The idea of cashing $1 million in taxadvance loan checks in a conveniencestore could be daunting to some retailers, but not Great Stops LLC. TheChapel Hill, N.C.-based operation has benefited from having a 10-year banking veteranas its co-owner, who was able to create acomplete financial services profit center forthe company’s eight multi-faceted convenience centers.
It’s not an operation that co-owner FrankSutton suggests retailers get into half-heartedly, but it’s been a home run for GreatStops, so much so that it has become aseparate business, Check Solutions LLC,with which the company is ready to showother retailers how to get a piece of the pie.
How it all began
After selling the Village Bank in ChapelHill, N.C. in 1995, Sutton founded GreatStops in 1996 with his brother-in-law, Phil Kleinman, who had more than 20 years ofconvenience store operations experiencewith Conoco. For 10 years, the two focusedon building large, modern facilities whichoffer a number of services under one roof—gas, traditional c-store merchandise, fastfood and laundry operations—which arespecifically targeted to its customer base ofblue-collar workers and renters.
Great Stops began offering check cashing in its stores in 1999. The companyquickly learned that such service wouldbring in new customers and increaseinside sales. From this point, Great Stopsbegan looking for ways to expand financialservices offerings based on the needs ofcustomers, which resulted in the addition ofWestern Union money transfer and moneyorder sales. Today, the company offerscheck cashing, money transfers, utility payment acceptance, lottery sales and moneyorders.
“Based on our internal success, weapproached our software provider. Both parties realized immediately that there wasgreat potential for the companies to worktogether,” Sutton said. “Integrated SoftwareServices (ISS) had the technical know-howto support and customize the softwarewhile we had the financial, compliance andoperational expertise to help other convenience store chains successfully enter intothe financial services. Check Solutions wasthe end result.”
Sutton believes that the services offeredat Great Stops has made it a “destinationfor the ‘unbanked’ consumers” in its communities, but it’s also a program that speaksto anyone that might need money fast.
Based on the demographics of GreatStops’ stores, 80% of customers wouldqualify for a bank account, but choose tocash their checks weekly and use moneyorders. Sutton said they want “convenienceand speed.”
Banked customers often come in tocash insurance checks or 401K distributions, which banks might not be able toprocess quickly, but Great Stops can havepaid out in about 30 seconds.
“We have speed of service down, so ourcustomers come to us even though theycould go to their banks for the same service,” said Sutton. “Everyday people getinsurance settlements or 401K distributions and have a solid check, but a bankwill put a hold on it. With our operation, weverify funds and provide cash instantly. Itgives us a competitive advantage for specific types of checks over banks.”
But the real advantage for Great Stopsis that those customers are turning rightaround and spending their cash in thestores, creating a loyal customer that willcontinue to come back for the convenienceevery month.
“Our customers come back every monthto cash their checks and wire out bill payments,” said Sutton. “We’re building strongrelationships with our customers and it’s agreat business as long as you can handlethe money management. But we’re also at a point where we’re providing the keys forother retailers to do it themselves.”
What it takes
In Check Solutions, Sutton and hispartners have created a “risk minimized”financial services offering for retailerslooking to create a long-term profit center,but he warns the return is contingent oncommitment.
“This is not for someone trying to makemoney fast. It’s a profit center that can create a substantial income stream for yearsto come,” Sutton said. “During the last twoyears, we have continued to make customupgrades, which have significantly improvedour capabilities. For example, through a highspeed connection we can connect with anyof our stores and review checks as they arebeing processed.
“Our system constantly updates checkhistory between stores. The system is capable of cashing a large volume of checks in ashort amount of time in less than 10 linearfeet of space.”
Some retailers might argue that 10 linear feet of space is too much to devote in afinite amount of space, but Sutton feels hehas created the best possible set up for asuccessful operation that won’t impede onthe convenience side of the business. Forexample, within those 10 feet, there arethree desktops to handle the considerablevolume his stores see.
The check cashing software, whichSutton himself had a hand in updating andcustomizing, is not integrated with the convenience store point-of-sale (POS) system.However, the company chose a softwaresolution that interfaces with a cash dispenser so that it could better safeguard andcontrol cash.
“At first we thought it would be nice tointegrate, but in hind site, you couldn’t doit at c-store checkout. With a business builton convenience, you don’t want to slowdown the checkout process, which is ultimately why we didn’t integrate the softwareinto the POS,” Sutton said. “With the volumes you’ll potentially be doing, you’ll want that devoted to a separate area. We didn’twant to bog down speed at the registerfor traditional c-store customers. We wantcheck customers to get in, get out and feelimportant.”
The program is very similar to a c-store,except that the inventory you’re keeping iscash. Sutton feels operators must maintainan in-store minimum of $30,000 cash onhand, which mean one has to coordinatewith their banks. The per store investmentof software and hardware utilizing a cash dispenser can range from $28,000 to $36,000depending on several options. The largestpart of this cost is the dispenser which canrange from $13,000 to $18,000.
However, CheckSolutions believesthe dispenser, whichhas an exterior shelllike a traditionalsafe and the interiormechanics similarto an ATM, is essential for security and cash management. Thecompany believes one should reasonablyexpect a one-year payback period if they arecommitted to building a separate profit center for financial services.
When everything falls into place
Having the financial services counteradjacent to the convenience check out isalso helpful for the staff required for thistype of profit center. Sutton feels employees can be cross-trained, but it’s essentialto have at least one employee dedicated tolearning and adhering to the most criticalaspect of financial services: compliance.
“Compliance is the IRS buzz word formoney management,” said Sutton. “You canbuy check cashing software off the shelf,but all you’re getting is software. You haveto be prepared for federal audits and youmust have reporting procedures in place.That’s what we bring to the table. It’s not aquestion of ‘if’ you’ll run into problems. Ifyou don’t have these systems in place youwill run into problems.”
Many chains have attempted to buythis model off the shelf, but there is muchmore to creating an ongoing income stream.Check Solutions can provide site analysis,implementation and training.
“The implementation of our software’s risk minimization tools is critical to control losses from bad checks” Sutton said.”Also, compliance and training proceduresare very important in helping your staff succeed. We believe these services offered byCheck Solutions will set us apart from othersoftware vendors.”
The company has made a push
overthe last three months to market CheckSolutions to other retailers. Currently, thereare a significant number of chains rangingfrom 10 to 180 stores evaluating if the program would be a good fit for their business.
“It’s a niche like anything else in the convenience industry. Some chains are goodat foodservice, some aren’t,” said Sutton.”Financial services is a niche in whichwe’re doing very well, and we’ll be happyto help those outside our market area do the same.”