7-Eleven Inc. tops the inaugural 2022 NACS/NielsenIQ list of the Top 100 Convenience Retailers as ranked by store count. The Irving, Texas, convenience retailer has 12,763 locations in the United States as of year-end 2021. In February, 7-Eleven, founded in Texas in 1927, celebrated a milestone 77,711 stores open in more than 18 countries. The convenience giant has locations across the U.S., with the largest presence in the Northeast, where it has 3,603 stores, and the smallest footprint in the Central region, where it has 709 stores.
Alimentation Couche-Tard Inc., which owns the Circle K and Couche-Tard brands, is the second-largest chain by store count, with 5,739 stores in the U.S. The parent company is based in Laval, Quebec, with U.S. headquarters in Arizona. Couche-Tard operates convenience stores in 26 countries and territories, with more than 14,200 stores, of which roughly 10,800 offer road transportation fuel. Circle K’s largest U.S. footprint is in the Southeast, where it has 1,911 stores.
Casey’s, EG America and GPM Investments LLC round out the top five by size, with 2,394, 1,744 and 1,383 stores, respectively. Casey’s, based in Ankeny, Iowa, dominates the Central region, where it has 1,481 stores.
The NACS State of the Industry enterprise breaks down the size of convenience retail chains as A (1-10 stores), B (11-50), C (51-200), D (201-500) and E (500+). In the 2022 Top 100 Convenience Retailers list, no A- or B-size stores rank among the top 100, yet there are 13 E-size firms atop the list, followed by 20 D-size firms and 69 C-size chains.
(Note: The top 100 includes several ties in the rankings when chains had the same number of stores.)
Industrywide, 148,026 convenience stores operate in the United States—a 1.5% decrease in the number of stores from a year earlier, according to the 2022 NACS/NielsenIQ Convenience Industry Store Count. Of these, 116,641 convenience stores sell motor fuels (78.8% of all convenience stores).
The main trend line in the NACS/NielsenIQ store-count data is industry consolidation.
The biggest chains continue to expand their reach by acquiring smaller chains with a track record of growth and strong fuel and convenience assets. (Combined,the top 5 retailers make up just over 16% of the industry.) 7-Eleven’s 2021 blockbuster $21 billion acquisition of Speedway and its roughly 3,800 convenience and fuel stores in 36 states is a case in point. At the same time, the number of single-store operators continues to shrink—down by 3.1% at the end of 2021 vs. 2020. Single stores account for 60.4% of all U.S. convenience stores, or about 90,000 sites.
M&A Boom
Regional family-owned companies opt to exit — not just because of attractive valuations but also tepid interest from the next generation.
By Renee Pas
The perspectives are slightly different in terms of whether a person identifies as a seller or a buyer in today’s market, but the underlying story remains the same: Convenience store businesses continue to change hands at an astonishing pace. It’s an old-school M&A story of the big getting bigger. The new twist, industry observers note, is that longtime, dominant regional players seem to be moving toward the exit door.
To note, while the colloquial “mergers and acquisitions” is the much-repeated turn of phrase, most of these transactions wind up in the acquisition ledger. “There is a strong appetite for acquisitions and expansion,” said Roger Woodman, managing director at Raymond James, an investment banking firm that provides M&A advisory services. “We don’t see it showing any signs of slowing down. There will be a continued demand for growth from acquirers.” The future may bring some increased scrutiny from the Federal Trade Commission on larger acquisitions, he said, which could translate to the larger consolidators making acquisitions in markets where they have less of a footprint.
Some of the deals are surprising because these are established regional players opting out, such as Titletown Oil (dba Grand Central Station) in Green Bay, Wisconsin. Founder and President Dan Pamperin sold the company’s 19 retail stores, three unattended fueling locations and its wholesale fuel operation to Ohio-based True North Energy LLC in November 2021. He kept one store out of that sale, the first site he opened.
That sale certainly made Robert Buhler look twice. “That was big news in Wisconsin,” he said. Buhler’s perspective comes by way of investment banker turned second-generation owner of Open Pantry turned businessman more heavily vested in real estate today via E&K Land, his commercial real estate company. He maintains his role as president and CEO of Open Pantry, now a seven-store chain based in Pleasant Prairie, Wisconsin, after the majority of his stores changed hands to 7-Eleven back in 2012. “We made a lease deal on 18 sites,” he said, “which is not very common anymore.” The locations that continue as Open Pantry sites are largely because of conflicts for 7-Eleven, such as a location being co-branded with McDonald’s. The current Open Pantry management team, led by Jim Schutz, now gives those stores “a lot of love,” said Buhler.
“Honestly, I sold because I couldn’t buy reasonably at the time,” Buhler said. “Prices were too high.” The answer for someone considering getting out today, he said, is “Yes, you can get out. And at a great multiple. But then what are you going to do ... just stare at your Merrill Lynch account all day?” The flip side, he said, is knowing the vulnerability that comes with continuing in the industry. “Every year, sites get eroded by a highway or competitor; you have to build or acquire more—and not every chain has that kind of energy in their company.”
Noting the increased interest in the convenience store segment from private equity firms, Buhler believes that will follow a historical private equity model. “Most of these guys will repackage it and move it,” he said.
The most dominant consolidators come to the table with significant existing capital, Woodman said, including 7-Eleven and Alimentation Couche-Tard, plus other companies that have quickly achieved scale in recent years, including EG Group and ARKO Corp. “We’re seeing a broader set of well-capitalized companies in the universe than we have ever seen before,” he said. “And they will likely continue to grow.”
Every year, sites get eroded by a highway or competitor; you have to build or acquire more – and not every chain has that kind of energy.
POV: A PROMINENT CONSOLIDATOR
With a focus on rural, secondary markets, ARKO Corp. seems primed for continued growth. The publicly traded entity has no intentions of lessening its appetite for acquisitions, according to Arie Kotler, founder, chairman and CEO. “We can continue to grow,” he said. “This is still a fragmented market.”
In terms of how big and how fast, “everything’s possible,” Kotler said. “We are driven by return on capital.” ARKO has realized a nearly tenfold increase in 10 years. Its nearly 3,000-store portfolio includes 1,572 dealer sites and 1,406 company-operated stores.
As ARKO continues to acquire, one noticeable difference from the super-consolidators is its robust portfolio of convenience store brands (which fall under its wholly owned subsidiary GPM Investments), with Fas Mart, E-Z Mart and Village Pantry among a total of 19 brands.
Retaining the brands it picks up will remain part of ARKO’s strategy, Kotler said. “The way we look at it, the regional brands will stay in place. They carry a huge legacy. Why would I take a strong brand and convert it?” Economies of scale happen through centralized purchasing, loyalty programs and private-label items, he added.
Kotler also believes that maintaining regional brands adds appeal for sellers, which have largely been family chains without a succession plan. “That was the case with E-Z Mart,” he said, referring to the Texarkana, Texas, chain founded by Jim and FaEllen Yates that second-generation CEO Sonja Yates Hubbard sold to GPM Investments in 2017. “They wanted to sell to the right group that would keep the legacy and brand intact. That is really our model with acquisitions,” he said. For the most part, he added, management teams stay in place.
“At the end of the day, we may not be doing the crazy multiples that everyone wants to read about, but we are keeping employees and are unique in how we structure deals,” Kotler said. “We do a lot of due diligence up front to get the number right.”
Some organic growth will also be part of the mix, Kotler said, such as the 5,600-square-foot truck stop raze-and-rebuild Scotchman store that opened in South Carolina in December 2021. “We will do both,” he said, “but our M.O. is really growing through acquisitions.”
POV: A LESSER-KNOWN CONSOLIDATOR
“I’m not aware of another market as fragmented and large as this one,” said Mark Jordan, president and CEO of Refuel, a convenience retailer and wholesale fuel distributor based in Charleston, South Carolina. “I think we could be acquiring for another 20 years. It could be decades before the landscape truly changes.”
Part of private equity firm First Reserve since 2019, Jordan credits the decision to align with private equity as one that provided him the financial power to make more acquisitions—and faster. “We now have enough power to double our size or more,” he said. “We accomplished what I thought would take five years in 11 months.”
Notably, Jordan owned a different convenience store entity prior to launching Refuel in 2008. He sold his former company because it felt like the right financial time, he said. “It seemed like such a good idea, but I didn’t really have an Act 2 in mind,” he said. “When the financial crisis hit, I realized I had been in a business that was stable that I loved.” He now intends to remain in the convenience store industry for a long time. “I never want to stop doing what I’m doing,” he added.
What Jordan has been doing is taking Refuel from a small, five-store operation to a 175-store chain. Acquisitions have included regional players such as Action Fuels, a Texas jobber with eight stores; Turtle Market, a three-store chain in Myrtle Beach, South Carolina; and DoubleQuick, a Mississippi-based 48-store chain known for its proprietary fried chicken. Except for the DoubleQuick stores, all others will be rebranded Refuel. “DoubleQuick is such a big brand in their market, we decided to leave that intact,” Jordan said. Refuel will build roughly 10 new stores per year, he said, as part of its “buy and build model.”
Jordan finds sellers are exiting the market for the same reasons Kotler stated. “Owners are ready to retire and don’t have a clear way of passing the business on,” he said. “Refuel can offer a good home to those stores and hopefully will continue to be seen as the right buyer. As new teams come on board, we’ve been able to offer them more opportunities.”
We could be acquiring for another 20 years. Even the largest chains don’t represent that much of a share. It could be decades before the landscape truly changes.
POV: A MID-TIER CONSOLIDATOR
Acquisitions are also fueling growth for Parkland USA, an approach that company President Doug Haugh said he will lean into versus new builds. “I don’t see us moving to a model where most of the growth is through new builds. We will build some, but to meet our objectives for growth, we will continue to buy,” he said.
The Charleston, South Carolina-based consolidator has made 20 transactions in the past 36 months, bringing the store count to 650 locations in the U.S., 214 of which are company-operated stores. Half of the acquisitions, Haugh noted, were the result of owners/operators reaching out to Parkland, something he believes is both a sign of some companies being ready to exit the business and also an indicator that multigenerational companies recognize the “kindler, gentler” approach that Parkland takes to acquisitions.
“Among the many things driving the changing of ownership of companies is that handoff from generation to generation where there is not always the next generation interested in ownership,” Haugh said. “We want to keep that kind of business intact,” Haugh explained. In terms of Parkland’s acquisition history that means both retail and wholesale elements, which could include fleet services, lubricants and the like.
On the commercial fuels side, Parkland’s model is to continue to develop regional brands. That includes Farstad in Parkland’s Northern Tier; Rhinehart in the Rockies; Conrad & Bischoff in the Pacific Northwest; and Tropic Oil in the Southeast. Other brands will consolidate under those four over time, Haugh said. On the retail side, Parkland will continue to unify all stores under the On the Run banner, which the company gained rights to in the U.S. in 2020.
Parkland made a slew of acquisitions in late 2021, including the November acquisition of Miami-based Urbieta Oil, which included Urbieta’s fuel distribution business and 94 gas stations; Lynch Oil, an Idaho-based operator with seven large-format stores and a commercial and wholesale fuels business; and Parker’s Energy, the wholesale fuel side of Georgia-based Parker’s convenience store chain. When the calendar flipped to 2022, Parkland acquired M&M Food Market, a high-end frozen-food retailer in Canada with more than 300 standalone locations along with an expanded freezer presence at retail partners. While outside the norm for traditional U.S. c-store retailers, Parkland plans to align M&M’s fresh-from-frozen meals with On the Run stores both in Canada and the U.S.
A lot of us in my age group, where their families don’t want to take over the business, are going to be primed to sell.
POV: A SELLER
Echoing previous sentiments, Bob Bolduc sold his Massachusetts-based Pride convenience-store chain, a business his grandfather started, because there was not a generation behind him wanting to come into the family business. And that was fine with him. “That wasn’t surprising to me,” he said. “A lot of my colleagues, where their families don’t want to take over the business, are going to be primed to sell.” Looking ahead, Bolduc intends to put his energy into charitable giving through two foundations his family created: the Bolduc Schuster Family Foundation and the newly launched Hope Foundation for Youth and Families.
Pride sold to Boston-based private equity firm ArcLight Capital Partners in December 2021. The sale included 31 convenience stores and travel centers, eight parcels for future development, 15 Subway franchises and 15 Chester’s Chicken franchises. The new owners intend to keep both the Pride name and the management team in place, Bolduc said.
Boston-based investment banking firm Capstone Partners served in an advisory capacity on the deal. Pride is a “great example of a strong regional player—a leader,” said Ken Wasik, managing director, head of consumer investment banking at Capstone Partners. “Bob did not have to sell, and he was not fearful of consolidators because geographically he was a leader. If you are a leader, it gives you both the ability to compete or be attractive as a seller. You get to choose your own destiny.”
From a banker’s perspective, Wasik said both consumer dynamics and appealing real estate are fueling acquisition interest. “C-store chains are good investments because they are important to the consumer,” he said. “And the financial model works well. There are cost savings that come with consolidation, efficiencies of scale. The consolidators have already proven this works. The regionals have to compete with the consolidators, so they are motivated as well.”
Private equity is also realizing they can come into the segment and find success, said Jesse Betzner, director, business services and consumer for Capstone Partners. “Private equity was cautious in the past, somewhat because of the vertical power of Big Oil and concerns over fossil fuels. Now, private equity sees the future of alternative fuels and the value of c-store locations.”
Like many other industry observers, Betzner noted that it is still a fragmented industry. “We believe Pride is an early indicator of what’s going to keep happening over the next couple of years,” he said. “There is still a lot of room for continued consolidation.”
Small Retailers Contend with Growth
The discourse over small retailers disappearing from the convenience store landscape will likely continue following the 3.1% drop in the 1-10 store count range recorded in the 2022 NACS/NielsenIQ Convenience Industry Store Count. At the same time, even with the decline, those small retailers remain the largest overall segment with 93,994 locations. In comparison, companies that sit on the opposite end of the spectrum with store counts of 500-plus, total 30,890 locations. And they have growth on their side with an almost 20% increase. The dots are easy to connect: Small operators appear to be folding into larger companies.
So, how do independents and leaders of small regional chains view this? Many are considering whether to sell or invest. Chris Bambury, vice president of Bambury Inc., which owns three Bonneau-branded stores in Sonoma, California, understands that quandary. The chain originated with his grandfather, making him a third-generation owner and precisely the kind of business that industry observers feel is most likely to be acquired. “We actually thought about selling back in 2019, when gallons and real estate were both peaking,” Bambury said. “We asked ourselves back then: Is this the time to get out?”
Ultimately for Bambury, the answer was no. “I decided I loved the industry,” he said. “I love what I’m doing. I do tell others, however, if they have something else that they might want to do, now might be the right time.” At the same time, he said, “It’s a good time to grow if you are going to stay.”
What has been surprising to Bambury in the current round of M&A activity is watching companies he once viewed as acquirers now selling. That includes SC Fuels, a family-owned commercial fuel distributor that dates to 1930, selling to Pilot Company at the end of 2021; along with Flyers Energy Group, a family-owned company that carved a niche in cardlock stations and sold to World Fuel Services Corp. Notably, the family sold its 37-store chain of retail stores four years earlier.
Bambury is also sensing a shift in the California c-store landscape, noting that Utah-based Maverik moved into the Northern California market with a new-build that opened in October 2021. “What’s interesting is that’s a major chain doing a ground-up in California not driven by major oil,” he noted.
Bambury is decidedly part of the next generation of c-store owners who are bringing new energy to the industry—carving out their niche with the intent to stick around. “You have to innovate, and we’ve been happy with what we’ve put into our strategy,” he said. “We feel we are well poised with where we are and want to duplicate that.”
“Where they are” includes creating an unbranded gasoline model, adding a loyalty program and exploring expansion plans. “We want to pick up one to five sites and are considering access to capital,” he said. Smaller operators can build economies of scale just like larger operators, he said.
Another small operator closely watching what’s happening in the M&A scene is Lonnie McQuirter, owner of 36 Lyn Refuel Station in Minneapolis. “I’m very bullish on the industry,” he said, “and looking to buy.” Whether he will grow organically though new-builds or through acquisitions is yet to be determined but, like Bambury, he does not intend to sell his store.
McQuirter plans to focus on his niche, which he’s been honing since opening the store in 2005. While the store carries typical convenience SKUs, it’s more known for its range of organic and local products. “Our target is the person on the go looking for better-for-you items,” he said. “We capitalize on trends such as fresh and organic, which lets us compete in an area where larger chains are not.”
As far as looking for sites to buy, McQuirter said he primarily considers long-term viability. “I’ve turned away opportunities to buy and don’t regret it as many of those stores didn’t make it,” he said. “It’s a challenge for the small operator to be sure, but I still see a lot of potential in the business.”
M&A and the Small Retailer
Lori Buss Stillman, NACS vice president of research, discusses how smaller retailers fit into the picture when M&A activity heats up.
You are well-versed in the strategies of smaller c-store retailers. Do you find this group is playing offense or defense today in relation to M&A activity?
There are two strategies at play right now among small operators. There is certainly one group playing offense trying to figure out how to fortify their business, boost their bottom line and be ready should the opportunity arise to transact a sale and exit. The multiples are pretty attractive right now to operators exploring their options. There is another group that is playing defense and taking steps to protect and grow their business. They are focused on being opportunistic and are committed to the long game. It’s a decision many small retailers are weighing right now in the face of the economy, digital transformation and increased competition: Do you want to make your business more attractive to be acquired or make the foundational investment to remain competitive?
What advice would you give to those committed to remaining a c-store operator for the long haul?
Most importantly, figure out your unique value proposition. What do you offer that enables you to stand out in the industry? It might be customer service, a signature foodservice offering or being more ingrained in the community than your competitors. Pinpoint it, and then make sure you are using it to your full advantage.
The next step is to punch above your weight. Small retailers can be more influential than some of them think, especially when it comes to establishing ties locally. Engage with customers and interact with them in the community. Command the same mindshare of larger competitors. Two small retailers that do a great job with that are 36 Lyn Refuel Station in Minneapolis and Lou Perrine’s in Kenosha, Wisconsin. Lou Perrine’s is a third-generation business that continues to thrive and connect with customers while keeping the store relevant for its current generation of customers. 36 Lyn takes an extreme focus on locally sourced items in addition to improving the neighborhood in which it serves. Both use social media to their advantage, and others can follow them and see how they are doing it. This doesn’t always require a mega marketing budget to have a significant impact.
Do you believe small operators, those with five stores or fewer, can be profitable in the future c-store landscape?
Yes. There are countless communities where the independent store is the glue that holds the community together. These stores often are fueled by the owners and employees who have a personal connection to customers, making the store integral to the fabric of the community. Independent owners can really leverage this advantage and strengthen it. It can be difficult for large brands to personalize their stores at the same level. There will always be a place for small retailers. I’m seeing more smaller retailers really committed to the channel, with a lot more participating in the NACS State of the Industry Compensation Survey this year and grasping at every opportunity to better their business. It’s very encouraging. To play into the sports metaphor, the best defense is a great offense.
