Veteran Turnaround Expert Takes On TravelCenters Of America Makeover

Since he is always an outsider, veteran turnaround expert Jon Pertchik begins every new project trying to figure out what the business does for a living.

Named CEO of TravelCenters of America TA three months ago Pertchik is still discovering what's right and wrong with the operator of more than 260 TA, Petro Stopping Centers and TA Express locations in 44 states and Canada.

"I'm a process person. I'm new to this industry, but this is the fourth company I've had a role like this, where I was new to it when I got there. The others went pretty well," the 52-year-old told FreightWaves in an interview.

Most recently, Pertchik was CEO of Intown Suites, the largest wholly owned extended-stay hotel chain in the United States. On his four-year watch, the number of properties grew from 134 to 189. Earnings before interest, taxes, depreciation and amortization (EBITDA) doubled through disciplined cost control and growth initiatives.

A dozen years ago during the Great Recession, Pertchik was chief restructuring officer at WCI Communities. He steered the publicly traded homebuilder, high-rise developer, and mortgage and title company through Chapter 11 bankruptcy, shedding $2 billion in debt.

"That was riddled with fear," he said. "This is nothing like that. There's zero fear. I can visualize the steps that need to happen here. It's just a matter of putting one foot in front of the other to get there."

Wanted: Vision And Values

On a Feb. 25 call with analysts to discuss fourth-quarter and 2019 results, Pertchik listed myriad challenges facing TA: expenses rising faster than revenue, a lack of centralized purchasing to take advantage of scale, aging restaurant concepts and inconsistent merchandising in its convenience stores.

But the biggest gap, he said in the interview, is the lack of a clear identity.

"The company hasn't had a mission, vision or values statements in probably a decade," Pertchik said. "That's a huge thing. It's not just some kind of fluffy, marketing speak. It's not some kind of ‘Who do we want to be?' and grab something from the sky externally. It's really an introspective perspective."

C-Suite Changes

Pertchik brought in Peter Crage, formerly chief financial officer of Diamond Resorts, a $1 billion private equity-owned organization with 350-plus vacation destinations in 35 countries, as CFO on March 2.

Around the same time, TA President Barry Richards gave up the role of chief operating officer so Pertchik could hire someone "to go chase down things that are underperforming."

Both moves speak to Pertchik's belief that the best organizations grow their own talent and hire outsiders who bring fresh perspectives.

He avoided criticizing past leaders but admitted his senior leadership team may interpret some of his comments as disparaging or critical of what went before him.

"I just want to get things done and go kick some butt," Pertchik said. "And have the team around me to do it."

Shares in TA rose dramatically upon Pertchik's hiring. Other than a coronavirus-related dip that punished almost all equities, TA shares (SONAR/Stock.TA) have held the gain.

Shares in TravelCenters of America rose dramatically after Jon Pertchik became CEO in December 2019. (FreightWaves SONAR/Stock.TA)

Engaging Employees

Pertchik spent his first three months reaching out to the company's 21,000 employees — "from porters cleaning our truck stops to senior leadership and everybody in between" — trying to learn what they think of the company.

Draft results of an employee engagement survey found some good news. Overall, employees rate TA about 3 percentage points higher than the industry average for competitors like Love's Travel Stops & Country Stores and the Pilot Co., the industry-leading parent of the Pilot and Flying J brands.

Respect The Tech

But TA's repair and service technicians rate the company about 10 points lower than other employees. Pertchik said that is consistent with what he hears during field visits.

"The level of respect our techs sense or feel is not what it should be," Pertchik said.

That helps explain a turnover "significantly north of 50%," similar to the industry at large but a detriment to TA, where heavy repair of trucks is a hallmark along with light maintenance, oil changes and tire sales.

Additional technician training is planned to slow the revolving door. But Pertchik said a key to retention is getting the broader team, particularly site managers, past the idea that technicians are relegated to "the dirty room in the back.

"It's more of a cultural phenomenon," he said. "There are a lot of things we can do to effect that. Some of this is science and some of it is art, and we'll be focused on both."

‘Eating Our Lunch'

Holding share in the service business got tougher last year.

Navistar International Corp. NAV and Love's signed a service partnership agreement in March 2019 that added 326 locations and 1,300 technicians to Navistar's service network. Love's and Speedco service locations handle an array of work covered by Navistar warranties.  

"I think that was a really solid move for them, and I think to some extent they have been eating our lunch," Pertchik said. "It is more of the commodity stuff, but nonetheless they are taking share away and that's what we're famous for. It's what we do best."

In November 2019, meanwhile, Pilot launched the One9 Fuel Network, a nationwide fueling network aimed at smaller fleets that includes access to credit and reward benefits with a variety of travel center brands.

TA has a long strategic relationship with Daimler Trucks North America. Pertchik hopes to leverage that and relationships with TA's larger fleet customers to create an "innovation lab" to  address training protocols and "technology threats that are starting to change this industry."

Franchise Growth

Love's, which plans 40 new stores in 2020, and Pilot, which plans 20, are adding "dots on the map" faster than TA, which needs to catch up.

"The most efficient way to do that is not to build ground-up truck stops but to convert existing independent truck stops in great locations that are good quality to the TA model," Pertchik said.

While he acknowledges the approach is not unique, Pertchik thinks the value proposition for independent truck stops joining TA is appealing because they would gain access to large fleet business they currently lack. Franchise candidates can be large or small truck stops. A subset would be independent repair shops.

"We're seeing a ton of interest, and we're scrubbing that very carefully," Pertchik said. "I don't think we're going to have too much trouble adding dots to the map. And quality dots at that."

Hopping On IHOP

Before Pertchik came on board, TA signed a deal to replace up to 94 of its full-service travel center restaurants with International House of Pancakes (IHOP) locations over the next five years. Twenty of those expect to come on line this year as permits are secured. The first has opened in south Atlanta, a neighborhood of the Georgia capital.

Though he is changing many things, Pertchick loves the IHOP arrangement.

While truckers are satisfied with TA's Country Pride and Iron Skillet restaurants, the average consumer most often drives by.

"I hope and believe we're going to see a big uptake in [passenger vehicles] that'll cross-pollinate: … the soccer mom or dad or the family after church on Sunday, if they're in the area, will pull in."

TA might sell a few extra tanks of gas after pancakes.

"I'm scouring the opportunities within our QSR [quick service restaurant] world to see what we can do better," Pertchik said. "That's kind of modeled after the IHOP decision, which was a great one."

Image Sourced from Pixabay