Why convenience store chains are betting big on travel centers

Near the end of Casey's General Stores' investor day in late June, CEO Darren Rebelez showed the convenience store industry the store format the Midwest retail giant is considering for the coming years. Rebelez said large travel centers exceeding 7,000 square feet are on Casey's radar.

Although he did not specify how many such stores Casey's currently operates—a company spokesperson did not respond to inquiries by press time—Rebelez mentioned that Casey's already has some travel centers and they have performed well so far.

"We think this is a great opportunity for us," Rebelez said. "Obviously they cost more to develop, but the volumes are much larger, and they tend to be more prominent in prepared food because that's a big need for long-haul drivers."

Casey's is not the only traditional convenience store retailer making a big push into travel centers.

QuikTrip, which has been in the travel center business since the 1990s, launched its "remote" travel center concept in 2020. The format has grown rapidly since then and has become a priority for the company's future, corporate communications manager Aisha Jefferson-Smith said in an interview. The difference between QuikTrip's two travel center formats is that remote sites are only built in new markets and are specifically located near QuikTrip food distribution centers. To date, QuikTrip has a total of 96 travel centers.

"With the launch of the new remote network plan, we expect a bright future for QuikTrip," Jefferson-Smith said.

Meanwhile, RaceTrac had 3 travel centers in 2021 and now has 25 truck stops in its network, a company spokesperson said in an interview. Although no further growth plans for the format were disclosed, the spokesperson noted that "travel centers are the future of the company."

For decades, convenience stores and travel centers operated relatively independently due to different customer bases: the former catered to quick shoppers and passenger car drivers, while the latter served truck drivers needing extended stops. But over the past few years, these two segments appear to be converging, with traditional convenience store operators such as Casey's, QuikTrip, and RaceTrac entering the travel center space. Multiple experts and industry leaders believe this move makes sense for these operators.

"Clean restrooms, prepared food, showers, laundry facilities, secure parking—these are the attractions of travel centers," Rebelez said. "We offer these services at our truck stops and will continue to expand in this area."

Attractive profit margins

Multiple experts agree that, when operated properly, travel centers have significantly higher profit potential than traditional convenience stores. This is likely one of the primary reasons traditional convenience store operators are increasingly investing in this format. The core factors driving high profits at travel centers are their larger size and higher traffic. A typical convenience store is usually around 3,000 square feet, while a typical travel center is often twice that size. And depending on location, many sites can attract up to 40,000 vehicles passing by daily, said Darren Schulte, vice president of membership at NATSO, the association representing America's truck stop operators.

"Compared to traditional convenience stores, the potential customer base is enormous," Schulte said.

Experts also point out that travel centers have diversified profit centers. With larger spaces, they can offer more goods and services to both truck drivers and passenger car drivers. A typical convenience store might offer around 7,000 SKUs, while a travel center can typically reach 20,000, leading to higher revenue, said Jeremie Myhren, former chief information officer at Road Ranger and co-founder of truck payment company OnRamp, in an interview.

Beyond merchandise, the vast space of travel centers also supports foodservice. A convenience store might have one quick-service restaurant or an in-house food program, while a travel center might have up to three quick-service restaurants, a sit-down restaurant, and its own food program, Schulte said. "Food offerings and food revenue are significantly higher than at convenience stores," Schulte noted.

The high profit margins of travel centers also stem from fuel sales volume. For example, truck drivers average about 105 gallons per refueling, while passenger car drivers average about 13 gallons, Myhren said. He noted that diesel margins in the U.S. have been at historically high levels for a long time, which in itself could attract convenience store operators to the travel center space. "The margins on diesel are there," said Peter Rasmussen, former marketing manager at Wawa and founder and CEO of convenience store consulting firm Convenience and Energy Advisors. "You have much higher volume—filling up a trailer with 200 gallons is truly exciting."

Building travel centers is not cheap. Depending on the scope of facilities, each site typically costs around $10 million, compared to about $5 million for a standard convenience store, Myhren said. But once a site is operational—and ideally located on a major highway—the return on capital can be "multiples higher" than a standard convenience store, he noted. "I think many people have realized this, and it's fundamentally driving traditional convenience store retailers into this space."

Energy transition considerations

In the face of climate change, the energy transition is underway, with more companies investing in electric vehicle charging projects. In the convenience store industry, EV charging has become a focus over the past few years as retailers grapple with and prepare for a future where gasoline may become obsolete. Although electrification will undoubtedly impact the trucking industry, its pace is much slower than for passenger vehicles, meaning diesel-powered vehicles and the fueling stations that serve them will last longer, multiple experts noted.

"Convenience store operators see this and say: 'My convenience store might suffer from changes in future mobility, but travel centers have a longer lifecycle—they will be around for a long time,'" Schulte said.

Even if EV charging becomes widespread in trucking, long-haul drivers or truckers driving extended hours will still head to highway sites—the home turf of travel centers—for charging, said Roy Strasburger, former convenience store operator and CEO of retail services company StrasGlobal. This differs from urban consumers, who may more easily charge at home, work, or other locations. "Sites outside cities will continue to be popular and continue to grow," Strasburger said. "EV charging on highways will be a major focus."

Investing in travel centers for EV charging could also help traditional convenience store retailers achieve profitability in electrification, something many retailers are still struggling with, said Lisa Biggs, former retailer and president and CEO of consulting firm Impact21. Having large travel centers with a variety of amenities—from more merchandise and food options to hygiene or vehicle maintenance services—may attract highway drivers needing a charge more than urban EV drivers, she noted. "We want consumers to stay longer, and EV is a natural complement," Biggs said. "Travel centers have been doing this for years. So this showcases the advantage of large-format stores more than ever."

In February of this year, oil giant BP acquired TravelCenters of America for $1.3 billion. At the time, BP CEO Bernard Looney said the acquisition aimed to create "future mobility sites"—a network that would allow BP to grow its "growth engines" in convenience, bioenergy, EV charging, and hydrogen to become an integrated energy company. Looking ahead, Myhren believes other travel centers will adopt similar strategies. He noted that the future of travel centers is what he calls an "energy oasis"—a place accommodating all forms of energy—something standard convenience stores cannot achieve. "That's one reason to support larger sites," Myhren said.

Is the competition real?

Although brands like Casey's, QuikTrip, and RaceTrac have loyal customer bases and are building travel center networks, experts expect these retailers will not pose much of a competitive threat to established truck stop operators like Pilot and Love's Travel Stops & Country Stores. The main reason is that brands like Pilot and Love's have fuel supply agreements with trucking companies, meaning truck drivers must refuel at contracted chain locations. This greatly reduces the likelihood that Casey's or QuikTrip, even if opening across from a Pilot or Love's, could take business away from established brands, Rasmussen said.

"That's why sometimes you see a line of trucks at Pilot, while the diesel pumps at the independent truck stop across the street are empty," Rasmussen said. "It's simply because truck drivers don't have a choice."

Strasburger agrees, noting that fuel supply contracts and trucking companies' loyalty to partner brands create competitive barriers. "I'm not sure how many truck drivers would switch to convenience store brands," Strasburger said. "They might feel these brands can't meet their needs, don't fit the image, and don't have loyalty programs like truck stops do."

Although experts like Rasmussen and Strasburger see limited competition between traditional convenience stores and major travel center brands, it's a different story for independent truck stop companies, which typically do not have fuel supply agreements. "If Casey's, RaceTrac, or QuikTrip opened across the street, I would be scared because they would have newer and nicer stores," Rasmussen said. "They would operate more efficiently than I would."

Although there may not be much competition between traditional convenience store players and established travel center brands, Schulte believes it is no coincidence that truck stop retailers like Pilot have invested in store renovations and aggressive growth plans in recent years. He believes major players like Pilot and Love's will welcome the challenge brought by traditional convenience store operators such as Casey's, RaceTrac, and QuikTrip. "There's nothing better than sharpening your own saw," Schulte said. "I believe these chains recognize this is both competition and an opportunity for improvement, which will elevate the entire industry."

Not an easy task

Beyond lacking the fuel supply agreements that Pilot and Love's have, traditional retailers investing in travel centers face other challenges. First, travel centers are a completely different business from convenience stores, Strasburger said. Convenience stores have historically focused on quick shopping trips, while travel centers need to provide amenities and space for truck drivers to stay for extended periods, requiring more resources than a standard convenience store. "This business has more moving parts," Strasburger said. "You're not just running a convenience store and foodservice program; you're also managing truck driver lounges, shower facilities, etc., which is challenging from a management and organizational perspective."

Because travel centers are much larger than standard convenience stores, convenience store retailers entering the truck stop space need to consider parking layouts, types of amenities, number of food options, and other issues, Schulte said. "Once you enter the travel center space, you encounter many different challenges," he noted.

Another challenge for traditional retailers entering travel centers is staffing, Strasburger said. These sites ideally require 50 to 60 people to operate, and they are typically located in rural, sparsely populated areas, making it potentially difficult to find enough employees. Additionally, Strasburger noted that equipping sites with appropriate fueling equipment such as high-speed diesel pumps and satellite pumps can be quite expensive. "I think the two big challenges are capital and... maintaining enough staffing to ensure smooth operations," he said.

Although Strasburger also foresees this trend continuing, he warns convenience store retailers entering the truck stop space to ensure they do not cannibalize their own market. "Convenience store operators tend to cluster their stores for management efficiency," he said. "If you build a truck stop every 50 miles, you'll take away customers who would otherwise stop every 100 or 200 miles."

The convenience store industry is capital-constrained—experts say retailers should prepare for inflation for the rest of the year. But as convenience store retailers continue to seek ways to expand their store counts, buying or building travel centers could be a solution to boost profits. "If you have limited capital for new stores each year, why not?" Rasmussen said.