Top 5 stories from C-Store Dive

With Love’s Travel Stops & Country Stores celebrating six decades in business in 2024, the convenience store and truck stop chain is shining a spotlight on how it weaves its family-owned culture into everything it does.

It’s this culture that’s grounded the company over time, making it feel and appear as an organization that seems close-knit even as it’s grown through the years, President Shane Wharton said in an interview. 

Growth is a balancing act for Love’s, which is constantly looking to maintain this culture while evolving its brand and offerings, Wharton said.

“You can’t be in business for 60 years if you don’t innovate and change and adjust to what your customers ask you to do,” Wharton said.

Oklahoma City-based Love’s has 640 locations in 42 states along with more than 400 Speedco and Love’s Truck Care locations. Recently, the chain touted plans to open 25 new locations and conduct 40 remodels. But those plans are only a small piece of the company’s overall vision for this year and beyond.

Wharton sat down with C-Store Dive to talk about the strategy behind Love’s store-count goals and remodels, the company’s electric vehicle charging blueprint, and how it’s addressing labor woes.

This interview has been edited for length and clarity.

C-STORE DIVE: Last month, Love’s outlined some store count growth plans. Talk to me about the strategy.

WHARTON: 20 to 25 locations is a pretty good balance of finding the right properties, getting approved and getting them developed — a lot of it is just filling out the existing network. And that usually comes along with some truck care facilities. Of that 20 to 25, maybe eight to 10 will also have truck care. We’re also adding RV hookups. So now when we’re going in with travel stops, we’re pretty much having four to eight RV hookups as part of that development as well.

Our stores in the last 10 years are the newest, the greatest and the most precious, but everything prior to that has been around a little longer. So we’re going back and reinvesting in those locations. And I think we got eight or 10 of them done last year — not just a paint fix, but major remodels where we sometimes have to close them for a little bit. We’re going to ramp that up this year, we’re going to get 35 to 40 of those done.

In terms of those remodels, are there certain elements of those locations you’re looking to revamp, like the kitchens or forecourts?

WHARTON: A lot of times it’s around food, giving us more opportunity to serve more food, in particular around our proprietary offering. We’re incorporating a fresh kitchen, so customers can actually see us preparing the food on-site. 

Sometimes it involves just just adding more square footage — just to give more walkable space for our customers and more shelf space for more products and services. A lot of times, it means more showers. We [have customers taking] over 300,000 showers a week, and so a lot of those older locations needed to be updated. And definitely bathrooms are always getting updated and refreshed.

Is the fresh kitchen already in some Love’s stores or is this currently in the works?

WHARTON: We’ve had a fresh food offering for a while but people didn’t necessarily know it because the kitchen wasn’t visible — it was in the back. But now that you’re actually seeing that, you know it’s fresh and prepared on-site. We have a handful of sites now that have that fresh kitchen look. In 2024, you’re going to see us adding those to either new locations or the remodeled locations.

How do you find the balance between growing organically through new builds versus acquisitions?

WHARTON: Most of what we’ve done has been [from the] ground up. There are a lot of things that go into the asset itself — how it’s designed and how it’s laid out are a big part of that. And so, typically, it’s just really hard for us to find something that makes sense for us to buy. And there’s always the financial side of that.

EZ GO was kind of unique because those locations were on the turnpike system. And there’s really no other way to get on the turnpike unless you acquire something. So far, our customer reaction to that has been very good. We now have it on our list that whenever a location comes up via a turnpike authority in the different states, we’re definitely going to keep an eye on that.

I know Love’s EV charging program was part of the NEVI funding grants not too long ago. Can you share the current state of your EV charging program and where you see it going this year and beyond?

WHARTON: We have 25-26 locations existing today that have charging units. But the NEVI funding is what’s really accelerating the build-out of that. I think we’ve gotten through about six or seven states. All the states have their processes and different timing, and through that process so far, we’ve been granted a little over $16 million to build out infrastructure at our locations. 

Is there a specific number of Love’s locations you’re looking to have charging at by the end of the year?

WHARTON: I’d be disappointed if we don’t get up to 100 locations that have EV charging available.

Tell me about what Love’s is doing to improve hiring and retention this year and what your outlook is on the labor front.

WHARTON: Our HR team is always looking at how we can speed up the process whenever we need to hire talent and make it as frictionless as possible. We get out on college campuses and talk about the opportunities at Love’s. And then of course, they’re working on development programs to grow people’s careers. We have all these different business segments that provide opportunities for someone to start with us in one role that develops what they’re capable of doing [before] moving on to other positions. I think that’s a little bit different from a traditional c-store.

We continue to have high aspirations in terms of growth. You can’t do it without the right people and talented people. I’m not saying that it’s a problem — it’s a challenge. That’s a big focus for us. We want to maintain the family-oriented culture that we have today. And as we get bigger, and scale, we have to work harder at that and be intentional about it. We’re very focused on that

Casey’s General Stores made headlines in late July when it announced it would be buying Fikes Wholesale — parent company of CEFCO Convenience Stores — for more than $1.1 billion dollars. The deal comes with nearly 200 stores, 148 of which are in Texas. The remaining 50 are in Alabama, Mississippi and Florida, all of which are new states for Casey’s. 

This acquisition will generate a big bump in Casey’s store count when it closes, which is expected to happen later this year. But this is just one step in a long, steady history of growth for the Ankeny, Iowa-based company.

Casey’s is well known throughout the central U.S. for its expansive pizza menu. Its 2,600-plus stores in 17 states mean it’s nowhere near as large as the top two chains, 7-Eleven and Alimentation Couche-Tarde, but the company is still more than 50% larger than fourth-place Murphy USA according to CSP’s 2024 Top 202 report.

Casey’s growth, which has been steadily building for years, comes from both acquisitions and new builds — a trend it managed to maintain even through the COVID-19 pandemic and up to present day. 

“Our two-pronged approach allows us the flexibility to build or buy, and our strong balance sheet gives us the freedom to be opportunistic with acquisitions,” CEO Darren Rebelez said during the company’s fourth quarter earnings call. “That was the case in fiscal 2024, where we had our second most acquisitive year in the company’s history.”

In Casey’s 2024 fiscal year ending April 30, the company reported 42 new builds and 112 acquisitions. One of those acquired locations has not opened yet, but six acquisitions it made before the start of the fiscal year also opened during the year.

This is part of Casey’s current goal of building or buying 350 stores between fiscal years 2024 and 2026, according to its 2023 Investor Day presentation.

Aiding in these expansion plans is Casey’s focus on smaller, rural markets. Around two thirds of its stores are in towns with 20,000 people or less, where it is “less expensive to build, buy, and operate units,” according to Casey’s 2024 investor deck.

Casey’s fiscal 2024 M&A

Casey’s is no stranger to building its own stores, but it has augmented those new builds with strategic acquisitions. In addition to some smaller, unreported deals, the company made several larger pickups. 

The fiscal year 2024 M&A plans began with the purchase of 63 Minit Mart and Certified Oil stores from EG America last August. This collection of stores, in Kentucky and Tennessee, was an “excellent strategic fit” for the convenience retailer, CEO Darren Rebelez said at the time. The next acquisition brought Casey’s into a new state for the first time since 2018, when it built its first Michigan location. The convenience retailer bought Lone Star Food Stores, a 22-store chain in Texas, entering its 17th state.

In December 2023, Casey’s acquired 11 EZ-GO stores in Nebraska and Oklahoma. Love’s Travel Stops & Country Stores had bought the 22-store chain in April of that year, specifically for its turnpike locations, and sold the rest to Casey’s. 

Casey’s may find it easier to make M&A deals in the coming years due to a difficult economic environment squeezing smaller retailers.

“Those pressures are continuing to mount on smaller operators, and we see that in terms of the velocity of potential M&A opportunities,” said Rebelez in the company’s Q4 earnings call. 

Lone Star Food Stores join Casey’s

Zooming in on Texas, the Lone Star acquisition extended Casey’s presence to five counties in the northern part of the state, between Dallas and the border with Oklahoma. The proximity to areas Casey’s already served was an important aspect of the acquisition.

“These stores will serve as a springboard into the great state of Texas for Casey’s, while still located within our self-distribution network,” Rebelez said at the time

The acquisition included sites in Sherman, Denison, Princeton, McKinney, Sunnyvale, Allen, Bells, Van Alstyne, Gainesville, Bartonville and Denton, Texas.

Eight months after the Lone Star acquisition, Casey’s announced its intent to buy Fikes, the bulk of whose CEFCO stores are in Texas. Once the deal closes, Casey’s will not only penetrate much further into Texas, but more than sextuple its store count there

Additionally, the Fikes acquisition came with a commissary and fuel terminal to help support its stores in the state.

It all came crashing down in the early evening on Aug. 24, 2023.

Mountain Express Oil, which filed for Chapter 11 bankruptcy protection in March of that year, sent a notice to its 1,000-plus team members informing them their employment was coming to an end. The company was shifting to Chapter 7 bankruptcy and ceasing operations, and its staff would lose their jobs at 5 p.m. the following day.

“Despite everyone’s best efforts, it has unfortunately become impossible to continue to operate Mountain Express Oil and its affiliates,” read the notice, a copy of which was obtained by C-Store Dive.

Several months later, that notice is the last time many ex-employees said they have heard from Mountain Express. They did not receive a severance package or parting benefits, nor a phone call from their former managers.

This abrupt turn illuminates the chaos that has ensued since Mountain Express filed for bankruptcy last March. That chaos has included Mountain Express’ ongoing disputes with its bankruptcy lenders, as well as the company cutting off fuel to its subtenants, allegedly misleading employees about its future and ultimately failing to sell its assets in a courtroom battle that pitted the company against its lenders.

According to four former full-time Mountain Express employees, the company was a dysfunctional workplace for years, largely due to the aggressive — and unorthodox — growth strategy its former leaders implemented.

Not only did these ex-employees cite a lack of transparency from leadership regarding its strategy and major decisions, but they also noted there was unethical deal-making and financial mishandling happening behind the scenes. Court documents filed by Mountain Express’ Chapter 7 bankruptcy trustee from as recent as March 2024 indicated these mishandlings were happening.

The former team members spoke to C-Store Dive under anonymity to avoid retaliation. They worked across Mountain Express’ finance and operations divisions, which gave them a front row seat to the company’s internal operations. C-Store Dive also spoke with two real estate owners who acquired stores from Mountain Express and leased them back to the company, as well as multiple attorneys who are familiar with Mountain Express’ situation, for this story.

The past year has marked a stark shift for Mountain Express, which seemed to be on cloud nine after experiencing rapid growth.

“I worked harder in this job in two years than I ever worked in any job I've had before,” a former employee who worked in operations said. “The potential of the industry was great. But the execution of the company was terrible.”

Ambitious growth plans

Three years ago, Mountain Express received accolades for its ambitious growth strategy, including being named one of the top private companies in Atlanta by the Atlanta Business Chronicle in 2021.

Mountain Express’ growth was spearheaded by then co-CEOs Lamar Frady and Turjo Wadud, who both joined the company in 2003 in senior management roles and became the co-owners and CEOs in March 2020. Their goal when taking over was to grow Mountain Express “into a multimillion dollar business,” according to the company’s Chapter 11 bankruptcy declaration filed by its chief restructuring officer.

According to multiple ex-employees, Frady and Wadud aspired to not only grow the company’s fuel supply footprint, but take Mountain Express public and sell a billion gallons of gasoline in the process.

But Frady and Wadud wanted to go even bigger still, pushing into areas Mountain Express had never been before. They wanted to turn the company — which had only been a fuel supplier since it was founded in 2000 — into a full-fledged retail operator.

Wadud and Frady did not respond to several requests to be interviewed for this story. Their attorneys declined to comment.

“Instead of staying a dealer-only jobber, they moved to go into retail,” one ex-employee who worked in operations said. “And that is what put the nail in the coffin, if you ask me.”

In June 2021, the company entered into a $1 billion agreement with real estate investment trust Oak Street Capital — the same firm that has funded acquisitions for GPM Investments, the c-store arm of Arko — in which Oak Street would finance Mountain Express’ acquisitions of c-stores and travel centers via sale-leaseback transactions. 

For more than a year after this agreement, Oak Street funded Mountain Express’ acquisitions of 286 properties across 60 sale-leaseback deals totalling more than $825 million, the Chapter 11 declaration shows. 

Oak Street did not respond by press time when reached to comment for this story.

How Mountain Express' sale-leaseback strategy failed

One of its notable acquisitions was of Brothers Food Mart, New Orleans’ largest c-store chain, which it acquired in October 2021. Mountain Express planned to introduce the 50-store brand to several new markets, such as Atlanta, Dallas and Memphis, and open as many as 100 more locations. 

The following summer, Mountain Express acquired 25 convenience stores in Wisconsin and Michigan from convenience retailer and tire and auto services company Team Schierl Companies.

Beyond these noteworthy deals and several other acquisitions, Mountain Express started purchasing individual stores and small chains from REITs.

According to the Chapter 11 declaration, Oak Street “never raised any concerns with the speed at which” Mountain Express was acquiring stores and “continued to make hundreds of millions of dollars available” for Mountain Express to continue growing.

However, many Mountain Express employees at the time were worried about the pace at which the company was growing, as well as the fact that leadership had no experience with traditional retail operations, which requires “a totally different mindset” than fuel distribution, a former employee who worked in operations said.

One ex-employee, who was brought onto Mountain Express’ finance team to help integrate the Brothers locations in New Orleans, said the lack of expertise needed to run retail stores was apparent from the start.

“It was clear very quickly when I stepped in the depth of the hole that I was having to inherit,” the former finance employee said.

This same employee noted that acquisition decisions were often poorly planned and executed. He would often see “transaction cycle missteps” by Mountain Express, including a lack of preparedness and knowledge of the assets they were acquiring. 

“I’m supposed to, say, integrate another 10-store chain, and everybody’s looking at each other like, ‘What’s the deal? What’s the structure?’” he said.

While it acquired stores at a rapid clip, Mountain Express proved itself to be an extremely poor retail operator, several ex-employees said.

For example, the Brothers stores were “way behind” technologically, and only one of those 50 locations ever reached brand compliance, the former finance employee said.

Additionally, Mountain Express didn’t properly conduct initial site inspections for repair needs and environmental compliance, multiple ex-employees said. 

“When you buy [a store], you investigate everything to see if they have any environmental issues, any building issues, any type of issues with the city, where they are and stuff like that,” a former employee who worked in operations said. “We didn't do [any] of those.”

Mountain Express was often responsible for repairs to the locations it oversaw with subtenants. Two ex-employees said that despite the company’s initial commitment to making repairs for various stores, Mountain Express either took months to begin the work or ignored these responsibilities altogether.

Upon acquiring the 25 convenience stores from Team Schierl Companies in 2022, Mountain Express agreed to reimburse Schierl for repairs done to these stores. According to a court document filed in early July 2023 by Schierl and its attorneys, Mountain Express owed Schierl over $367,000 in reimbursable repair expenses, which included plumbing, electrical and air conditioning maintenance.

As of late September, Mountain Express had still not paid for this work, another court document filed by Schierl and its attorneys shows. Schierl did not respond by press time when reached to offer an update on this reimbursement.

“They weren’t doing a damn thing to [the stores],” another ex-employee who worked in operations said, referring to Mountain Express’ inattentiveness to repair work.

A single-store owner who purchased a location from Mountain Express in 2022 experienced similar headaches. 

When the deal for the location closed, Mountain Express contractually committed to making about $150,000 worth of upgrades to the location. Months went by with nothing done, according to the store owner, who asked to remain anonymous to avoid retaliation.

After almost a year and several attempts to reach management, work on the site finally began, but quickly fizzled out when Mountain Express filed for bankruptcy, the store owner said. 

Mountain Express stopped responding to the owner. “At that point, I realized they’re not going to do any more work on the site,” the store owner said. “So whatever they told me they had done that winter, that was it. And that’s all they had done.”

John Canchola, who acquired his Oklahoma City-based store from Mountain Express in July 2022 for $1.2 million, said that when he and his father purchased the location, it was in terrible condition. Cable wires were dangling from the ceiling, gas lines were exposed and the restaurant “was in shambles,” he noted.

At the time, Canchola didn’t quibble, since the store’s master lease agreement — which C-Store Dive obtained a copy of — stated that Mountain Express would maintain and upgrade the property at its own expense. 

“They sold us on the premise that it was already under construction,” Canchola said.

However, that wasn’t the case. Mountain Express “never touched the store,” which has remained vacant from the moment Canchola purchased it, he said. 

When he and his father were in the buying process earlier that summer, Mountain Express’ broker, The Kase Group, confirmed that all the permits needed to operate the location “were good to go,” Canchola said. 

But four months after purchasing the store, Canchola was slapped with a violation from the Oklahoma Corporation Commission for having failed to register the location’s underground fuel tanks. 

“I’m getting these letters from the OCC and they’re saying, ‘Okay, since you’re the new owner, these are the past violations,’” Canchola said. “And I went, ‘Oh my God, what is going on?’”

Questionable decision making

Multiple ex-employees said that Mountain Express’ inattentiveness to store repairs was mainly due to financial constraints, noting that leadership often did not have the funds to make various fixes.

Getting the funds to fix a broken air conditioner, for example, was “like pulling teeth,” one of the ex-employees who worked in operations noted.

“They just didn’t have enough operating capital to run the stores correctly,” he said.

But why did a company with so much funding not have the capital to make simple improvements and repairs? 

Several sources, including every interviewed former Mountain Express employee and attorneys involved in its bankruptcy case, have questioned the processes behind the company’s acquisition strategy.

According to its Chapter 11 declaration and several ex-employees, Mountain Express would acquire sites and almost immediately resell them to “third-party investment vehicles,” often REITs. The REITs then would lease the locations back to Mountain Express via long-term agreements, with Mountain Express’ fuel distribution business providing the fuel to the sites.

According to several sources with direct knowledge of the matter, Mountain Express would quickly flip the properties it had just acquired for a considerably larger price than what it had just spent days — or sometimes hours — before.

For example, on June 15, 2021, Mountain Express acquired a convenience store in Shelby County, Tennessee, for $430,000. Later that day, Mountain Express sold that same property in a sale-leaseback deal to a REIT for $960,000, according to Shelby County records.

Despite the large gains from these transactions, Mountain Express could not afford the monthly rents it agreed upon in many of the deals, several former employees said. This was mainly because Mountain Express wasn’t investing in repairing and remodeling the stores which, in turn, made them undesirable for shoppers and thus could not generate enough sales to hit their monthly numbers.

Mountain Express had leased 71 stores from AR Global Investments, a real estate asset firm, since 2018. Those leases were terminated during the retailer’s bankruptcy proceedings, according to AR’s 10-Q SEC filing from August. 

One ex-employee who worked in operations noted that many of these AR-leased locations were quite short on rent.

“On some of those properties, just as an example, we were paying $175,000 a year for leases, and we were probably only getting $90,000 in rent,” he said. “We were upside down on so many leases.”

Financial mismanagement

Mountain Express’ lack of funds was due to more than just the poor performance of its stores. Financial statements and court filings from its trustee indicate that Mountain Express’ leadership — including Frady and Wadud — was using the business to funnel money to various entities they own.

According to Mountain Express’ statement of financial affairs, the company made hundreds of payments to various entities, referred to as “insiders” in the financial documents, over the previous year prior to filing for bankruptcy.

Many of those entities were either partly or completely co-owned by Frady and Wadud. Companies called Time and Water LLC, Adelphi Transport LLC and Red Mountain Fuels Transport LLC were each 100% owned by Frady and Wadud. Another entity, 4Court Holdings LLC, was one-third owned by Frady and another third by Wadud, according to the statement of financial affairs.

Although these entities are under the ownership of Frady and Wadud, they are not under Mountain Express’ corporate umbrella in any way, according to the company’s organization chart found in the Chapter 11 declaration.

During an August 2023 court hearing shortly before the bankruptcy case shifted to Chapter 7, an attorney representing one of Mountain Express’ lenders said that a former Mountain Express employee, as well as a pre-bankruptcy seller of retail assets to Mountain Express, informed him that Mountain Express’ leadership “enriched themselves” at the expense of the company, referring to the “insider” payments made to companies like 4Court, Time and Water, and others.

“It's uncontested that millions of dollars were paid out to the debtors’ insiders within one year prior to the petition date,” John Elrod, co-chair for law firm Greenberg Traurig’s Atlanta Financial Restructuring Group, who was representing Mountain Express’ lender First Horizon Bank, said during the hearing. “The debtors have undertaken no substantive investigation of those transactions whatsoever.” 

Elrod’s accusation that Mountain Express did not investigate those transactions aligns with what one ex-employee, who worked in the finance department, noticed. 

This former finance employee said that in 2021, Mountain Express was working with a small audit firm to get its finances in order, but that the audit failed due to a lack of financial records kept by Mountain Express.

When it came to 2022, Mountain Express’ financials were unable to be audited, the former finance employee noted.

“It was the worst-looking audit I had seen… an auditor can’t necessarily audit something with almost no records,” he said.

During that same August court hearing, Elrod also said that no formal review of any of Mountain Express’ sale-leaseback transactions, including those with Oak Street, was conducted to see if they were problematic.

“Just the basic review of your garden variety trade preference claims — none of that has been done either,” Elrod said.

According to property records and multiple ex-employees, some of Mountain Express’ deals were not made in the name of the company, but instead in the name of some of the entities Frady and Wadud owned.

When Mountain Express sold the c-store in Shelby County in June 2021, instead of Frady or Wadud, a person named Hunter Smith signed off as the authorized member on the seller's part of the $960,000 deal.

According to all four ex-employees and public information, Smith owns the final third of 4Court Holdings alongside Frady and Wadud’s two-thirds.

Smith did not respond to several requests to be interviewed for this story.

“You’ve got to understand that [properties] were bought and sold separate from the company so the money would flow into the pockets of the people that were making the deals,” one former employee who worked in operations said.

That’s not to say some of these vendor payments weren’t legitimate. 4Court, for example, is split into several divisions that focus on fueling equipment, store branding and other retail elements. Mountain Express leased equipment from 4Court for 148 stores between September 2021 and February 2023, paying nearly $267,000 per month, according to a September 2023 motion to reject those equipment leases.

While those leases have since been terminated, sources confirmed that 4Court supplied a lot of equipment to Mountain Express’ stores.

However, other payments made from Mountain Express to several of these entities haven’t been as clear.

One source who worked in Mountain Express’ finance department said they believe Mountain Express purposefully overpaid vendors like 4Court and Time and Water so Frady and Wadud could profit.

This same source said that this method of “shelling” money between entities — often called related-party transactions — is a common method businesses may use to “scuttle off some money or do some inappropriate things.” 

Such transactions can also be indications of fraud, according to the National Association of Certified Valuators and Analysts’ Journal of Forensic and Investigative Accounting.

Related-party transactions are not illegal on their face, but if used for fraud or other illicit dealings, may lead to civil penalties or other types of legal remedies, said Lloyd Lim, partner for Kean Miller LLP, the law firm that represented GSS Holdings — one of the retailers that received fuel from Mountain Express — during the bankruptcy case.

One example of a similar case was the 2001 accounting scandal at Enron. The American energy company used related entities to hide large amounts of debt from its investors and creditors. Some people involved in the case went to prison for securities fraud, wire fraud and insider trading.

Although the Enron scenario involves using related parties to hide debt instead of profiting specific individuals, the basic framework is the same — using an entity of common control for financial gain, one former Mountain Express employee who worked in the finance department said. 

Frady’s and Wadud’s questionable financial activity reemerged in March 2024 when a court document filed by Mountain Express’ Chapter 7 bankruptcy trustee revealed that she was investigating the two executives for “the potential siphoning of millions of dollars” from the company into separate entities they own. 

According to the document, this siphoning may have been connected to the 60 sale-leaseback transactions Mountain Express made during its rapid growth phase in 2021 and 2022. Specifically, it notes that at the closing of many of these deals, Frady and Wadud would “cause funds to be wired” to their side companies as fees for work they performed while locating and conducting due diligence on properties.

For instance, in September 2021, two entities owned by Frady and Wadud each received $875,000 in connection with a sale-leaseback transaction. About a month later, those entities received another $875,000 after another deal was made, the document notes.

According to the court document, those entities were called Illuminous, which is 100% owned by Wadud; and Indepth, which is 100% owned by Frady.

A culture of dysfunction

Mountain Express’ demise wasn’t only due to bad business decisions, but also to a secretive and unhealthy company culture, several former employees said.

Every ex-employee interviewed for this story said that leadership rarely communicated company initiatives throughout the organization. When Frady and Wadud would make a deal or plan for a market expansion, only their closest confidants knew what was happening, sources said.

“There was no communication structure within the organization — things did not cascade down from the top,” one of the ex-employees who worked in operations said. “Everything was tightly held. We were all compartmentalized.”

That same former employee said the lack of communication caused a certain “uneasiness and doubt” that lingered throughout the company, which continued when Mountain Express filed for bankruptcy.

“We were being told that we were going to come out of this and we were going to be just fine,” he said. “We were told that Turjo had the financial backing to take back the company.”

Another former employee, who worked in finance, recalled multiple instances when someone who they didn’t know would show up in their office to retrieve sales information for an unknown transaction.

“It was like, ‘Who are you? Oh, no, they didn't give me the memo. I didn't even realize those stores were being divested today,’” they said.

That lack of transparency also bled into the company’s bankruptcy proceedings. 

Lim, who was directly involved in the bankruptcy case, said Mountain Express and its counsel were “very close to the vest” and didn’t offer much transparency to other parties. That lack of transparency eventually got out of hand, to the point where Mountain Express was in too deep a hole to dig themselves out, resulting in the failed $49 million outright sale to Arko.

“It’s just such an epic failure… it’s probably one of the worst [bankruptcy] cases I’ve ever seen,” Lim said.

Another former employee who worked in operations said team members raised the issue of poor communication to leadership on multiple conference calls, only to be ignored.

The disconnect between leadership and the rest of the company wasn’t the only dysfunction within Mountain Express. Several ex-employees said that Frady’s personality created an unhealthy company culture. A former finance team member specifically referred to Frady’s personality as “reactionary and energized.”

Much of Mountain Express’ ambitious growth plan during those few years was tied to Frady’s intense persona, which wasn’t conducive to running the business, this same former finance employee said. 

Multiple ex-employees said that Frady would often scream during company meetings. One ex-employee who worked in the finance department specifically noted that Frady would berate team members over things like taking their time to review company materials or financial information amid an acquisition. This same employee also said that Frady often “couldn’t be corralled” when he had his mind set on something.

“We would have certain company meetings, and Lamar would scream as loud as possible,” another ex-employee, who also worked in the finance department, said. “It was pretty bad.”

What’s next for Mountain Express?

Since Mountain Express shifted to Chapter 7 bankruptcy in August — about a week after its proposed sale to Arko failed — the company’s trustee has liquidated many of its property rights, fuel supply agreements and equipment leases. 

However, there’s still a long road ahead until this situation is resolved, said Ted Gavin, managing director and founding partner of bankruptcy consultancy Gavin/Solmonese.

According to several updates in Mountain Express’ bankruptcy court docket, the trustee has undertaken several claims analyses and will likely look to recover monies Mountain Express paid to certain entities within 90 days or a year of filing for bankruptcy — a process which may take years, Gavin said.

Meanwhile, Lim said he thinks that one of the largest set of claims will come against Mountain Express’s former management.

“I fully expect the Chapter 7 trustee to begin suing those folks and to try to recover as much as she can for mismanagement and other things like that,” Lim said.

Mountain Express’ bankruptcy trustee and First Horizon Bank have conducted multiple “examinations” of Wadud and Frady over the past several months under the Federal Bankruptcy procedure. The executives have been required to address various elements of Mountain Express’ activity over the past few years. Topics included the company’s corporate governance, its accounting and auditing done between 2017 and 2023, its financial records, other business entities either man owns or controls, and Mountain Express’ acquisition history.

Also among those topics was any funds Frady and Wadud received directly or indirectly from Mountain Express between 2017 and the bankruptcy filing.

As of April 2024, there are currently no updates from the court regarding any results from these examinations.

These examinations could be “the precursor to other motions or future litigation,” said Gavin.

Amid the accusations of financial mishandling and dysfunctional leadership, Frady and Wadud already seem to have their sights set on the future. Several sources said that they heard the two executives are starting a new company.

When asked if they’d work for a newly created venture under Frady and Wadud if given the chance, one former Mountain Express employee, who worked in operations, didn’t hesitate.

“I’d starve first.”
 

News Graphics Developer Julia Himmel also contributed to this story.

Candy sales in convenience stores are booming, according to market research company Circana. In 2023, convenience stores generated $8.5 billion in candy, mint and gum sales, up 11.9% over 2022, according to the NCA.

However, these sales increases are being driven by higher prices, while unit sales and volumes are in decline.

"The price point compared to other snacks is affordable, but you've got a perfect storm — prices are high, cocoa is high, so prices are a little elevated and consumers are not walking away, they're just buying less," said Dan Sadler, principal with Chicago-based Circana.

As customers trade down, private label candy has emerged as a winner. A leader in this area is 7-Eleven, which has an extensive offering including gummies and jelly beans. 

According to the National Confectioners Association, store-brand chocolate sales grew 12.6% in 2023, but were still only 2.2% of chocolate unit sales. Store brand non-chocolate sweets, meanwhile, make up about 5.4% of unit sales

Candy sales remain fairly strong because consumers consider chocolate and other sweets an affordable treat. It's tied to their emotional well-being, seen as a reward but also a pick-me-up, Sadler pointed out. Eighty six percent of consumers say they are OK with treating themselves with candy — on average, twice or three times a week, according to the NCA.

"C-stores have been a particularly bright spot for confectionery companies, as younger consumers are drawn to the unique, fun options offered by the segment," said Mike Kostyo, vice president with Menu Matters, a Vermont-based food consulting firm. "Candy is often a poster child for affordable indulgence."

Non-chocolate sales are going strong

While dollar sales of chocolate were up in 2023, according to Circana, unit and volume sales were down by 5.4% and 4.4%, respectively. These drops were due to households buying chocolate less frequently and purchasing smaller amounts, according to the NCA.

Non-chocolate candy is filling the gap left in the candy market by chocolate. Non-chocolate candy sales were almost $12 billion in 2023, up 12.2% over the previous year, the NCA said. Chocolate, meanwhile, earned $19.3 billion. 

There's a lot of variety in non-chocolate candy, from gummies to lollipops, and retailers last year reported that they'd expanded their assortment, with the average items per store up by 7.4%, says the NCA. The biggest increase in sales came from novelty candy (up 49%) but hard sugar and rolls sales were up 10.7% and chewy candy by 9.5%. Mint sales jumped 13.9%.

Sour candy is popular with younger generations, said Anne-Marie Roerink, principal, 210 Analytics, as are licorice and gummies that change flavors as you eat them. "There's been a lot of innovation in textures, flavors, shapes, and that's driving a lot of engagement with younger generations," she said. 

Kostyo pointed to the popularity of freeze-dried candies and "sweet-heat" products with spicy profiles as well.

Natural and ‘free from’ choices are gaining traction 

Even though many consumers eat candy as a treat, some are also looking for healthier sweets, or those that have positive attributes. Overall sales of sugar-free non-chocolate candy, for example, were up 14.4% in 2023, according to the NCA.

But “healthy” means different things to different people. The leading health claim Americans look for from candy is all-natural, meaning it contains no artificial ingredients. That’s followed by organic ingredients. Shoppers also are looking for lower-sugar, sugar-free, gluten-free and vegan options. These claims are especially important to Millennial and Gen Z consumers, according to the NCA.

Other increasingly important traits for candy are: palm oil-free; helps with energy/alertness; lactose-free; helps with oral health; low-, reduced- or no-cholesterol, according to Innova Market Insights, a global market researcher.

Nostalgia versus innovation

Some differences in candy trends depend on peoples’ age.  Baby Boomers in particular, but also Gen Xers, are looking for familiar products like M&Ms and Starburst. Younger consumers, meanwhile, are looking for innovation in some of these time-honored segments, or “newstalgia,” which according to Suzy Badaracco, president of Culinary Tides, picks up "where nostalgia left off, merging old products with new directions."

Candy is one of the most innovative categories in retail, said Roerink. In other categories, 1% to 2% of sales come from new items, but for candy it is 5% to 6%. "It's for the younger shopper who likes to explore,” Roerink said. “It's also that Instagram and TikTok moment to share with others."

Two big success stories are Nerds gummy clusters and Ring Pops, said Sadler, who's also seeing growth in liquid-type candy or squeezable gels. 

MrBeast, the brand run by the popular YouTube star, also excels with innovation.

"Within candy, consumers are willing to try something different — it's sensory, it's experiential, and there's a lot of ideas that could be presented to consumers that would resonate," Sadler pointed out.

Smaller companies and brands innovate and grow

The big confectionery companies still dominate the candy market, said Sadler, with four or five firms claiming a 75% share of the market while the mid-size candy manufacturers hold another 10% to 15%. That leaves only 10% to 15% for niche companies that need "to have a point of differentiation to have some success," he said.

But according to Innova, smaller companies have been gradually taking a larger share of the market in the past three years. Last year 64% of new product launches in candy came from smaller companies, up from 55% in 2021. On the flip side,  22% of new products came from mainstream giants, down from 28% two years earlier.

While the very largest candy brands continue to grow, innovative brands a little further down the rankings are increasing their share, said Jordan Mann, senior vice president of corporate strategy, capital markets and investor relations for convenience retailer Arko Corp.

"In our experience, these brands reflect the growth in the non-chocolate and health, energy, and protein segments," Mann said.

 

In 2014, Mexican retailer and bottling company Fomento Económico Mexicano S.A.B. de C.V. (FEMSA) had just under 13,000 Oxxo convenience stores across its network. That summer, the company looked to take a leap of faith by opening an Oxxo in Eagle Pass, Texas — its first convenience store in the U.S. 

It’s unclear if the store ever opened, and one glance at the store on Google Maps indicates it’s not there now. 

About a year later, FEMSA planned a second Oxxo in Texas, this time in Laredo, another small town close to the Mexican border. While that store appears to still be open, its phone number is disconnected.

This summer, FEMSA firmly planted its roots in the U.S. by announcing it agreed to acquire Delek US Holdings’ retail business, which includes 249 convenience stores across Texas, Arkansas and New Mexico. The $385 million agreement is expected to close by the end of 2024, both companies said.

The move makes sense for Delek — mainly known for its refining business — which had openly teased a sale of its retail arm for the past year and half, saying a transaction could boost shareholder value. Earlier this year, Delek even cut its retail capital budget in half after its c-store division saw a $74 million drop in revenue in 2023 compared to 2022.

For FEMSA, the deal doesn’t just stamp its long-awaited arrival in the U.S. As retailers like 7-Eleven, Casey’s General Stores and Alimentation Couche-Tard continue to dominate the c-store M&A landscape, FEMSA’s emergence establishes a new competitor with the financials to continue growing at a rapid clip.

“It’s a complex company in that it [owns] the world's largest distributor and bottler of Coca-Cola products,” said David Marcotte, senior vice president for market research firm Kantar, where he leads insights on international retail, business processes and technology. “That gives them an incredible spine of logistics to build just about anything they want.”

A new threat in Texas — and maybe beyond

In February 2023, FEMSA’s leadership revealed its FEMSA Forward plan, in which the company would prioritize its retail, beverage and digital businesses. Part of that plan included reaching the U.S., which the company couldn’t achieve until it sold its shares in beer company Heineken, according to reports at the time and Marcotte.

“They had a Heineken distribution agreement that violated various states' arrangements about who owns liquor stores versus who can sell and such,” according to Marcotte, who said he’s worked as a consultant for FEMSA on and off for the past quarter century. 

Once FEMSA sold its Heineken shares in May 2023, Marcotte said it became apparent that the company wanted to prioritize its U.S. expansion.

“I saw it clearly as a sign that they were establishing the ground rules for how they were going to move into Texas,” he said. “So this is a long time coming.”

Once the deal with Delek closes, FEMSA will have a strong foundation of convenience stores in the U.S. Regardless of whether those locations remain under the Delek branding or if they’ll take on the Oxxo banner, FEMSA's presence will have ripple effects on the broader U.S. c-store landscape, Marcotte noted.

Among those is increased pressure on another retailer with a massive foothold in Texas.

“7-Eleven’s going through some significant strategy shifts, and I think those are going to accelerate,” he said. “There's been a lot more productive synergy going on between Seven & I and 7-Eleven in the United States that might go further.”

Marcotte believes that one of FEMSA’s biggest advantages is its financials. Its total consolidated revenue grew by about 18% in 2023 compared to 2022, according to its 2023 annual report. This gives FEMSA the ability to move quickly if it wishes to do so — and keep acquiring stores.

“The other side of this is it gives them a position legally inside the United States to keep the pressure on mergers and acquisitions,” he said. “They have more than enough cash flow.”

Marcotte also noted that FEMSA’s several business units will play to its advantage during its U.S. expansion. Besides c-stores and its Coca-Cola bottling group, the company also operates drug stores and a third-party logistics service.

“They could do a lot of different things once they start getting their real estate in order,” Marcotte said.

Despite being in a position to grow fast, Marcote doesn’t see FEMSA doing much beyond the Delek acquisition until it’s settled and understands the day-to-day environment of U.S. retail.

“I don't think they're going to buy anything else for about another six to 12 months,” he said. “They're going to try to figure out what they got.”