On the Fas Track

Convenience Store News
by John Lofstock
May 25, 1998

On the “Fas” Track
Southern Express acquired Fas Mart just three months ago, but the retailer intends to keep growing. Its latest goal: $1 billion in annual sales.
by John Lofstock

Owais Dagra entered the convenience store with little more than the money in his pocket, a relentless work ethic and concise goals to build a successful business.

Owais Dagra’s hard work turned around one fledgling store and parlayed it into a thriving 67-store chain with more than $150 million in annual revenue. As was the case when he had just one store, Dagra still has big plans, works long hours and has visions of $1 billion in annual sales.

“It has been a very exciting time for our company and I’m very proud of the team effort it took for us to expand our operations,” said Owais Dagra, chief executive officer of Mechanicsville, VA. based Fas Mart Convenience Stores Inc. “We have plans to expand quickly, to buy and build our way to the $1 billion mark through a focused and aggressive strategy of acquisitions and new-store developments.”

Owais Dagra founded Southern Retailers Inc., operator of 22 Southern Express c-stores in Richmond, VA. area, which went on to purchase 42 Fas Mart c-stores in February.

Owais Dagra merged all of the stores under the Fas Mart name and image to capitalize on its brand equity and proprietary foodservices program, “Fas Mart Café.”Now, with 650 employees and respectability in the marketplace, Owais Dagra feels he is ready to broaden his current marketing plan beyond Virginia with new stores and new programs.

“We are taking the best characteristics of two successful companies and blending them into one premier force in the marketplace,” Owais Dagra said. “The combination of our size and our approach to operations will create a consistent level of service across the chain – all of which will enhance our position in the convenience market.”

How It All Began

How Owais Dagra got started is a true American “rags to riches” success story. Born in Pakistan, Owais Dagra moved to the United States in 1990. After working several odd jobs, he decided to go into the c-store business for himself. He purchased one store, called Shannon Express Mart – which was not profitable – from a local chain that was rapidly losing money.

Characteristic of his nature, Dagra was confident he could nurture the store back to profitability.

“My first store was in a local suburban neighborhood that was a pure c-store with no gasoline,” recalled Owais Dagra. “I was new to the industry and had a lot to learn, but I immediately recognized the potential this store had.”

What Owais Dagra learned was that the convenience industry is demanding physically and mentally, good help is hard to find and customers are very picky about where they buy their food. “I worked 18-hour days, running the register, merchandising, stocking, housekeeping, ally shopping at the banking, you name it,” Owais Dagra said. “But I was able to turn that store around pretty quickly through some cost efficiencies, margin enhancements and sales growth.”

The store began to turn a profit in just six months. One of the problems the previous owners had was they were trying to operate the store as a superette. They were working on lower margins and trying to compete with the supermarket segment.

Owais Dagra stepped in and put an emphasis on the high-profit categories and focused on a c-store pricing profile versus a supermarket pricing profile. “The store needed some individual attention,” he said. “The customers that were shopping at the store were re store were really shopping there for convenience and not for value – not from a price-point standpoint. We fine-tuned the merchandise mix and pricing to reflect consumer habits and shopping patterns. That helped significantly.”

By the end of 1990, Dagra had a profitable business and decided to stay committed to the industry long term. He was faced with a couple of options: go out and buy another store and grow one store at a time, or try to purchase a multiple-unit operation.

Due to a lack of capital to invest, building one store at a time was not cost-effective. Plus, Owais Dagra would have to spend just as much time developing a management system and corporate structure from scratch as he would operating the stores. He realized that left little time for small things like family and sleep. He decided making a multi-unit acquisition was the best approach.

“The big challenge once we decided to go after small chain of stores was finding one that was willing to lend us money,”Owais Dagra said.

His persistence paid off in mid 1991 when he came across U-Totem, a 14-store chain that was bankrupt and antiquated. “U-Totem had one high-volume profitable store that barely kept the entire chain going,” Owais Dagra said. “They decided to sell that store separately but there weren’t many takers for the other 13, “Although the stores were still furnished with 1950s and 1960s features, run-down and void of fuel facilities, Owais Dagra merely saw this as another obstacle en route to bigger and better things. “They had the one thing we needed most and that was an infrastructure already in place,” he said. “From there, we could build upon the positive features and slowly bring business back to respectability.”

But Owais Dagra found that even the best plans can’t get off the ground without money. He was turned down by 10 banks before he could secure a loan to make the acquisition. “Many people thought it was a bad investment. Some had bets we wouldn’t last six months. One was nice enough to give us a year,” he said.

It took Owais Dagra less than six months to prove the skeptics wrong. He immediately cut costs and operating procedures, developed a cluster –management system that utilized one manager for six stores instead of a manager at each store, and trained employees to handle customer-service issues relating to customers on a personal level.

Even though the stores were old and falling apart, he was able to make minor structural adjustments. Owais Dagra was able to enlist the help of vendors and suppliers to re-planogam the stores and replace slow-moving items with the ones customers wanted most.

“We were able to enhance margins and boost sales just by paying more attention to what was on the shelves,” said Owais Dagra. “By the end of 1991, all of the stores were stabilized to the point where the company wasn’t bleeding anymore.”

EXPRESS LANE: Owais Dagra,
founder of Southern Retailers Inc.

The Next Step

Once again, Owais Dagra found himself in position to continue moving the business forward. This time, though, his focus was going to be on upgrading existing sites and reimaging the stores.

“First, I decided we had to come up with a new trade name because U-Totem had developed a pretty bad image in the marketplace,” Owais Dagra said. “Then it was an issue of purchasing equipment, getting new signage and a new color scheme.”

The 13 U-Totem stores – Shannon Express Mart was sold to finance U-Totem’s acquisition – were reintroduced as Southern Express convenience stores. “Our goal was to get the stores up and operating with the basic necessities, they were lacking, such as central air conditioning, attractive store-fronts and eventually, gasoline.”

Part of Owais Dagra’s strategy over the next two years was to purse single unit gasoline and c-store facilities and work them into the Southern Express network. When he added a new store, Owais Dagra sold off the least-profitable store acquired in the U-Totem acquisition. This strategy left him with a powerful multi-unit chain of Southern Express stores.

“For the first two years, we were looking to strengthen our presence through renovations, upgrades and acquisitions of new sites with strong up-side potential,” said Owais Dagra. “We really wanted to build network of stores that had strong fuel facilities that would make our stores more of a destination for consumers.”

In 1994, the company entered the ground-up development phase by designing and building 12 units in the Southern Express mold. “Our image had evolved quite a bit by then. We were beginning to get a reputation in the market as being an aggressive, high-profile company.” Owais Dagra said. “We went from having one of the worst images in the area to receiving compliments about our position in the community.”

A New Challenge

By the beginning of 1997, Southern Express had 22 units that combined good locations and new or renovated stores with a loyal consumer base.

Of the units Southern Express owned in 1997 only three of the original 12 U-Totem stores remained. Seven of the units were acquired.

Owais Dagra said the company took step in mid – 1997 to evaluate its growth and begin to developing a new strategy to lead the company into the next century.

“As in 1991, we were forced to make another decision about how we wanted to approach our long term strategy based on the current state of the convenience store industry, where we expected the industry to be in 10 years and what we hoped to accomplish,” Owais Dagra said. “There are serious financial questions and margin pressures to take into consideration, as well as the growing competition from drugstores and supermarkets. It’s not just simple case of saying ‘Let’s go out and make our company bigger.”

Southern Express hired a team of consultants and financial analysts to evaluate its situation and returned with four potential options: sell the business, grow methodically over time or grow the company on fast track.

Owais Dagra’s burgeoning business was garnering a nice market share in the Richmond area, so selling was not really an option.

“Since we were still a very young company and early in our business life cycle, the analysis was that we had not matured and maximized the value of our business,” Owais Dagra said. “The option of shrinking was not good either because sometimes if you shrink the company you can make a little bit more money, but the competition in the industry could end up hurting our company far greater than it would impact mid-sized company.”

To stay stagnant also presented problems, Owais Dagra said. It would be difficult for small 20-unit operation to muster the strength to deal with the long-term challenges the industry is facing.

“Our resolution was that the best option for us was to grow, and grow at an aggressive pace,” said Owais Dagra. “We spent next six months developing a strategic growth-and-acquisition plan.”

Owais Dagra led a team that built an acquisition growth model that outlined how the company would evaluate companies, broke down potential acquisitions and labeled them as strategic or fill-in acquisitions and evaluated new markets and geographic compatibility.

“The fundamental base of our plan was finding a company that had a strong management infrastructure,” said Owais Dagra. “With only 22 stores, we had limitations on the size and depth of the infrastructure we had. So we felt that the first company we needed to buy was one that had strong management, depth and respectability in the marketplace.”

In order to facilitate rapid growth, Dagra said he was very particular about the company he would pursue. He was concerned about having the right employees and management in place, brand equity and his company’s ability to operate as a multi-retail organization. Without those factors in place, all stores could suffer and fail to reach full potential.

“The plan required us to adopt a strategy where we were able to operate multiple retail concepts, rather than entering a market and dictating how we prefer to do things,” Owais Dagra said. “That doesn’t work. Our strategy was to develop a model by which if the location demanded it be operated as low-margin, high-volume unit, we could do it. But in other areas, if we had to be more margin driven, then we could handle that as well.”

CHANGE OF GUARD:
Frank Bradley (right) founder
of Fas Mart, sold the
company.

Timing Is Everything

Little did Owais Dagra know that in a far off boardroom in a galaxy far, far across the city of Richmond, Fas Mart executives were silently deliberating their company’s future as well.

“We had both gone through similar exercises and come to completely different conculsions.”

said Owais Dagra. “It was their view that [Fas Mart] would be more compatible with a major oil company than them going out and being the acquirers.”

Chalk it up to fate, good fortune or excellent timing; Owais Dagra was pleasantly surprised at potential deal before him.

“We had just completed this huge analysis and retained a consultant specifically to start a search for the right company, and this company comes in that is right in our own backyard,” said Owais Dagra. “We even shared the same market area as Fas Mart, but had no overlaps of stores. It was a match made in heaven.”

After brief negotiating period, the two sides closed the deal in February. “Since we had just completed a long evaluation, we were extremely clear about what we wanted to do,”said Owais Dagra. Kevin Fox, formerly of Rochester, N.Y. – based Sugar Creek Stores, was also hired to facilitate the acquisition. He left when the deal was closed.

Frank Bradley, who founded Fas Mart in 1974, has been in the c-store industry for more than 30 years. Although he wanted to sell the company, he didn’t want to turn over his years of hard work to a company that would ruin it.

“Our organization has done a fantastic job of building Fas Mart into one of the most respected names in the industry,” Bradley said. “I wouldn’t be selling this company if I didn’t believe in Owais Dagra’s vision for the future and the opportunities that such large scale growth will create.

In central Virginia, Southern Express and Fas Mart provide a strong complement of locations that create a dominant c-store presence. But that’s just the beginning. What Owais Dagra has in mind will take Fas Mart to the next plateau in the industry.”

Owais Dagra was very concerned that he would not be able to find the right company to merge with to reach that next plateau. “It was a very real concern that the right company would not be anywhere close to our market area. We figured we may have to go two states out and move our headquarters. It all worked out better than we could have ever hoped,” he said.

Owais Dagra’s Deal:

Bought first c-store at age 26
Bought 13 unprofitable U-Totem stores and turned a profit in only six months. Rebranded those stores under the Southern Express name.
Started building new Southern Express convenience stores from the ground up.
Signed a letter of intent to purchase Fas Mart Convenience Stores, Inc.
Closed Fas Mart acquisition deal

The New Fas Mart

Fas Mart has been able to combine the best characteristics of two successful businesses to deliver quality and consistency across its network. Stores offer numerous amenities including financial services, food services, new or renovated facilities, ATMs and state-of-the-art cameras and security equipment.

Plus, all of 67 stores, ranging from 2,000 square feet to 4,500 square feet, sell fuel through strong national brands such as Amoco, Citgo, Chevron and Texaco.

“We are very brand-oriented,” Owais Dagra said. “We find it more appealing to be aligned with a national brand, rather than creating our own brand equity. The companies that have their own brands have worked for years to develop the program. We wanted to make an immediate impact with brands customers could easily identify with.”

The company is also growing its own proprietary foodservice program, the Fas Mart Café, which serves a variety of hot and cold dishes including sandwiches, chicken and salads.

“We are confident that we have the ability to gauge what a community wants in terms of price and variety to offer them choices they are comfortable with,” Owais Dagra said. “Our goal is to keep them satisfied with our selection and quality and keep giving them reasons to comeback.

Under Owais Dagra’s rule, Fas Mart maintains strong ideals and has established a new set of goals for the future. And the number-one goal of most successful businesses is usually padding the bottom line.

“When we were trying to figure out how many stores we should target for acquisition, we concluded that that’s too much of subjective approach,” Owais Dagra said. “If we set our target in terms of numbers of stores, we might be out there buying store that does not really make sense to buy. Our target is revenue, and we came out with a very aggressive and ambitious goal of reaching $1 billion in revenue.”

Such lofty plans might be scoffed at by industy experts and analysts. But Owais Dagra has heard them chuckle before. “There’s no sense in being in business if you’re going to let others affect how you make decisions,” he said. “There has to be a mission and goals to work towards.”

Fas Mart is once again on the fast track. Owais Dagra said he has several other deals in the works that would increase store count by the end of the year. Plus, he retained just about all of the district managers, store managers and employees from Fas Mart to insure that he has a good talent pool at the store level to lead Fas Mart’s surge toward the next millennium. The company also has a very active recruiting and training program in place to line up new employees.

“It is a very exciting time for our company,” Owais Dagra said. “My role has been to have the vision and direction, but everything else has been carried out by a great management team and loyal employees.

Their hard work and commitment to the company has been an invaluable part of our growing process.”