Can Convenience Store Franchises Survive in 2019?

For decades convenience stores have been among the most popular and reliable concepts in franchising. Relatively low startup and operating costs, a straightforward operations and service model, and near-universal demand have made convenience stores attractive options for franchise investors in virtually any market. But in recent years, a new field of competitors offering on-demand delivery have threatened to out-convenience convenience stores. Now, the once-dependable model has to adapt or die.

According to Nick Powills, Chief Brand Strategist at No Limit Agency* and Publisher of 1851 Franchise, convenience stores still offer a number of lucrative benefits over other concepts.

“If you’re building a standalone convenience store, like a 7-Eleven, there isn’t much to it,” he said. “It’s a small buildout, there’s minimal licensing required, labor is low — sometimes just a single employee — and the margins are better than you’re going to find in a number of other segments, particularly foodservice.”

But the primary advantage of convenience stores has always been the reliable customer base, and that’s an advantage that Powills says is rapidly shrinking.

“The whole point of convenience stores is convenience,” he said. “For decades they were the easiest way to quickly pick up certain essential items, and they reaped substantial rewards for it. Now, the Amazons of the world are offering an even more convenient alternative, allowing people to get what they need delivered straight to the door.”

Amazon’s fastest delivery option, Prime Now, offers Prime subscribers delivery of a select inventory of grocery and retail items within a two-hour window that typically starts one to two hours after ordering, meaning customers can get items delivered to their homes in as little as two hours and up to four. That window, combined with Prime Now’s current $25-minimum-order requirement, makes Amazon’s delivery services still slightly less convenient than, say, stopping at a 7/11 on the way home from work for pet food, but it’s clear that the behemoth online retailer has its sights set squarely on convenience.

Add to that picture the new field of delivery-only markets like Foxtrot and GoPuff, and convenience stores may seem not long for this world. But Powills says it’s not too late for the segment to turn things around. In fact, the keys to its survival may come from the same field of competitors threatening to kill it.

“Third-party delivery services could help convenience stores stay competitive,” he said. “Delivery is going to be essential for convenience stores to remain the most convenient option, and there’s no reason they should spend the time and money on developing a delivery infrastructure when they can partner with a third party that is focused exclusively on those that.”

There’s even an opportunity to partner with Amazon. “Convenience stores have a lot of valuable real estate, and Amazon is looking to partner with existing businesses to host drop-off locations,” Powills said.

While the segment recalibrates, Powills recommends franchisees look to non-traditional locations, where the services disrupting much of the wider market have yet to penetrate.

“There are places where it’s going to be harder for Amazon and other delivery services to break into,” he said. “Gas stations, airports — places where you can’t easily offer delivery. Those are going to remain valuable locations for convenience stores.”

However the segment decides to move forward, Powills says a pivot is critical.

“Right now, convenience stores are struggling to stay competitive, and if they don’t innovate, they’ll become obsolete,” he said. “There is a solution out there. There may be multiple solutions. It could be drive-through stores, it could be partnerships with third-party delivery services, it could be something else. But if convenience stores want to continue to be the most convenient option, they need to innovate.”