sites — including 150 company-operated convenience stores — from Transit Energy Group (TEG) for $375 million. The deal would expand Arko’s c-store footprint to more than 1,530 locations and extend its reach into Alabama and Mississippi — its 36th and 37th U.S. states of operation.
“We’re here to stay,” Kotler said. “We’ve shown the market we know how to do this.”
Making a difference
Mergers and acquisitions are at the core of Arko’s business.
“We’re an acquisition company,” Kotler said. “We have it in our blood.”
When scoping out new brands to acquire, Kotler and his team are selective. On their journey to acquiring 21 brands, the company vetted roughly 5,000 convenience stores.
“We don't buy just because we have the liquidity,” he said. “We buy where we believe we can make a difference.”
To make a difference through acquisitions, Arko prioritizes family-owned brands that have been in business for decades and are located in states where Arko doesn’t yet operate.
Once acquired, Arko tries to avoid changing the stores’ brands, Kotler said. Oftentimes, customers don’t even know the store they’re shopping at had been acquired, he said.
“We’re buying into very strong brands, family brands, that have been in business for many years,” Kotler said. “We’re not changing the brand of the store, but we’re changing some of the experience.”
In changing the experience, Arko always implements its own marketing and rewards program with each new site. Additionally, it usually updates acquired stores with foodservice enhancements.
“For us, it’s a deal,” he said. “For those families, the store is their legacy.”
But it’s not just mergers and acquisitions that are driving Arko’s success. The company is also heavily invested in hiring and retention strategies, supply chain management and foodservice.
Saying ‘thank you’
Finding and retaining employees continues to challenge c-stores nationwide, as industry turnover hit 150% in 2021 — the highest it has been since 2012, according to the National Association of Convenience Stores (NACS).
Despite Arko’s massive growth, Kotler acknowledged the company’s labor challenges.
“I don’t need to tell you the labor market is tight,” Kotler said. “Since we operate in lots of rural markets and small towns, the labor just isn’t there. There’s not enough people.”
However, with a potential recession looming, job applications at GPM stores are on the rise as people look to get back to work, Kotler said. So much, in fact, that Arko has brought recruiters on board so store managers can focus on their regular duties instead of interviewing candidates.
“People are coming back to work,” he said. “In order to process the applicants, we’re bringing more and more recruiters to get them on board.”
On the retention side of operations, Arko recently gave all employees a $500 reward as a token of appreciation, Kotler said. The company also gives its employees gift cards, gas discount cards and other rewards.
“Let’s not just concentrate on new employees, but current ones, and how we can take care of them,” he said. “We felt [the $500 gift] was a thank you to the employees for just coming to work and doing what they do on a daily basis.”
Think outside the box
As supply chain issues ripple throughout the c-store industry, thinking outside the box has become essential to finding success, Kotler said.
Case in point: With c-stores seeking protective gear at the onset of the pandemic, Kotler and his team flew in masks, hand sanitizer and other essential supplies from other countries, he said. And when Arko announced a partnership with pizza chain Sbarro in 2021 amid a shortage of pizza ovens, they resorted to eBay.
“You need to be creative when looking for [product] replacements,” Kotler said.
Arko plans to have 50 Sbarro locations in GPM stores by the end of 2022. The company is also investing in its own private-label frozen pizza brand, which is currently being sold in 200 stores and has an in-house made-to-order program that offers hot items such as fried chicken, mac n’ cheese and potato wedges.
At GPM’s proprietary deli, customers can purchase pre-made sandwiches, salads, paninis and more. Arko is specifically looking to grow this area in order to relieve certain foodservice duties, allowing employees to focus on other areas of the store such as ensuring the bathrooms are clean, keeping the shelves remain stocked and supervising the main floor and register, Kotler said.
“We’re trying to get involved in foodservice that doesn’t require additional labor at this time in this environment,” he said.
Heading into 2023, Kotler said he’s excited to continue growing — not just from an acquisition perspective, but in total Arko employees as well.
“We have close to 12,000 [store] employees and 1,000 corporate employees,” he said. “Creating these jobs makes me smile.”
Kotler said the challenges Arko faces are constantly changing. In the beginning of the pandemic, it was having essential items on hand and keeping stores open. This year, it has been inflation and supply chain challenges resulting from Russia’s invasion of Ukraine.
“I can't tell you what's going to happen next from a challenge standpoint,” he said. “But whatever challenge comes next, we’ll be able to overcome it.”