America’s new favorite restaurants are Wawas and 7-Elevens

To keep up, chains are hiring executives from restaurants and expanding their snack choices and prepared food in kitchens on site.

Consumers, especially Millennials, are not always willing to go to a quick-service restaurant, a fast-food joint or walk around a 40,000-square-foot grocery store, analysts say. Instead, they’ll often head to a convenience store, where the average amount of time customers spend inside the store is less than four minutes.

“People simply don’t have the time to sit down a whole meal at night like they used to,” said Carl Rick, leadership development specialist at Kwik Trip, which is building around 40 stores a year and just opened its 700th. “The more places there are where people can duck in, be out in three minutes with milk, eggs, maybe a sandwich, something to drink—those places are doing very well.”

The growth of convenience

Over the past decade, convenience chains have increased sales inside their stores by around 30%, according to the National Association of Convenience Stores, an industry advocacy group. Since 2000, the number of convenience stores in the United States has grown by 28%.

Convenience stores in the United States took off in the postwar period with the growth of car ownership, the creation of the interstate highway system and migration to the suburbs.

In 1965, there were 5,000 convenience stores in the United States. Today, there are upward of 153,000 of these mini-marts, more than all the grocery stores, drug stores and dollar stores in this country combined. 7-Eleven is the largest US convenience store chain with more than 9,000 outposts.

Around 93% of Americans live within 10 minutes of a convenience store, a highly-fragmented sector where regional chains and mom-and-pops dominate. Close to 80% of convenience stores have a gas station attached.

For years, convenience chains relied on tobacco, soft drinks and fuel to draw in customers, a business model often known as “Cokes, smokes and gas.” But Americans today are smoking less and steadily cutting out soda.

And increased regulations on tobacco and the decline of sugary drinks will continue to chip away at the areas convenience stores have long relied on to grow. This has forced convenience stores to adapt.

“When we look at what’s going to make us competitive in the future, it’s what’s going on inside the store,” said Rick from Kwik Trip.

Sheetz subs and Casey’s pizza

Top chains see an opening to cater to customers hunting for breakfast, a quick snack or a prepared meal for dinner. From 2009 to 2018, food service sales in convenience stores grew at a higher rate than any other area in the store, according to the industry trade group.

Spending on food away from home surpassed spending on food at Americans’ home for the first time in 2010, according to the Department of Agriculture.

“Fewer people are making those big grocery trips and more and more people are buying individual meals,” said Rick. “We’re looking to capitalize on that.” Kwik Trip sells eggs, milk, burgers and produce and has been expanding its selection of take-home dinners and fried chicken, which it preps at kitchens in Wisconsin.

These food trends are pronounced among Millennials, who eat out more often and visit the grocery stores less frequently than their parents, according to the agency.

“Millennials exhibit a higher preference for convenience” when it comes to buying food, a 2017 USDA study found.

“Our bullseye is kind of that younger age group — the late teens to the early thirties for food and beverage,” said Travis Sheetz, chief operating officer at Sheetz, a family-owned chain that has more than 600 stores on the East Coast and topped $7 billion in sales last year. “They tend to be much more accepting of eating at a gas station.”

Sheetz offers made-to-order sandwiches and salads and has espresso bars. Everything is done on touch screens, which it introduced in the 1990s.

The chain tries to separate its offering from McDonald’s, which it calls its biggest competitor, by offering more customizable sandwiches and a wider variety of choices.

“We’ve always had breakfast at night,” he said. “McDonald’s did that recently.”

“This isn’t what a lot of people would characterize as gas station food,” said Darren Rebelez, chief executive officer at Casey’s General Stores, which has grown to become the country’s fifth biggest pizza chain.

The chain recently debuted Voyager Point, its own line of wine priced under $12.

Competition bearing down

But convenience stores are not the only areas of retail that recognize shifting consumer habits and demand for small-size stores.

Retailers and grocery stores have introduced copycat convenience-type models with food, and restaurants have sharpened their focus on breakfast and snacks. These strategies by competitors threaten to lure customers away from convenience stores.

A better cup at coffee at McDonald’s, for example, could take away trips to convenience stores during the morning, which these companies depend on.

“Other retail channels also are trying to steal our thunder,” said Steve Holtz, who covers the convenience store industry for CSP Magazine.

“This ability to get in and out really quickly is certainly something that is resonating,” Kroger CFO Gary Millerchip told analysts last year.

Meanwhile, online competitors threaten to disrupt traditional convenience stores.

But some convenience store executives say they are unfazed by Amazon and online entrants.

More than half of Casey’s stores are in towns with fewer than 5,000 people. And CEO Darren Rebelez believes Amazon will have a difficult time reaching those rural customers.

“I don’t think that [Amazon Go] is something that’s likely to show up in our footprint anytime soon,” he said. “It’s tough to really disrupt this industry in a meaningful way.”