The Future of Gas Stations and Convenience Stores | Michael Salafia (SQRL)

you're listening to the fully occupied show presented by occupier [Music] hello everyone Thanks for tuning in to the fully occupied show we appreciate your support be sure to follow us on your favorite listening platform we have an awesome episode today Michael salafia from Stacks equity and squirrel joins us Stacks Equity is a private Equity Fund that purchases commercial real estate triple net leased assets and increases their value one of their major clients is squirrel they are revolutionizing the gas station convenience store concept once State at a time Michael walks us through their strategy on how they're taking gas stations and creating much more client-centric experiences has taken the EV charging market and a whole multitude of other things that are interesting to the everyday consumer as we are all stopping at gas stations from time to time enjoy the episode thanks for tuning in [Music] foreign [Music] hey Michael welcome to the fully occupied show thanks for joining us hey Matt thanks for having me on it's a pleasure cool it's great to meet you um doing some background on uh your various business ventures I wouldn't do it justice to try to um explain all the cool stuff you have going on so why don't you give yourself an intro for the audience here yeah absolutely so my name is Michael salafia I'm the managing partner at Stax equity and stacks Ventures we're a private Equity Firm based in Miami Beach Florida we specialize in commercial real estate investment our strategy focuses on a value-add approach to single tenant net lease assets basically we look for properties that have underperforming management but strong real estate fundamentals we acquire these properties renovate them install a new tenant and operator and increase the ebitdon store performance our largest client is actually called squirrel squirrel is the fastest growing independent operator of gas stations and convenience stores in the United States right now I'm actually the head of real estate for squirrel and the CEO of squirrel is a partner in the private Equity Fund cool let's break that down a little bit so let's talk about the the real estate business um so your strategy is to basically find under performing assets turn them around or you focused on specifically on um the retail sector or is it any sort of net leased asset yeah very focused on retail it could be any sort of net lease asset we've been uh doing a lot of peripheral in the energy structure so even something like a billboard is technically a piece of netlist real estate um and we're doing we're doing quite a quite a bit with that as well as fuel and energy Supply EV installing EV charging stations and just continuing to innovate in the convenience store space as we see this shift uh towards non-fuel retail sales becoming more prominent in the convenience store space um what's your Geographic Focus do you have I mean squirrels obviously growing fastest growing national uh you know gas station are you guys all over the place or yeah what's your kind of strategy there well I'll tell you what we're very we're very opportunistic and we've been moving into markets on a state-by-state basis where there's a good opportunity to open up new stores and and execute on our strategy we love Florida uh squirrel was founded in Arkansas so we have a large presence there and we really focus on the states where we're seeing high growth rate uh driven by economic fundamentals right I I really care about job creation and why the population is growing more than just uh non-sustainable trends got it yeah so obviously more people more cars more need for fuel more more spending power in that in that population thus probably a good growth Market to get into um absolutely yeah I mean I got two young kids and I drive a lot so I I could I could name all the all the things that I love about convenience stores and all the things I hate about them what are what are the some of the things that you see in like some of the most like underperforming stores that you guys turn around it's interesting uh part of the fundamentals for squirrel came from uh my partner Blake his wife and him have four daughters right so when his wife's driving around she's very particular about which convenience stores or gas stations she could stop at they need to have a clean restroom and be family friendly inside so that's a core principle at squirrel at all of our stores are family friendly and have immaculately clean restrooms even if you look on social media you can see we put bidets in some of the stores and that's always a big guy that's very funny it's very funny but but truly it's about creating a safe place for people to stop and fill up um a nice well-lit environment right where challenges with some convenience stores and a lot of them that we acquire they've become run down they don't have adequate security they're not well lit there's paraphernalia being sold inside of the store we we don't do that we do the opposite yeah so you're not going to um fear for your life while you're pumping your gas and then walk inside to pay and you know buy like a glass like bong or pipe or something like that to eight exactly and hey there there'd be nothing wrong with the Cannabis retailer and dispensary that's licensed operating next to the convenience store but that doesn't need to be in there where you're coming in with your young children and you know getting them uh some soda and potato chips yeah basically a healthy drink yeah yeah yeah like a prime is what the kids like these days um are you are you guys uh usually the only tenant in the space are you co-tenating with certain other retailers or is there a Partners all the time all of the time um we love acquiring stores that might have another franchise inside um we have some stores with McDonald's some with Subway and in our model we're adaptive to the hyper local market so when we have the opportunity and we don't need to use a national retailer one technique that we like to do is take whoever's the coolest local food truck will let them operate inside of the kitchen space in the convenience store because the fresh and prepared foods are one of our highest profitable items to sell and it brings in a big demand so if you have that local flavor it's fantastic we're buying a store right now or we just closed on it it's in Cocoa Florida and it actually has the taco shop inside of the convenience store there's no wall separating it The Operators are doing great they're just local operators they report up to us and you know we basically manage them as a sub-tenant but we share the space and it's going very well yeah it's like an episode of like Diners Drive-Ins and Dives where like Guy Fieri like pulls over into like a gas station and there's like a taco stand like running out of the back it's you probably you could probably find some much better food than the um 7-Eleven hot dog on the roller heating up exactly exactly and it's not that hard right I mean yeah I think like my experience with convenience stores is the highway ones you typically get like the you know the big chains right you get like The Operators that at the McDonald's the Dunkin Donuts or whatever and you know what you're gonna get uh and then you have like your suburban ones which are usually pretty clean and nice and then you have kind of your outlying areas that might be a little sketchier um where do you see the biggest opportunity is it is it in underserved areas obviously you just you know told us your thesis of the population growth and looking at you know fundamentals from an economic standpoint um but like where is the biggest kind of margin for you guys to improve um is it along the highways is it rural is it you know CBD type of of situations or is it does it matter it's it's really a mix of all three um at squirrel in particular we do have a rural Market strategy that works very well in those stores they become more of a neighborhood corner store and a center for the community because typically you'll have you know a One supermarket one gas station you're in a very rural area um we can put them next to a Dollar General because Dollar General does not sell prepared foods uh so the two will pair well together for example we're acquire acquiring one in a more rural area of Missouri is across from a dog food plant um dog food manufacturing plant it's one of the largest in the United States there's a lot of workers there there's a lot of tractor trailer trucks so for us we can sell the diesel fuel the tractor-trailer trucks that's very lucrative um and additionally we can sell hot and prepared foods right there's nowhere for all of those workers to eat and there's thousands of them and they have nowhere to get lunch nowhere to you know stop and buy a beer so we even put picnic tables outside with a canopy so that way you can just after work you know pick up some fried chicken and beer and hang out outside yeah are you guys um I've always been kind of fascinated by the convenience store and gas station combination walk us through like the difference between the convenience store business and the selling gas business so it's on a case-by-case basis right and for us for squirrel specifically all of our stores are company owned and Company operated so everyone inside of the store is a corporate employee they receive full benefits and they get paid above minimum wage I don't really know of many gas station operators doing that the fuel business itself it's going to be on a case-by-case basis and this just applies to the fuel industry as a whole um you have Supply contracts so in some markets at squirrel we're our own suppliers of fuel and frankly we're just getting Shell Fuel that's unbranded and we're selling at the squirrel stations so you're buying really good quality Shell Fuel when we have it unbranded on others we have to assume existing fuel supply contracts and deal with that or we can buy out the existing fuel supply contract uh typically with with a partner right and and sign something new so it's on a market by market basis to determine what the best what we call flag is going to be what what brand of fuel should we use now our margins when we go unbranded and sell squirrel fuel that's when we have slightly higher margins however that could easily be offset um by doing a deal with shell or Chevron right and selling their fuel and it depends on the market there's certain marked areas of the country where BP is is um seen as a lower quality brand and other areas of the country where BP is considered a premium brand and it's funny how much it'll shift it's kind of on a state-by-state basis for the most part that is kind of funny um I always I mean I don't have like a Affinity towards a certain brand but there are certain brands in the area where I live where you're like okay yeah I'm gonna go to the Shell station or I'm going to go to the Mobile station um but I'm not going to go to that off-brand gas station Down on the Corner because I have no idea where that fuel is coming from but right it could it could just be Shell Fuel just you know they're just being supplied by it not they're not putting the flag up I guess I don't know right right the flag is expensive you know they're you're giving up a lot of margins to have that brand yeah and I've also always been fascinated by um you know those intersections where there's four different gas stations and three of them have the same price for 93 and one of them has like a price that's 40 cents more expensive per gallon and I don't know if that has to do with the um the curb cuts and how easy it is to get in and get out of that lot this must be more expensive here because it's just easier to get in and out and people are willing to like pay for that convenience I don't know if that's the factor or not but I'm just I've just always been fascinated by how like the competition in like a certain strip or a certain intersection works there's going to be multiple factors but the flow of traffic is is predominant you hit the nail on the head there that's the biggest reason right other than that when you put multiple gas station operators against each other there are economies of scale and competition for example if we have a 7-Eleven that's corporate across the street from one of our squirrel stores we're not going to outperform 7-Eleven on cost of fuel they will always beat us at that game they're much larger so they will have a lower cost of fuel so they can always undercut our Mark our prices on that so you have to kind of pick and choose your battle on a case-by-case basis and it depends on who you're going up against yeah yeah totally um let's let's uh shift the discussion towards like EV and EV charging because that's obviously part of these thesis here as well um I feel like we're in like the like the first inning of figuring out how to build an EV infrastructure throughout the country we are yeah maybe not even the first inning we're still experimenting with it but obviously some states and cities are further ahead than others in in terms of figuring it out but just before we go into the micro of squirrels strategy with it just can you give us a little bit of a kind of a flyover of like the EV world right now and then also um what like what you're seeing in terms of the development of of like a nationwide infrastructure for charging stations yeah absolutely so there's a big political and social undercurrent pushing this forward right but the that current is not is stronger than the actual Demand right based on the amount of EVS that are on the road so again the EV infrastructure Investments are hyper local right it's it's on a corner by Corner basis if it makes sense to install an AV charger there and the cost of installing these is actually pretty expensive so you have to set it up with some kind of financing mechanism no matter who you are to make sure it it works out because you could end up just kind of putting those out there more as a reason to tell people that your hotel is green rather than actually profiting on the EV charging component of the uh of that deal it's a big picture that's kind of where it's at right so it's until there's more demand for it it will be a kind of high cost way of installing these things and I would imagine I'm not an expert in it but there's probably multiple different ways you can structure those um those Investments right you could buy it outright it's all at home and operate it you could hire a third party to install it and operate it who makes money off the electricity I guess what are those different models for EV charging stations in an Ideal World and you'll hear other operators pitch this we're going to put solar panels on top of the convenience store we're going to put solar panels on top of the fuel canopy create a storage device a giant battery essentially to store the energy and we will sell the solar energy through these EV charging outlets and even sell any excess energy back to the grid that sounds great in theory okay in practicality unless you have data to show me that there is a substantial amount of EV traffic and we can profit from doing that level of uh capital expenditure on solar panels and battery chargers I'm not going to make that investment that play is not for me um if we want to get specific okay in Florida FPL that's the main electricity utility provider in Florida they emailed me actually today saying hey Michael we have a new program we'll install the EV chargers at your properties and we'll actually pay you to do it and we'll share profits with you okay that's way more attractive because now we can start testing it right and if that model becomes lucrative then I can take fpl's position and be the infrastructure investor but right now it's very uncertain as to how profitable this is actually going to be and there's a lack of data to make an educated decision so there's a lot of speculation happening yeah is there is there a First movers Advantage here um across your portfolio or just on an individual gas station basis like if if you're the like the first one in town to have the charging stations does that help yeah it does it does especially when it comes to Brand recognition right so for squirrel we're still small I don't know if it's going to make a huge difference for squirrel in particular maybe by the end of the year we'll have a big enough footprint for that to matter um but if you're for example Circle K and you have over a thousand stores all right well if the market starts thinking of oh Circle K a place where I can charge my EV that would be very positive right that there's your first mover Advantage it's just creating that connection in the EV driver's mind that they can always stop at a Circle K and we are working towards creating that for squirrels but we're at uh about 165 stores as of today across 13 states so it's a bit spread out um and once we reach a more critical mass in a state like Florida and Texas where there is a higher rate of EV adoption it would be more advantageous for us to to have that brand recognition yep with the installation of the EV Chargers you have to start thinking about a whole new set of amenities for the space I'm just thinking like absolutely yeah it's going to take 20 minutes for me to charge my battery like what am I going to do here right so that that yeah and and that's been the transition right how do you bring experiential retail into the convenience store space so take a step back the entire notion of a convenience store is that it's supposed to be fast and convenient you can get in and out as quickly as possible right so let's say average time in store is two to three minutes all of a sudden we have an EV charger guy is at 10 to 15 minutes while the EV charging happens what can we do to improve that experience so we're looking at many different Avenues um creating space for Cafe style seating inside of the store offering free Wi-Fi again having clean reliable restrooms um improving the coffee service very specifically with coffee we partner with local Roasters right and bring in their beans so we don't have a full Starbucks inside but we have good quality coffee that's being offered not just the typical gas station coffee that's you know not very good and again it's on a hyper local basis the demand has to be there from the customers but we're all about elevating the customer experience inside of the convenience store keeping them in the store longer um and and there's a few other avenues of that and I could I'd be happy to elaborate and give more examples no that that makes total sense I think just having Wi-Fi clean restroom and a place to sit down and I don't know either plug in do some work on your laptop or scroll on your phone or have a good cup of coffee that goes a long way with keeping people saying you know I'm gonna stop there versus there um just one pet peeve of mine from my extensive convenience store experience over the years is how come how come convenience stores haven't like figured out like an Express scratch ticket line yet I know I I wasn't sure if we could talk about the scratch tickets but that's another huge driver for us right it's literally people want to be able to buy a bunch of scratch tickets sit down and do that and when you have this checkout register with somebody buying scratch tickets and someone who just needs to pay and leave it's very frustrating for the customer that needs to pay and leave so all of our at squirrel all of our employees are trained on how to handle that why because we're different in the market and we're competing based on our quality of service that's our key differentiator of squirrel you come into a squirrel you're greeted with the highest level of uh service quality greeted with a smile yeah everything's well then there's a drop tile ceiling so we finish the ceilings make them all eyes we have recessed lighting like you have in your house it looks nice inside you don't feel like you're in a sketchy gas station yeah um do you have like the prepare like I think one one place that I've grown to love over the years is Wawas because they have the um you know they have good sandwiches basically and you could you could build one and you could customize them and they actually have somebody there like that's making your sandwich fresh versus grabbing the plastic wrap sandwich and wondering if it's three days old seven days old or whatever exactly exactly and they do a fantastic job with that Wawa is arguably a quick service restaurant disguised as a gas station convenience store yeah absolutely all their fuel is unbranded but people are buying it and they're like oh wow wow gas it's good is it yeah no I just want to I just want a large Italian sub that I know is going to be fresh um exactly so that's why I love the food truck play I mean you can't go wrong is a hyper local flare and then when in doubt we usually have a fried chicken concept or or one of the other uh Nationals like a Subway or something like that cool is there anything else about Stacks or squirrel that you'd want our audience to know our Stacks Ventures fund one is open still um so we are raising funds through credit investors and they can definitely visit staxequity.com to get in touch with me and we can explain the thesis from there but um our strategy is very sound and I love what we're doing I love what we're doing because one we're achieving above Market return on investments okay that's great that's what everybody wants but two we're creating jobs we're improving the infrastructure of America one corner store at a time I mean these stores that we're buying before the you know you had people who were underpaid they're struggling to be open and now we're giving them proper corporate jobs they're getting health insurance they're getting 401ks right for working at a gas station it's incredible the the social impact that we have is incredible and at every single store there's a story with someone who has a family that we've really helped turn their life around by revitalizing the business so that's what I love about what we're doing cool it's pretty inspirational um let's let's pivot into some uh rapid fire questions um I'm gonna give you we're gonna go five questions and uh I'm just gonna rapid fire them at you and you can you can uh elaborate as much as you want or just give me one more dancers um question number one are you a morning person or a night owl night owl what's your typical bedtime there are you are you like past midnight oh yeah I'm I'm past midnight I don't know I think it's just inherent I just it's just natural I try to be a morning person last night I went to sleep super early had a glass of red wine got real sleepy went to bed early but in general I'm just up at night it is what it is we'll be in this office with my team nine o'clock on on nights regularly we'll be here from 9am to nine pm on a regular basis sometimes we'll stay later depending on how much we have to get done but we're always we're always cranking we're really hard workers here cool question two um if you could add dinner with any famous person um Dead or Alive who would it be dinner with Dad Albert Einstein alive Drake nice nice um hip-hop fan or just a big drink yeah huge hip-hop fan and and big theories I just think it'd be a fun dinner it'd be fun we'd be chilling and have a great time right so there it is and then on the other thing I'm bringing somebody back from the dead who is a genius let's let's dive into that conversation and see what we can pick out of that brand get one or two ideas from that guy um yeah all right question number three uh if you were going into a convenience store to grab a slice of pizza what would be your go-to topping well you know it depends on the convenience store if we were going into one where we have a full concept I would go with like the spicy salami with the calabrian chili and the Honey drizzle but if it's a regular store I'll just go with the pepperoni all right right down the middle there uh question four um besides a squirrel convenience store what is the most interesting place you've ever visited like in the world yeah a good place in the world maybe you haven't been there yet who knows I don't know Manhattan it's pretty much there it's it's a mesmerizing amazing world and I've traveled all over the world cool um yeah you get pretty much a slice of that everywhere in the world in Manhattan so um and get whatever you want um energy is incredible unbeatable um all right well it's been awesome having you on the show there's one final question that we ask everybody like who are one or two people you think would be interesting guests for us to host interesting question um I would love for you to interview Blake Smith CEO and founder of squirrel also my partner so I'll give that plug um unconnected to me I'm gonna make a recommendation for Elon Musk to join you on the show because I think your show is fantastic and you could offer a lot to your audience and he's got to support uh the local producers you know yeah I love it um I'm sure he'll out out um duel Me Maybe you know intellectually but I could I think I could stay with him yeah well Michael it's been great having you on the show um if people wanted to find out uh more about squirrel or Stacks or just reach out to you how would they do that yeah absolutely I would recommend going to our website stacksacquity.com s-t-a-x equity.com um or just plug that into a Google search or search my name Michael salafia and we are very easy to find awesome thanks Michael appreciate you having me on thanks Matt take care [Music]

Channel: Occupier

Views: 6,219

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Id: 3AVV05Jo4Jk

Length: 29min 23sec (1763 seconds)

Published: Wed Jul 05 2023