INSIGHTS/

A Quiet Consumer Shift

Convenience Stores Rival Fast-Food Chains for Customer Loyalty Shopping for snacks for my hotel room during a recent conference in Miami, I stopped by a 7-Eleven store. I was surprised to see the line of customers. It was so freaking long! As I stood there in line watching people check out, I realized two things. […]

June 7, 2024

Convenience Stores Rival Fast-Food Chains for Customer Loyalty

Shopping for snacks for my hotel room during a recent conference in Miami, I stopped by a 7-Eleven store. I was surprised to see the line of customers. It was so freaking long!

As I stood there in line watching people check out, I realized two things. First, a lot of customers were doing their grocery shopping, getting items they needed to make dinner. I realized I was in the middle of one of those urban food deserts, where the nearest grocery store is so far away that people have to shop at a convenience store.

Second, some customers were buying pizza or other hot entrees along with other items. I could see how people would think, “I can go to a convenience store and immediately pick up a really good hot dog or taco, and I can also get some of the other things I need.” You can’t go to Taco Bell and also get a Red Bull or a big bottle of water or a PowerBar or paper towels.

I realized I was seeing some pressure points where quick-service restaurants are losing ground. Fast-food chains are facing intense competition from convenience stores, and therein lies one of the biggest threats facing the industry.

Once known for selling “Cokes, smokes, and gas,” convenience stores have quietly overhauled their business model to become food-service destinations. C-stores’ food sales rose by roughly 20% in both 2021 and 2022, according to Restaurant Finance Monitor, far outpacing single-digit annual fast-food sales growth. Consumer surveys show diners think convenience stores offer a

better value than fast-food restaurants, and that their hot-food items are just as good or better, at a lower price. Clearly, many people, including blue- collar professionals and the millions of NASCAR fans who might otherwise be fast-food customers, have gotten used to seeing those prepared foods on display and like them, both for the convenience and the taste.

The biggest convenience store operator, 7-Eleven, has grown to 13,000 stores across the U.S. The Canadian company Alimentation Couche-Tard, operator of about 7,000 mostly Circle K-branded stores, ranks at or near the top of lists of consumers’ most trusted and popular grocers. I don’t know how to differentiate among these convenience store brands — to say whether one has a great Indian food bar with fluffy basmati rice or another has the best sandwiches. But C-stores’ growing army of customers clearly have already figured that out.

The made-from-scratch pizza sold by Casey’s General Stores, the third-largest convenience store chain, is so popular that Casey’s has become the fifth-largest pizza seller in the United

States (just behind Papa John’s).

If you as a fast-food franchisee are competing on the ground level with that local convenience store, you’re going to have to lean into the fact that you need a quick turnaround on service and high-quality food. Your food has to be better and your service has to be fast enough

that your customers think going to two places to get a meal and other items is worth it. If the customer expects to be served low-quality food at your restaurant, or if they’re going to have a

long wait, they’re not going to stay with you. They’re going to hit a convenience

store instead, where the food is already prepared and kept hot in the warmer. They can just grab it and go.

Noting the convenience-store trend toward serving up “delicious food… from fried chicken and pizza to organic salads and veggie burritos,” USA Today ran a Readers’ Choice contest in May to name the “Best Gas Station for Food.”

Consultants often advise fast-food restaurant operators to do a competitive analysis of similar restaurants in their area to assess speed and efficiency of service, pricing, and customer satisfaction. If you’re planning to visit your rivals any time soon, don’t forget to stop by the local 7-Eleven. You may be surprised by what you see.

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