Pilot Corporation

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Pilot Corporation

5508 Lonas Road
Knoxville, Tennessee 37909
Telephone: (865) 588-7487
Fax: (865) 450-2800
Web site: http://www.pilotcorp.com

Private Company
Employees: 7,209
Sales: $1.76 billion (2000)
NAIC: 447110 Gasoline Stations with Convenience Stores

Pilot Corporation is one of the largest independent retailers of over-the-road diesel fuel, as well as one of the top 25 largest restaurant franchises in the United States. The company operates approximately 235 travel centers spread across 35 states through a joint venture with SuperAmerica LLC, a wholly owned subsidiary of Marathon Ashland Petroleum. CEO James Haslam III and his family own Pilot, which also manages more than 60 convenience stores in Tennessee and Virginia.

One Tiny Gas Station: 1958

The history of Pilot Corporation begins with the story of James A. Haslam II, an athlete who played starting tackle for the University of Tennessee football team. After he graduated in 1952, Haslam joined the U.S. Army and served a tour of duty in the Korean War. Upon his return, he began looking for a job. He began working for Fleet Oil Co., an independent enterprise based in LaFollette, Tennessee.

Dad always wanted his own business, said James A. Haslam III, son of the founder, in a 1998 interview in Nations Restaurant News. Consequently, in 1958, after saving what money he could from his Fleet Oil job, the elder Haslam went into business for himself, opening the first Pilot gas station in the heart of the Appalachians, in the small town of Gate City, Virginia.

The first Pilot gas station was a tiny affair, with a mere four pumps for gasoline. In addition to gasoline, Haslam also offered customers the option of purchasing cigarettes and soft drinks at the counter. From these modest beginnings would grow, by the year 2000, an enterprise approaching $2 billion in revenue.

Slowly the company grew, and Haslam added more tiny gas stations here and there throughout the Southeast. In 1965, Pilot Corporation was bringing in some $2 million per year. Casting its acquisitive eye out, Marathon Oil Co.a fuels giant that began life in 1887 as The Ohio Oil Companypurchased 50 percent of Pilot Corporation. Marathon was focusing, according to its Company Goals, on being an aggressive, innovative company, constantly seeking improvement, building upon the competitive strengths of our integrated operations, to take advantage of worldwide business opportunities. Marathon thus loaned its tiny new business interest some $4 million, which was earmarked to build new Pilot gas station locations.

Branching Out into the Convenience Store and Restaurant Industries: 1970s80s

By 1973, Pilot Corporation operated more than 50 stores and was boasting annual sales of $30 million, mostly in gasoline, motor oil, and cigarettes. Pilots larger partner, Marathon, also continued to grow, acquiring Cleveland-based Gastown stations in 1971, Oshkosh-based Consolidated in 1972, and Springfield, Ohio-based Bonded in 1975. It could have turned into a disaster, though. Severe gas shortages hammered the United States in the 1970s. With a huge lack of people with an interest in operating dealer-based gas stations, Marathon was forced to convert many of them into company-operated Speedway stores.

Three years later, in 1976, Pilot opened its first convenience store on the Alcoa Highway in Knoxville, Tennessee. The following year, the company bought Lonas Oil Co., also headquartered in Knoxville, converting most of that companys locations into convenience stores.

With 100 convenience stores in 1981, and total annual sales of $175 million, the company opened its first Travel Center in Corbin, Kentucky. The expanded concept included shower facilities for truck drivers on long-haul trips. Some of the first full-length platform scales in the world were installed at some of Pilots Travel Centers by CAT Scale Company. CAT, founded in 1977 by Truckstop entrepreneur Bill Moon, would go on to become the largest truck scale network in the world, supplying scales at most, if not all, Pilot locations, as well as those of some of its competitors, such as Rip Griffins, Loves Country Stores, and TravelCenters of America.

But in 1981, Pilots partner, Marathon, was busily fending off a hostile takeover by Mobil Oil. U.S. Steel stepped in to purchase Marathon and then restructured, becoming USX. Marathon Oil, in turn, became the largest and most profitable arm of the new company. USX/Marathon purchased Checker from Exxon in 1983, Ecol in 1984, and Globe in 1985. These brands began appearing in the Speedway stores and in Pilot stores.

In 1984, Pilot started to branch out into the restaurant industry when it opened the first Pilot Kitchen in one of its Travel Centers. It was a deli counter, offering sandwiches, salads, and soups. It was basically a deli set-up with limited opportunity, said James A. Haslam III in a 1998 interview in Nations Restaurant News. We realized brands were the way to go. So, Pilot approached Dairy Queen about the possibility of a partnership. DQ liked the idea and, in 1988, the first Pilot Travel Center-based Dairy Queen opened in Hebron, Ohio, and the companys in-store restaurant business was off and running. In 1991, Subway opened its first truck stop location in a Pilot Travel Center.

Also during 1988, some 33 years after Marathon Oil Co. gave Pilot Corporation its much needed infusion of cash, the latter company bought out its larger partners interest. It would not be the end of the relationship between the two companies, however. Ten years later, in 1998, a merger between Marathon Oil and Ashland Oil divisions created Marathon Ashland Petroleum LLC, which would play a large part in Pilots life in the 21st century.

Continuing Family Leadership and Company Growth: 1990s and Early 2000s

Somewhere along the way, James Haslams sons, James A. Jimmy Haslam III and William Bill Haslam, joined the family business, taking executive positions. The family followed in the philanthropic footsteps laid down by an earlier generation of Rockefellers and Carnegies. James, the founder, received numerous awards during his career, including two Luminary Awards from the city of Knoxville, for services to the community. He also served as a trustee to the University of Tennessee from 19802001; as a key policy advisor to the George W. Bush Administration; as a member of the Knoxville Chapter of the American Marketing Association; and as a member of the board of directors of Tennessee Tomorrow Inc., a public, private, and academic partnership focused on the climate for economic development within Tennessee with emphasis on education and workforce development, among other things. Jimmy would go on to become, in addition to his duties for Pilot, a member of the board of directors of First Tennessee National Corporation and Ruby Tuesday Inc. CEO and President Bill Haslam served on the Knoxville, Tennessee Community Development Corporation from 2001-03. Also during 2001, Bill organized a group of investors (including his brother and father) to purchase the Tennessee Smokies, a local Class AA baseball team, from North Carolina businessman Don Beaver for $7.5 million. Are we doing this because we think its the worlds greatest financial investment? asked Bill Haslam in a December 2001 interview in the Knoxville (Tenn.) News-Sentinel. No, thats not why were doing it. We think it can be a good investment for all of the owners as well as something that is good for the community. And its fun. It did, however, give the company a chance to be exposed to a broader market by placing advertising in the stadium.

Company Perspectives

Our Mission: Pilot will be the Interstate retailer of choice for our customers by offering outstanding value and service at attractive and convenient locations, and for our employees by providing financial stability and personal development opportunities in an exciting environment. Pilot Values: Pilot is dedicated to hiring, developing, promoting and retaining an exceptional workforce. At Pilot, successful teamwork is rooted in our 42-year business strategy: 1. Integrity comes first. Do the right thing all the time! 2. A customer-driven company, offering true value! 3. Teamwork! Together, everyone accomplishes more! 4. Hustle. Faster, better, simpler, now! 5. A hands-on store-driven/customer-driven company! 6. The most efficient operator in the industry, with the lowest national operating costs and a sound balance sheet. 7. We will win by attracting and retaining the best players and giving them the best training and development. 8. Continuous drive for growth and improvement. 9. A company you can be proud of. 10. Be the best.

Key Dates

James Haslam II opens the first Pilot in Gate City, Virginia.
Marathon Oil Co. buys half of the $2 million-a-year Pilot and loans $4 million to build new locations.
Pilot has grown to more than 50 stores, with annual sales of $30 million, mostly in gasoline, motor oil, and cigarettes.
Pilot opens its first convenience store on Alcoa Highway in Knoxville, Tennessee.
Pilot buys Lonas Oil Co. in Knoxville, Tennessee, converting most of that companys locations to convenience stores.
With 100 convenience stores and total annual sales of $175 million, Pilot opens its first Travel Center in Corbin, Kentucky.
Pilot adds national restaurant chains to Travel Centers.
Pilot buys out Marathon Oils one-half interest.
Pilot ranks 99th on Forbes magazines list of the 500 largest privately held companies.
The nations largest supplier of diesel fuel for over the-road trucks, Pilot is the 25th largest restaurant franchise in the United States.
Pilot teams with Speedway SuperAmerica LLC to create the joint venture Pilot Travel Centers LLC.

The family also continued to grow the company. By 1997, Pilot Corporation ranked 99th on Forbes magazines list of the 500 largest privately held companies in the United States. In 1998, boasting some 3,000 employees, the company was rated as the nations largest supplier of diesel fuel for over-the-road trucks, as well as the 25th largest restaurant franchise in the United States. Desiring to add a breakfast restaurant to its roster, Pilot Corporation began looking around and decided to invite T.J. Cinnamons baked goods and coffee shops to join the ranks of the companys in-store partners, which now included Arbys, KFC, Pizza Hut, Steak n Shake, Subway, Taco Bell, and Wendys.

At the end of 2000, the company teamed with Idle-Aire Technologies to test a new system at its Travel Centers designed to provide air conditioning and heating to truck cabs. Telephone, Internet, and cable television access were added to some of the locations as well. Pilot began ramping up to create what essentially amounted to a hotel for truckersa place where they could park their trucks, sleep in their cabs, but still enjoy the luxuries of phone and television service, as well as air or heat, without having to leave their engines on and idling.

Early in 2001, Pilot Corporation teamed up with Speedway SuperAmerica LLC (a wholly owned subsidiary of Marathon Ashland Petroleum LLC (MAP), itself a joint venture between Marathon Oil Co. and Ashland Petroleum), to create Pilot Travel Centers LLC. The 50-50 joint venture combined the travel center operations of both companies under the Pilot name and created the largest travel center network in the United States, with approximately 235 locations in 35 states at its inception. CAT Scale Company also was brought into the venture, providing its truck scales to various locations. At the beginning of the 21st century, Pilot Corporation was set to just keep on truckin.

Principal Competitors

7-Eleven, Inc.; ChevronTexaco; Exxon Mobil Corporation; FFP Marketing; Flying J Inc.; Loves Country Stores; Motiva Enterprises; Petro Stopping Centers; Rip Griffin Truck Service Center; Royal Dutch/Shell Group; Stuckeys, Inc.; TravelCenters of America.

Further Reading

Gates, Nick, and Stan DeLozier, Smokies Purchase Nets Pilot a Publicity Vehicle, Knoxville (Tenn.) News-Sentinel, December 28, 2001.

Gordetsky, Margaret, Gingrich on Bandwagon for Truck Stop Heating, Cooling, Entertainment Units, Transport Topics, December 11, 2000.

Smyth, Whit, The NRN Fifty: The FranchiseesPilot Corp.: Launch into the Restaurant Business Has Sales Taking Off, Nations Restaurant News, January 26, 1998.

Daryl F. Mallett