Expansion Fever

Convenience retailers are growing their footprints at a rapid pace

By Tammy Mastroberte

IN TODAY’S CONVENIENCE STORE marketplace, chains are expanding their footprints at a rapid pace, and many are entering into brand-new markets to extend their reach.

In the past six months alone, Sheetz Inc. opened its first store in Columbus, Ohio; Kwik Trip Inc. announced plans to move into both North Dakota and South Dakota with new construction; Kum & Go LC announced plans to open stores in Utah and Michigan for the first time; and both QuikTrip Corp. and Buc-ee’s reported moves into Tennessee, along with Buc-ee’s first store in Mississippi to be completed in the next two years.

“There are not a lot of big acquisitions left because so many of them happened in the last couple of years, and the companies left standing are not going anywhere soon. We are not seeing big deals on the horizon, so companies are buying smaller chains or growing organically through new construction now,” said Dennis Ruben, executive managing director of NRC Realty & Capital Advisors LLC, based in Chicago. The larger chains with bigger bank accounts are less restricted in terms of where they expand, especially those run by private equity. Many are in a push to expand their total number of units across the country, according to Chris Kehl, vice president of SRS Real Estate Partners, based in Dallas.

“This is why we saw 7-Eleven’s acquisition of Speedway. The fastest way these major operators are going to become leaders in total unit counts is through acquisition,” Kehl explained.

However, in today’s market, there are more buyers than there are sellers, so acquiring stores is much more competitive. Instead, many chains are choosing to build stores from the ground up in new markets to increase their total number of units.

“There are two groups of c-store operators — the builders like Kwik Trip, Kum & Go, RaceTrac, Buc-ee’s and Casey’s. They are all building new big-box stores,” noted Terry Monroe, president of American Business Brokers, based in Fort Myers Beach, Fla. “Then, you have those like EG Group, GPM, 7-Eleven and Circle K, who build a

little, but they are the acquirers. They are looking at the 18-store, 19-store or 40-store deals.”

QuikTrip is another c-store chain in growth mode right now, through building. As of press time, the Tulsa, Okla.-based company had 46 stores under construction, Aisha Jefferson-Smith, spokeswomen for QuikTrip, told Convenience Store News. Since late last year, QuikTrip entered the San Antonio and Austin, Texas markets, as well as Tennessee and Louisiana. The chain currently operates 900 stores and travel centers.

“In Austin and San Antonio, we currently have 54 stores, and one remote location in Tennessee,” said Jefferson-Smith. “We also plan to add a few travel centers in the greater Nashville area to complement our overall network of stores that serve the trucking industry and traveling public. Greater Nashville’s strong economy and proximity to other markets in which QuikTrip operates made it a clear choice for the expansion of our travel center business.”

Ruben observed that the majority of c-store chains building new stores from the ground up right now are those that are larger with more spending power and the ability to wait 18 to 24 months for a store to build up sales. The bigger players do their research and have the time to wait, whereas smaller chains don’t have the balance sheet to do that, he said.

Site Selection

In terms of market selection, many convenience retail chains are expanding into new markets that not only make sense for their store models, but also for their distribution networks. Those who have already saturated the markets they are operating in need to expand to other related markets in order to grow, Ruben pointed out.

“They are looking at markets with a close enough radius to where they have the distribution and efficiencies in economies of scale, like RaceTrac which is expanding into adjacent states,” he noted. In January 2021, RaceTrac reentered the Alabama market after 15 years with a new store in Gardendale, with plans to add more stores in the area.

This is also true for QuikTrip’s first location in Louisiana, where the company opened a travel center in April 2021 in Shreveport. The site features a complete selection of grab-and-go items and an expanded QT Kitchens serving up fresh, made-to-order food, premium specialty drinks and frozen treats, as well as QuikTrip Snackles, which are part meal and part snack.

“QuikTrip’s new store model is created specifically for

The Biggest Movers

In the past year, convenience store chains have been acquiring and building new stores at a rapid pace. Below is a roundup of some of the biggest moves:

JANUARY 2021

QuikTrip Corp. opened its first location in Louisiana, after announcing additional plans for new stores in Tennessee and San Antonio, Texas, in late 2020 — all new markets for the chain.

APRIL 2021

Kum & Go LC announced multiple stores planned for the state of Utah in 2022.

RaceTrac Petroleum Inc.

opened a new store in Gardendale, Ala., marking the chain’s reentry into the state after 15 years — with plans to open more locations there.

APRIL 2021

Sheetz Inc. began its expansion into the Columbus, Ohio, market, with plans to open more than a dozen locations in the area.

MAY 2021

highly traveled areas of the country that are also within a reasonable proximity to a QT Distribution Center for access to fresh food,” explained Jefferson-Smith.

When selecting areas in which to purchase or build, Ruben noted that chains will look at what markets are underserved, and what is adjacent to states where they already have distribution centers and facilities that can serve those markets.

One state that falls into the underserved category is Denver, which is where Kum & Go moved into recently. QuikTrip also has plans to move into the Denver area with new stores over the next six to 12 months, according to Jefferson-Smith.

“Florida is still a red-hot market, although some parts have been challenging,” added Ruben. “Wawa went there in a big way and they have been growing pretty rapidly.”

On the flip side, there are major markets that might be underserved, but present more barriers to entry. In New York and New Jersey, for instance, it is very difficult to get permits and licenses to open c-stores, Ruben said, which is why many retailers choose to buy existing stores and remodel, rather than build new stores in these states. California is another difficult state due to the price of entry and environmental laws that bring challenges.

“In Southern California, there has been a massive push for c-stores in conjunction with a gas station,” said Kehl. “It seems the users like 7-Eleven and Circle K have abandoned the c-store only concept for corporate expansion and are finding it much easier to land the locations they want and justify the rents they are paying by adding the gas component.”

Kum and Go recently announced plans to open stores in Utah and Michigan for the first time.

Following the Population

In addition to logistic considerations, c-store operators also look at the demographics of an area and how their store models and products might fit in. Many chains are also analyzing population data, trying to figure out where people are moving across the country.

For example, there have been a lot of people leaving the Northeast and Midwest and moving to the Southeast, including North Carolina, South Carolina, Georgia, Florida and even Texas, said Monroe. In fact, 7-Eleven announced three new stores under construction for its entry into the South Carolina market in July 2021, in addition to 20 stores it acquired from Speedway.

“It’s about following the people, and the demographics

JUNE 2021

Buc-ee’s opened its first Tennessee location, and announced plans for an investment of $50 million in its first-ever Mississippi store. Kum & Go shared plans to enter Michigan for the first time with a set of new stores.

JULY 2021 JULY 2021

Kwik Trip Inc. announced plans to expand into North Dakota and South Dakota. 7-Eleven Inc. shared plans to build three new stores in South Carolina, following its acquisition of 20 stores in the state as part of its Speedway purchase.

JULY 2021

Since late last year, QuikTrip entered the San Antonio and Austin, Texas markets, as well as Tennessee and Louisiana.

have really shifted in the last several years,” Monroe stated. “Looking at population, competition and who are the customers in the market, to see if the model and offerings are a fit, is key.”

This is one of the reasons RaceTrac decided to reenter the state of Alabama after 15 years, according to Brian Thornton, vice president of construction, real estate, engineering and special projects. The region has been showing “an influx of new residents and businesses that provide an exciting opportunity,” he said in a news release. “We believe the region’s population and business growth, specifically the technology, aerospace and auto-manufacturing sectors, provide a foundation for continued growth for many years to come across the state.”

With so many people migrating south, NRC’s Ruben said whenever there is a sale for stores in Florida or Texas, there is always a ton of interest, and there’s also a low barrier of entry.

Another aspect of site selection that c-store chains should be aware of when choosing to expand is that in certain municipalities, restrictions may come with the development of a gas station, Kehl pointed out. This may include limited hours of operation, limited hours on the sale of alcohol, as well as limits on the amount of gas gallons that can be pumped.

“We are not seeing big deals on the horizon, so companies are buying smaller chains or growing organically through new construction now.”

— Dennis Ruben, NRC Realty & Capital Advisors LLC

“Some ordinances in California limit the amount of gallons that can be pumped in certain residential areas,” he explained.

It’s expected that the c-store market will continue to grow and expand at a rapid pace, and in many ways, the pandemic helped because it brought a lot of new people into c-stores since so many restaurants and other businesses were shut down, said Monroe.

“The pandemic last year was a tremendous boost for the c-store industry and gave it a lot of credibility, where people started visiting and eating the food,” he said. “The food products and presentation from the c-stores really got enhanced and discovered by customers who didn’t know about them before.” CSN