A Culture of Convenience

Superior service, loyal employees and an upscale retail offering define the Thorntons brand.

[callout title=At a Glance:  Thorntons Inc.]
Thorntons was founded in 1971 by James Thornton in Louisville, Ky. His son, Matt Thornton, was named president and CEO of the 165-store chain in 2001, while James remains chairman of the family business.

Headquarters: Louisville, Ky.

Annual revenues: More than $1.4 billion

• Markets of operation: Kentucky, Illinois, Indiana, Ohio and Tennessee

• Growth Markets: Chicago, Nashville, Tenn.

• Fuel Brand: Thorntons

• Food brands: Thorntons Quick Cafe, Dunkin’ Donuts

• Honors: Ranks No. 250 among Forbes 500 largest privately held companies

• Social Media: www.thorntonsinc.com; www.facebook.com/thorntonsinc; and www.twitter.com/thorntonsinc
[/callout]If passion, loyalty and hard work form the foundation of success, there is no limit to what the folks at Thorntons Inc. can achieve.

Thorntons has gained a reputation as a special company that cares about its employees, customers and the communities it serves. Just spend some time at any of the chain’s 165 stores across the Midwest and this becomes evident. Talk to a couple of customers and employees and it will be confirmed.

The Thorntons brand exudes confidence and excitement, and has become more than a routine stop for motorists in the course of a busy workday. Thorntons serves as a focal point for hot coffee, fresh foods and a warm smile.

“We take great pride in keeping our stores clean and having a friendly person ready to serve all customers that walk through our doors,” said John Zikias, Thorntons’ vice president of marketing. “Our highest priority is to make sure our customers can get in and out quickly, find what they need and feel safe in a bright, comfortable environment. That great service is what keeps them coming back.”

Investing in Employees
While the industry has experienced quite a bit of merger and acquisition activity over the past two decades, 2011 marks the 40th anniversary for Thorntons. The family-owned and -operated firm has maintained remarkable leadership stability through the years. The company was co-founded in 1971 by James Thornton and is now run by his son, Matt, who serves as president and CEO.

“This industry continues to get more sophisticated in terms of how retailers listen to and communicate with their customers, and the cost of being in this business has certainly increased with bigger buildings and larger lots, but at its heart we are a service-driven industry,” said Matt Thornton, who assumed the corporate reigns in 2001. “We always have an ear to the ground in search of what our customers’ needs are and how we can meet those needs. This business model has worked for us for 40 years.”

The emphasis on service begins with employees, who are among the most loyal in the convenience store industry. The Louisville, Ky., chain provides ongoing training to ensure employees have the skills they need to be successful, and is quick to celebrate their achievements with cash awards and exotic vacation packages (See sidebar on page 22).

“The recruitment process plays an important role in our customer service strategy. We believe in hiring for attitude and training for success,” Zikias said. “Throughout the hiring process and background checks we evaluate the attitude of prospective employees. Whether it’s a customer service representative or the maintenance crew, all employees must be service driven.”

The chain has developed an all-inclusive strategy to solicit feedback from managers, general managers and clerks to make certain their voices are heard and needs are being met. Zikias described this as a sense of empowerment for the ultimate purpose of “delighting the customers.”

“We believe in being open and honest with our team members and setting clear, direct goals,” Zikias said. “As part of our core values we preach respect for each other and everyone counts. All of our people have a voice in the company. The result is that they are eager step up and provide outstanding service.”

The proof is in the numbers. Thorntons’ annual revenues have surpassed $1.4 billion and the company in 2010 ranked No. 250 among Forbes 500 largest privately held companies.

Awards and Recognition

“OUR ABILITY TO SATISFY and exceed customer expectations is a result of the outstanding work of the people in this room and I’m proud to work alongside all of you.”

That was the message sent by Matt Thornton, president and CEO of Thorntons Inc., at the company’s annual meeting in November. Close to 400 managers, executives and sponsors participated in the event, and CSD had exclusive access. Thorntons culminated the meeting by honoring its top regional managers and store general managers. In all, dozens of awards were handed out to employees and vendor partners.

The top Regional Manager awards went to:
• Zach Mathews, Southern Regional Manager
• Dave Deters, Northern Regional Manager

The top 10 General Manager awards were given to:
10 ) Gordie “Dee” Ross, Store 62
9 ) Doug McGehee, Store 122
8 ) Ron Atkins, Store 22
7 ) Jim Hood, Store 555
6 ) Bryan Ritter, Store 369
5 ) Michael Vallejo, Store 501
4 ). Christina Knieriem, Store157
3 ) Dawn Yost, Store 86
2 ) Michael Staples, Store 141
1 ) Laurie Leber, Store 303

Thorntons’ Vendor of the Year award went to The Hershey Co., identified by Matt Thornton as a “valued and trusted partner.”
Tom Joyce, vice president of customer and industry affairs for Hershey, was on hand to accept the award with Dan Vucovich, Hershey’s global chief customer officer.

Train to Retain
Low turnover is a welcomed byproduct of this commitment to employees. Few people understand just how Thorntons has transformed through the years like Tony Harris, a 16-year veteran who has been instrumental in guiding the brand to prominence.

“For many years we had a good, but typical approach to developing a culture,” Harris said. “Under Matt’s leadership our culture began to change toward a team approach to make sure that we were making good decisions for our custumers and for our team in the field. To do that, you’ve got to have the right values in place, which gets back to respecting everyone on the team.”

To gauge just how well it’s doing in its training efforts, Thorntons has a comprehensive mystery shopper program. Every month, two unannounced visits are made to each store. Units are graded on customer service, cleanliness of the forecourt, food areas and restrooms, and shelves are inspected for out of stocks. “Scores continued to improve,” Harris said.

As training and responsibility has improved so has employee retention. At its worst five years ago Thorntons suffered from turnover of 157% for front counter employees. Today, it comes in at 81%. For management positions the turnover rate is an even more impressive 15%, down from 70% in 2006.

Despite its remarkable efforts to retain personnel, Thorntons continues to push forward aiming for even better results.

“These are good numbers and we know we have improved well beyond others in the industry, but we think we can do better,” Harris insisted. “These results are contagious and inspire employees to work hard in order to advance within the company, and it motivates us to keep training them to take on new responsibilities. There’s not a much better indicator in terms of how people value the company they work for.”

Marketing the Store
Thorntons also pushes the limits of innovation in its convenience stores. For example, in 2010 the company implemented monthly suggestive sales contests around key products in store. One item, Cadbury eggs, was so popular that the chain sold more Cadbury eggs than any other retailer in the U.S.

Stores have a heavy focus on dispensed beverages and fresh foods. Thorntons operates its own distribution center in Louisville where it produces its proprietary Quick Café doughnuts, sandwiches and wraps, salads and fresh fruits for 44 stores. McLane is the chain’s distribution partner, while Lapari Foods in Warren, Mich., is its primary foodservice provider.

Over the past year, Thorntons worked with a number of its supplier partners to review all of its commissary products, which led to the development of 10 new sandwiches and two new salads. After the first three months, commissary sales in units increased 125%, Zikias said.

To drive impulse sales, Thorntons also developed a store clustering program to identify each store by consumer demographics and location type—such as whether it was located in an industrial, commercial or residential neighborhood—then marketed each unit appropriately. Plus, it introduced a front counter bump out program, which allows store to quickly introduce new products and impulse items near the registers.

Among it key plans for next 12 months are:
• To expand E-85 fuel where viable. In 2010, Thorntons upped the availability of E-85 to 20 locations from seven.
• Expand the fresh food offering following the successful launch of a roller grill program with Sara Lee in 2010.
• Focus on hot dispensed beverages to improve the offering and meet consumer demand for unique products.
• Develop an annual general manager conference to recognize key team members and suppliers.
• Implement a general manager compensation program to align and reward general managers for profit growth.

To embrace Generation Y through social media, Thorntons has an active presence on Facebook and Twitter. It currently offers a frequency rewards program that is focused on dispensed beverages—coffee, fountain, frozen and iced tea. With a punch card every sixth drink is free, Harris said, adding that the company is examining automated loyalty programs and smartphone applications which could be rolled out in 2011.

Beyond loyalty, and to control credit card costs, Thorntons offers fuel discounts at the pumps for customers using debit with a pin. “This allows us to get the best credit card rate that we can,” Harris said.

Growth and Upkeep
Calling convenience stores “recession proof” is enough to make an industry executive cringe. No amount of growth seems to be good enough in an industry with such high standards. But despite the economy’s struggles, Thorntons is thriving and investing in its infrastructure.

After building about 10 new stores in 2010, Thorntons—contingent upon the permitting process—is planning to build 8-12 new units a year for the foreseeable future. With regard to rebuilds and remodels, the company expects to upgrade 10-12 stores a year as well.  Growth markets Thorntons is focusing on include Nashville, Tenn., and Chicago.

“Those have been pretty consistent numbers for us year after year and I don’t expect them to change anytime soon,” Thornton said. “We have every reason to be optimistic. Over the past 12 months our same-store sales growth jumped well above our targets, fuel gallons sold also came in above estimates and margins were stable. Business has been good here at Thorntons.”

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