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00:00circle k is one of the largest chains of convenience stores in the world and that
00:11has been the case for many years now there are about 7 000 of them in the united states and an
00:16additional 7 000 that are split between more than 20 other countries around the world i think it's
00:21safe to say that most of the people watching this have been there before or at the very least have
00:26one conveniently located nearby i always think of the polar pop branded fountain drinks that you
00:31could buy there they also sell coffee baked goods hot food gasoline of course and all the great
00:36stuff that you would expect to find at a convenience store the only comparable chain that is larger
00:41would be 7-eleven though i do want to point out that 7-eleven is much more heavily franchised whereas
00:47most of the circle k stores are owned by the company and that structure results in billions of dollars
00:52in revenue for them each year today by most measure circle k is considered a major success
00:57but it has been a bumpy road to get there exemplified by the fact that in 1990 after over 40 years of
01:03operation they filed for bankruptcy there is a lot to talk about here so for today i want to focus on
01:10the eventful rise fall and rise again of circle k fred hervey had been operating businesses practically
01:16his entire life when he was a kid he sold magazine subscriptions and eventually opened his own
01:21concession stand at his father's outdoor movie theater when he was 21 years old during the great
01:26depression he started a more professional root beer stand with his brother went on to serve in the
01:30navy in world war ii and then serve as the mayor of el paso in 1951 he bought a small chain of three
01:37stores in el paso called k's food stores the man who started it had the last name of k so that's where
01:44the k comes from in the name see six years later when he was trying to expand it into the phoenix area
01:49he learned that there was already a chain there with a very similar name called k's food products
01:54so to avoid confusion he changed the name of his company to circle k food stores and introduced the
02:00fitting logo to go along with it in fact i cannot think of any other company where the name of it
02:05actually describes the logo that's unusual in the 1960s they moved their headquarters to phoenix and they
02:12had a public stock offering to raise money to open many more stores in the 1970s they surpassed
02:171000 of them and in the 1980s a prominent phoenix based businessman named carl eller was put in
02:23charge as their new ceo and chairman of the board and that is when everything started getting crazy
02:29over at circle k strange things are afoot at the circle k carl eller had previously worked for an
02:35advertising company in the area selling billboard space he was eventually given the opportunity to
02:41buy that company for five million dollars so he scrambled to find investors to raise the money and
02:45he made it happen throughout the 1960s that company grew and merged with another company
02:50making him millions of dollars in the process notably carl eller was a founding investor in
02:55the phoenix suns basketball team with the goal of bringing professional sports teams to that city
03:00and was a big help in a merger between columbia pictures and the coca-cola company in the early 1980s
03:06clearly he had a proven history in making savvy business deals and he was kind of known for that
03:11so in 1983 when he was put in charge of circle k his strategy was to scale the business by making
03:18deals to acquire the competition and i know many other companies have grown by doing the same thing
03:23i've talked about them on this very channel multiple times but i have to say his approach was
03:28abnormally aggressive almost right after he took over they spent 225 million dollars to buy almost
03:341 000 locations of a competing chain called utotum that was such a large acquisition considering
03:40circle k only had 1200 locations going into it since they were branded all of the new stores as
03:45circle k's the deal effectively doubled their size and that was just the beginning the following year
03:51they paid another 100 million dollars to buy 435 locations branded as little general stores the year
03:57after that it was 450 shop and go stores in 1988 it was over 500 stores from the charter company and
04:04that same year they even spent an additional 150 million dollars to buy almost 500 stores from 7-eleven
04:11carl eller and his aggressive acquisition spree put them over a billion dollars in sales for the first
04:16time and made them the second largest chain of their kind when he took over they had 1200 stores and
04:22by the end of the decade they had 4600 almost quadrupling in size within a seven year span so when we're
04:29talking about the initial rise of circle k this is what happened and he was planning to take things even
04:34further despite growing four times larger he still fell short of his goal of reaching 5 000 stores
04:40by the end of that decade and that is because before he had the opportunity everything started
04:45going bad profits started nose diving they weren't making enough money to keep up with their debt
04:50payments carl eller resigned from his position and one week later they filed for bankruptcy now
04:57especially if you follow this channel you're probably thinking that there were complications from
05:01expanding too quickly and you are completely right obviously that was a huge part of it but there is
05:06a bigger picture here that i want to try to paint by listing what i believe to be the three biggest
05:11reasons behind their fall starting off they were at the center of a couple of scandals around that time
05:16that were hurting their public image there was a lawsuit involving gas prices but probably the most
05:21notable one would be their controversial health insurance plan it was a policy issued to their thousands of
05:27employees that did not cover issues resulting from lifestyle illnesses so if someone developed a disease
05:33from drinking or doing drugs their plan would not cover the treatment for it which i guess is almost
05:39unheard of that policy would also deny coverage to anyone suffering from aids unless it was contracted
05:46through a blood transfusion which is where the real backlash came from they were accused of being
05:50discriminatory protested by gay rights groups the policy was changed but overall it still upset a
05:56lot of people and hurt the reputation of circle k also on my list the competition between
06:01convenience stores had never been stronger when the company started in the 1950s there were well
06:07under 1 000 convenience stores throughout the entire country and by the 1990s that number was
06:13approaching 100 000 many of which were now owned by oil companies they were all opening up their
06:19own i mean how often do you see a convenience store attached to a gas station and when that combo is
06:24owned by an oil company they're generally able to sell their gas at lower prices that was actually
06:29part of the reasoning behind the big expansion strategy seek out some of the smaller brands that
06:33were struggling to compete to buy them at a reasonable price and then use economies of scale
06:38to take on these oil companies circle k had already been selling gas since 1964 that's actually why they
06:44dropped the food stores part from their name so they wouldn't be associated with selling just food and by
06:481990 most of their stores had a gas station attached to them but it was still hard to compete just before
06:54the bankruptcy they were hoping to avoid it by potentially being bought by an oil company and
06:59later in that decade after the bankruptcy circle k did in fact get acquired by a large oil company so
07:06there were most definitely changing dynamics in the market around that time my final reason behind their
07:11fall of course would be the acquisitions it turns out that was a very risky strategy for one it was simply
07:18too much too fast and the company was having trouble keeping track of everything what was being sold
07:24in which stores and for how much it was not an efficient operation and that was hurting their
07:29profits then they tried to improve their profits by raising the price of many of their items and i'm
07:34sure we can all see how that can backfire the customers started going to the cheaper competitors
07:38but to their credit they did bring those prices back down pretty quick but it was still harmful and
07:44consider that almost every year there was a new acquisition for hundreds of millions of dollars
07:49circle k didn't have that kind of money lying around so a lot of it was funded through
07:54debts and i'm not just talking about bank loans most of that money was coming from junk bonds they were
07:59selling these risky high yield bonds to people that to my knowledge became completely worthless following
08:04that bankruptcy seriously this was not a stable company when carl eller took over they had 40 million
08:10dollars in debt and by the time he left seven years later it was 1.1 billion when you have over
08:17a billion dollars in debt which i hope nobody watching this does but if you did you would be
08:21paying a lot of interest over a hundred million dollars a year in their case which only lowered
08:27their profits even further so at that point circle k was a large company with 3.5 billion dollars in
08:33sales that was losing money they reported over 700 million dollars in losses in 1990 and that is
08:39why they were forced to file for bankruptcy that right there could have easily been the end of
08:44the story but as we know circle k has made a tremendous comeback so now for the happier part
08:49of the video i'm gonna switch it up by identifying what i believe to be the three biggest reasons
08:54behind their comeback the first of which being their improved efficiency in the early 1990s if you had
09:00a circle k in your neighborhood there was about a 50 50 chance that it either closed or was sold around
09:05that time they trimmed down to a much leaner 2500 stores to cut down their costs and they used the
09:11money that they made from those sales to renovate and update the ones that remained open there were
09:16not nearly as many but they were better my next reason is the larger companies that took control of
09:22them they not only kept circle k alive but they propelled it forward in a big way specifically in 1996
09:28as i hinted at before circle k was bought by a large oil company called tosco they were looking to sell
09:34their gasoline at a retail level to take advantage of higher margins so paying 700 million dollars
09:39for circle k and their over 2 000 already established gas stations was a great way to do that
09:44then in the following years tosco just kept getting bigger when they were bought by philips
09:48and then philips merged with conoco all massive oil companies by the way in 2003 circle k was sold
09:54to a canadian operator of convenience stores called alimitation koosh tart for over 800 million dollars
10:01they were looking to expand into the u.s market first by acquiring the chain bigfoot in 2001 that
10:06is actually where the polar pop brand came from i think that's interesting and buying circle k was
10:10a way to do it on a much bigger scale my final reason behind the comeback is the rebranding see
10:16koosh tard went on to acquire additional large convenience store chains notably in 2010 they tried
10:22to buy casey's general stores for 2 billion dollars but were unsuccessful but two years later they
10:27did buy a norwegian chain for 2.8 billion dollars and two years after that they bought an american
10:33company known for their kangaroo express stores and a deal totaling 1.7 billion i know there are
10:38so many acquisitions in this video but that's how the industry consolidated and that is how circle k
10:43came out among the top of it all you see by 2015 they had all these separately branded chains of
10:48convenience stores and figured that it would be smart to unify them under one global brand name they
10:53revealed a new logo for circle k and announced that everything they owned except the original
10:57koosh tard chain itself would be rebranded under that logo so that is how we have 14 000 stores
11:04around the world branded under the name circle k it is such an unconventional path after a dramatic
11:09rise and fall circle k has somehow managed to rebuild it to triple the size they were before that
11:15fall let me know in the comments have you ever been to circle k and if you have how do they compare
11:20to 7-eleven or the other convenience stores in your opinion do they belong in that number two spot or
11:26would you like to see them go higher or lower i think this is such a cool story it has all the
11:30usual elements you would expect to see in these videos but to such an extreme level and somehow
11:35combined in an unexpected way let me know if you agree with that and any other thoughts you have
11:40about circle k or their incredible story leave them in the comments i'd like to hear what you have
11:45to say only it's circle k what else do you need thank you for watching
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