SETS UP FAST PAYS OFF FASTER

• Expanded services — Addressing the electric vehicle (EV) charging evolution; expanding seating areas, and getting more involved in the community;

• Customer engagement options — Delivery, pickup, food trucks, drive-thrus and pop-ups have all become the norm; and

• Investing in more appealing stores — Updating interiors and exteriors, and creating experiences for customers, not just transactions.

The good news is both Strasburger and Matthews agree that one key opportunity small operators have at their disposal to improve their business performance is leaning into the concept of local and putting the emphasis on “convenience” as the industry continues to evolve.

“[Small operators] have the opportunity to be the consumers’ retail location of choice for food, beverage and immediate consumable items. Convenience retailers have the unique position of being the local purveyors of products to the community and can know their community on a very individual and in-depth basis,” Strasburger pointed out.

Small operators can do this by optimizing their relationship with their supplier and distributor partners. In Strasburger’s opinion, the best thing a supplier can do for an operator is introduce new products to the retailer. Suppliers have earlier knowledge as to what is being introduced and can help assess which new products would work in an operator’s market.

“An offshoot to this is sourcing and introducing local products for the operator. The more locally oriented the store is, the stronger the relationship between the operator and the customer,” Strasburger said, predicting that the next retailing state will be hyperlocal. “The more locally oriented a store is, the better it can compete with the large chains, online purchasing and quick-delivery competitors. It’s not just about the products, but also about creating a relationship with local manufacturers that the community wants to support.”

Top 10 Growth Categories for Small Operators

Industry Store Growth Analysis

Additionally, Matthews suggests small operators seek out guidance on how to optimize every part of their business and look at their P&L line by line to find opportunities. Having a local store marketing plan and considering the “store of the future” also can be beneficial.

When asked what his 10-year outlook is for the c-store industry’s small operators, Matthews said it is not hard to see the future. “Adapt, invest, improve or become obsolete,” he stressed.

Should I Stay or Should I Go?

After four years of decline, the number of convenience store industry locations operated by single-store operators rose by 1.2 percent last year as this sector added 1,087 stores. Single stores account for more than 60 percent of the industry. The number of stores operated by chains also ticked up last year by 1,061 locations, increasing 1.8 percent. The industry ended the year with a total store count of 150,174 vs. 148,026 in 2021.

While the size and influence of singlestore operators remains significant, acquisition activity last year shifted to midsized and smaller operators. For example, Brunswick, Maine-based Rusty Lantern Markets picked up the Mallard Mart chain, adding four stores to its footprint in Maine when the Mallard Mart owners decided to retire. And moving west, the owners of Dino Stop Convenience Stores in the Green Bay, Wis., area exited the industry after more than half a century and sold their six-store chain to 7ECO Holdings LLC, a Denver-based chain of roughly 60 stores.

English punk rock band The Clash famously asked in the early 1980s, “Should I stay or should I go?” Lately, many independents and operators of small convenience store chains are asking themselves the same thing as the c-store business gets more competitive and complex.

On March 31 of this year, Green Zebra Grocery closed all three of its locations after a decade in the convenience store industry. Founded in Portland in 2013, Green Zebra sought to redefine what it means to be a convenience store in America. The retailer offered customers made-from scratch grab-and-go meals, a full-service coffee bar, kombucha Zlurpees, locally sourced meat, produce and groceries, and local beer.

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Small Operator Spotlight: Foxtrot

Co-founders Mike LaVitola and Taylor Bloom conceived the idea for Foxtrot nearly a decade ago while living in Austin, Texas. Their idea was to redefine convenience by marrying the modern convenience store and café with the best of neighborhood retail and e-commerce technology.

Today, Foxtrot is this idea come to life. The chain of 27 stores across Chicago, Washington, D.C., Dallas and Austin serves as a fun neighborhood destination where locals and visitors alike can gather and celebrate local makers. The retailer’s offering ranges from a signature all-day café experience to local craft beers and fine wines selected by an in-house sommelier to everyday essentials. All of its offerings are available to enjoy in-store, for pickup, or for on-demand delivery through the brand’s proprietary app.

On June 5, Foxtrot opened its largest location to date. Situated in Austin and boasting 6,000 square feet, the new flagship store was once two buildings, one being an auto repair shop and the other a grocer. Both are now bridged together, pulling in different elements of each to bring an all-day café, market and a courtyard patio to the Bouldin Creek neighborhood.

In the coming weeks, Foxtrot will add its third Austin location at the base of Austin City Hall. By the end of this year, the retailer plans to open 10 more stores, which are already in various stages of the pipeline in existing markets. The team is also scouting for new markets.

What kind of market is ideal for a Foxtrot store? “It can be found all over the country in vibrant neighborhoods — anywhere people want next-generation convenience and a café and coffee shop where they can meet up with other people,” said CEO Liz Williams. “And that’s not just on Main and Main. We already have suburban locations in Dallas, where most people drive instead of walk, and the sites are doing very well.”

Five Year Trend: Industry Store Growth

(% change in store count)

Small Operator Spotlight: Fuel City

Fuel City, a family-owned and -operated chain of eight convenience stores throughout Texas, has been on a mission since 1995: to create a fun place in which to have positive experiences with expansive offerings and services. Its slogan, “Where Dreams Come True,” is a sort of whimsical embodiment of how the company hopes its business impacts people.

On Dec. 30, 2022, the small operator debuted the next iteration of Fuel City in the city of Wylie, Texas. The new concept incorporates a more transitional take on the exterior architecture and interior, while maintaining the retailer’s “Texas urban ranch” aesthetic.

To create a sense of hospitality and a welcoming environment, the new open, airy store design contrasts industrial exposed ceilings with residential finishes like wide-plank white shiplap. The design features retro pops of color and graphics throughout the signage and interior finishes to deliver the playful touches guests expect to find at a Fuel City store.

The 10,000-square-foot Wylie store also features the company’s flagship, award-winning street taco program and showcases Fuel City’s daquiri program, as well as a new growler bar concept, among other food and beverage offerings. A 24-hour drive-thru is available.

Looking ahead, the company anticipates opening more Fuel City convenience stores featuring the same concept and design. The retailer seeks to learn and refine every store from each iteration along the way.

Fuel City is growth-oriented and actively searching for properties, but remains focused on developing only the best sites, seeking quality over quantity. For now, Fuel City plans to buildout across the Dallas-Fort Worth, Texas, metroplex and surrounding areas.

“We like to think of ourselves as a ‘Destination Station,’ and I think that may be a new category,” Fuel City CEO Joseph Bickham said.

Green Zebra founder and CEO Lisa Sedlar said the company had been “holding on by a thread” since the COVID-19 pandemic started and was “in austerity mode since then.” In a statement posted to the company’s website, she noted that Green Zebra experienced nine straight quarters of increases to its cost of goods, packaging, fuel, insurance, taxes and freight charges, among other expenses. Alongside those price hikes, the retailer also couldn’t overcome obstacles that included supply chain and staffing shortages, as well as “razor-thin” grocery margins.

“We definitely gave it our all and fought the good fight. We are thankful for the opportunity to have been in service to our community,” Sedlar said. “I want to express my deep gratitude and love for our truly awesome team members, loyal customers, vendor friends, landlords, investors and everyone who has helped us along the way. It has been a great honor to serve our local community over the last 10 years, and we’re beyond disappointed that we were unable to overcome the challenges presented by the global pandemic and current economic conditions.”

Industry experts expect to see more small operators exit the business.

“The demand for businesses with good cashflow and good assets is still in demand and will continue to grow,” predicted Terry Monroe, president of American Business Brokers & Advisors, based in Effingham, Ill. “There are many smaller and midsized convenience store chains in the United States that are owned by baby boomers who are at retirement age. Consolidation of the convenience store industry is not slowing down anytime soon.” continued on page 39

He pointed out that his company gets no less than two inquiries a week from qualified financial buyers outside of the industry wanting to purchase convenience stores because of the consistent cashflow the channel has generated over the years.

“The last four years, we have seen more acquisitions in the convenience store space be more aggressive than the first 20 years, and we anticipate the pace for acquisitions to increase due to the fact there are a lot of small chains that are thinking about exiting the business and most of the ‘A’ sites in the towns across the country are already taken,” Monroe added.

Small Operator Spotlight: Choice Market

Choice Market has undergone several tweaks since its flagship convenience store opened in October 2017 in the heart of downtown Denver. Choice (its banner name) debuted as a onestop shop concept that combines the speed of a convenience store with the product selection of a grocery store. The retailer focuses on three key differentiators: fresh, local and on-demand.

In less than a decade, Choice has grown into a chain of five convenience stores serving Denver’s metro area and continues to redefine the convenience store model.

In 2021, Choice debuted one of the world’s largest contactless and frictionless markets with the opening of a 5,000-square-foot store that features the brand’s revolutionary Choice: NOW shopping experience. Located at 939 Bannock St. in Denver, the frictionless experience allows guests to scan the Choice mobile app upon entry, pick up their groceries and freshly prepared meals, and then leave the market without any traditional checkout. Guests receive a receipt directly to their mobile devices moments after they exit the store.

Then, in October 2022, Choice introduced a new format, Choice Mini-Mart, at The University of Colorado Anschutz Medical Campus. Developed in partnership with St. Louis-based Health Hospitality Partners, the model is designed specifically for nontraditional retail spaces and features the Choice: NOW frictionless experience. Earlier this year, the small operator announced plans to rapidly scale the mini-mart format through strategic partnerships with hospitals, apartment developers, venues, airports, electric vehicle charging stations and college campuses.

Despite its focus on digital, Choice Market has big plans to grow its physical retail space. A five-year business plan calls for roughly 30 Choice stores to be in operation across three to four markets. To date, the company has raised nearly $10 million in funding.

“To us, as an omnichannel player, brick and mortar is the hub. It maximizes our revenue per square foot and creates that brand affinity,” said Choice Market founder and CEO Mike Fogarty. “I’m a huge proponent of physical retail space, particularly in convenience, because it’s all about proximity.”

Small Operator Spotlight: Hangry Planet

Hangry Planet, the brainchild of actor, entrepreneur and philanthropist Bobak Bakhtiari, seeks to redefine the traditional junk food landscape perpetrated by traditional convenience stores with the first-ever fully plant-based c-store.

Inspired to launch Hangry Planet after coming across an undercover investigation into organic dairy farms by Animal Recovery Mission, Bakhtiari said the mission of Hangry Planet is to “transform the compulsive junk food milieu of traditional c-stores into healthy havens of grab-and-go meal yumminess.”

To that end, Hangry Planet offers a carefully curated selection of vegan and plant-based grab-and-go meal options, beverages, sustainable and satiable desserts, and craveable snacks. Each product is vetted to assure that every item in the store is sustainable, animal product free, and cruelty free. In total, the single store carries roughly 3,500 SKUs.

Located at the Tanforan Shell station at 1199 El Camino Real in San Bruno, Calif., Hangry Planet boasts nearly 1,500 square feet and opened to the public in late spring 2022. The San Francisco Bay Area was the ideal location to debut the concept because of the growing momentum and affinity toward plant-based cuisine in the area, and the accessibility of West Coast vendors that offer ample plant-based snacks and meals that are flavorsome.

Since opening, the vegan community has zeroed in on Hangry Planet, making it a destination. With the concept’s growing popularity, Bakhtiari plans to open more locations. He has been in talks to introduce a store to the Ann Arbor, Mich., area.

“While it appears the c-store milieu is a great pipeline for expansion as health takes a greater priority, there’s also talks about opening a larger grocery store that fuels planet- and animal-friendly choices on a grander scale,” he added.

John Sartory, managing director of North Palm Beach, Fla.-based Petroleum Capital & Real Estate LLC, echoes that the forces that started big consolidation in the convenience channel — notably, the maturing of the industry and generational issues — will persist. Additionally, he observed that small operators today are being faced with several headwinds, including a heightened focus on technology as consumers demand new levels of tech to speed up transaction time and enable ordering when they want, how they want.

“Technology like self-checkout is great, but it costs money; it’s not cheap,” Sartory said. “You hope to offset labor costs, but initially you have to have the capital. For a small operator, can you compete with Sheetz, Wawa, 7-Eleven or QuikTrip with all the innovations they are bringing to their stores? I’m not saying you can’t compete, but it’s tougher and you have to have access to capital.”

The drivers behind an operator’s decision to sell are different for everyone, according to Ken Shriber, managing director and CEO of Petroleum Equity Group, headquartered in Chappaqua, N.Y. He pointed to business structure, geography, competition and asset stack as considerations.

“If an owner already has a very profitable portfolio of stores and a wholesale business, and they can fund additional acquisitions, rebuilds and build large format ground-up big box c-stores with large forecourts and foodservice, they may be advised to remain,” Shriber said. “If, on the flip side, they do not have the significant capital and expertise needed to develop big-box sites with a thriving foodservice business, they are well-advised to sell and monetize what they have, given the record prices being paid. When competition builds their bigger, modern sites nearby and impacts the local operator, it will be too late to achieve that outcome.” CSN

Building a Delicious Reputation

Updated technology and improved marketing efforts are key to making c-store food and beverages a top pick for consumers

By Angela Hanson

BUILDING A SUCCESSFUL foodservice program involves more than creating a tasty, appealing menu. Tasty items that fit customers’ preferences and offer value are critical, but they’re also the starting point, not the end goal, for food-forward convenience store operators.

In today’s evolving foodservice industry, it is more important than ever that operators investigate what kinds of technology can improve their program — both because it’s what customers expect and because tech is increasingly able to ease the pain of labor shortages and supply chain snags.

Foodservice Ordering: Currently O er

C-store retailers are increasingly making technology that assists with ordering a big part of their plans, and creative and effective promotional efforts are also vital as the competitive lines continue to blur and c-stores are increasingly competing against each other as well as quick-service

Foodservice Ordering: Plan to Add

Consumers are go, go, going like never before. And, with on-the-go life comes the demand for better ways to on-the-go eat. Uncrustables® sandwiches are here to satisfy their demands with the familiar tastes they know and love—made easier to stock on shelves and easier to enjoy anytime, anywhere.

Main Foodservice Competitors

restaurants, fast-casual chains and other retail foodservice segments, according to the exclusive 2023 Convenience Store News Foodservice Study

No matter what menu options and competitive strategy individual retailers embrace, they need to have a plan to put their program’s best food and beverages forward.

The Future of Foodservice Is Tech

Before customers can enjoy c-store food and beverages, they have to order and pay for them. The use of technology to make these processes easier is rapidly increasing.

Contactless payment in-store is the current top foodservice ordering method, offered by just over half of this year’s Foodservice Study respondents. This method also saw a significant year-over-year jump, going from being offered by 45 percent of c-stores in 2022 to 53 percent in 2023.

Other technology-based ordering methods that c-stores currently offer are order ahead by phone (offered by 39 percent), curbside pickup (31 percent), order ahead via

Change in Foodservice Promotions

Most Used Promotional Channels

app (26 percent), order ahead by computer (25 percent) and in-store touchscreen ordering (13 percent).

The importance of technology is even more evident when looking at c-store retailers’ future plans. Nearly all foodservice ordering methods that operators say they plan to add involve technology, with order ahead via app (26 percent plan to add) and in-store touchscreen ordering (25 percent plan to add) leading the way. These methods have seen a big jump in interest from 2021 when just 16 percent and 12 percent, respectively, reported plans to add them.

“More mobile ordering and third-party delivery options,” one respondent stated.

At-pump touchscreen ordering, curbside pickup and contactless payment in-store round out the top five grocery stores and chain sandwich shops saw the biggest jumps in c-store operators viewing them as their chief competition. foodservice ordering methods that c-store retailers intend to add in the near future.

These investments in ordering technology become even more important as c-stores’ circle of competitors expands to include foodservice retailers that are also diving into alternative ordering and payment methods. This year’s study respondents primarily view other c-stores as their top foodservice competitors (74 percent) and biggest threat to their share of stomach.