Why Convenience Store Chains Are Betting Big on Travel Centers

Held in late JuneCasey's General Stores Investor DayAs it drew to a close, CEO Darren Rebelez showed the convenience store industry the type of store the Midwest retail giant is considering for the coming years.

Large travel centers exceeding 7,000 square feet are where Casey's is focusing its attention, Rebelez said.

While he didn't disclose how many such locations Casey's currently has — and a spokesperson for the retailer didn't respond to inquiries by press time — Rebelez mentioned Casey's already has some and they have performed well so far.

“We think this is a good opportunity for us,” Rebelez said. “Obviously, they cost more to develop, but they also have much higher volumes and tend to perform better in prepared food because that's a need for long-haul drivers.”

Casey's isn't the only traditional convenience store retailer going all in on travel centers.

QuikTrip, which has been in the travel center business since the 1990s, launched its “remote” travel center concept in 2020, and the business has grown rapidly since 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 locations are only built in new markets and are specifically sited near its food distribution centers, Jefferson-Smith said.

To date, QuikTrip has 96 travel centers in total.

“We expect a bright future for QuikTrip because our new remote store network plan has taken off,” Jefferson-Smith said.

Meanwhile, RaceTrac had three travel centers in 2021 and now has 25 truck stops in its network, a company spokesperson said in an interview. While not disclosing further growth plans for the format, the spokesperson noted that “travel centers are the future of the company.”

For decades, convenience stores and travel centers operated relatively separately because of their different customer bases: the former catered to quick trips and passenger car drivers, while the latter served truck drivers needing longer stops.

But over the past few years, the two segments seem to be converging, with traditional convenience store operators like Casey's, QuikTrip and RaceTrac moving into the travel center space.

Several experts and industry leaders say the move makes sense for these operators.

Just ask Casey's.

“Clean restrooms, prepared food, showers, laundry facilities, secure parking — these are what make travel centers attractive,” Rebelez said. “We offer these services at our truck stops and will continue to expand in this area.”

See those margins?

Several experts agree that, if operated properly, travel centers have far greater profit potential than traditional convenience stores. Many experts point to this as perhaps the primary reason traditional convenience store operators are increasingly investing in this format.

But why are travel centers so profitable? Experts say the reasons are numerous, but a core factor is the larger size and higher traffic volumes compared to traditional convenience stores.

The average convenience store is typically around 3,000 square feet, while a typical travel center is often twice that size. And depending on location, many sites may see up to 40,000 vehicles pass by daily, said Darren Schulte, vice president of membership for the National Association of Truck Stop Operators (NATSO).

“That's something to consider: the number of potential customers you get compared to a traditional convenience store is enormous,” Schulte said.

Several experts also note that travel centers have diversified profit centers, meaning that because of their size, they can offer truck drivers and passenger car drivers more products and services than a standard convenience store.

A typical convenience store might offer 7,000 SKUs, while a travel center typically has up to 20,000 items — which leads to higher revenue — simply because there's more space, said Jeremie Myhren, former chief information officer at Road Ranger and co-founder of truck payment company OnRamp, in an interview.

Beyond merchandise, the large size of travel centers also relates to foodservice. Schulte said a convenience store might have one quick-service restaurant (QSR) and an in-store proprietary food program, while a travel center might have up to three different QSRs, a dine-in restaurant and a proprietary food program.

“Food offerings and food revenue are significantly higher than at convenience stores,” Schulte noted.

Travel centers' high margins also stem from their fuel volumes. For example, truck drivers average about 105 gallons per fill-up, while the average driver is about 13 gallons, Myhren said. He noted that U.S. diesel margins have been at historic highs for a long time, which in itself could attract convenience store operators to travel centers.

“The diesel margins are there,” said Peter Rasmussen, former Wawa market manager and founder and CEO of convenience store consulting firm Convenience and Energy Advisors. “You have much higher volumes — filling up a trailer with 200 gallons, that's certainly exciting.”

Building travel centers isn't cheap. Myhren said each site typically costs around $10 million depending on the scope of the facility, compared to about $5 million for a standard convenience store. But once a site is up and running — and in an ideal location along a highway — the return on capital can be “multiples higher” than a standard convenience store.

“I think a lot of people have realized that, and that's fundamentally driving traditional convenience store retailers into this space,” he said.

Energy landscape

It's no secret that an energy transition is underway in the face of climate change, with more and more companies globally investing in EV charging projects. In the convenience store industry, EV charging has become a focus over the past few years as retailers grapple withpreparing for a future where gasoline may become obsolete。

Several experts note that while electrification inevitably threatens the trucking industry, its adoption is spreading much more slowly than for passenger vehicles, meaning diesel-powered vehicles — and the fuel stops that serve them — will last longer.

“I think convenience store operators are looking and thinking: 'You know what? My convenience store might be hurt by changes in future travel patterns, but travel centers have a much longer lifecycle, they'll be around for a long time,'” Schulte said.

But even as EV charging becomes prevalent in the trucking sector, drivers on long trips or truckers driving for hours will still go to highway sites — the main battleground for travel centers — to charge, said Roy Strasburger, former convenience store operator and CEO of retail services firm StrasGlobal. This differs from urban consumers, who may more easily choose to charge at home, work or other locations.

“Sites outside cities will continue to be popular and continue to grow,” Strasburger said. “EV charging will be big business on the highways.”

Investing in travel centers for EV charging could also help traditional convenience store retailersachieve profitability in electrification, which many retailers have struggled to do so far, said Lisa Biggs, former retailer and president and CEO of convenience store consulting firm Impact21.

She noted that large travel centers with multiple amenities — from more merchandise and food options to hygiene or vehicle maintenance services — may attract highway drivers needing their next charge more than urban EV drivers.

“We want consumers to stay longer, and EV is a natural complement,” Biggs said. “Travel centers have been doing this for years. So this is more of a complement than the larger-format stores we've had in the past.”

In February, oil giant BP acquired TravelCenters of America for $1.3 billion. At the time, BP CEO Bernard Looney said BP made the acquisition to create “the mobility station of the future” — a network that would allow BP to grow its convenience, bioenergy, EV charging and hydrogen “growth engines” to become an integrated energy company.

Going forward, 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 that accommodates all forms of energy — something a standard convenience store 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 followings and are building travel center networks, experts don't expect these retailers to pose much of a competitive threat to established truck stop chains like Pilot and Love's Travel Stops & Country Stores.

On a macro level, that's because brands like Pilot and Love's have fuel supply agreements with trucking companies, meaning truck drivers must fuel at the chains they're contracted with. This greatly reduces the likelihood that brands like Casey's or QuikTrip could take business away from these established brands even if they open across the street from a Pilot or Love's, Rasmussen said.

“That's why sometimes you'll see a line of trucks queuing at Pilot, but across the street there might be an independent truck stop with empty diesel fueling bays,” Rasmussen said. “It's just because truck drivers don't have a choice.”

Strasburger agrees, noting that fuel supply contracts and fuel companies' loyalty to their partner brands are barriers to competition.

“I'm not sure how many truck drivers would switch to convenience store brands,” Strasburger said. “They might feel those brands can't meet their needs, don't fit their image, or don't have loyalty programs like truck stops do.”

While experts like Rasmussen and Strasburger expect limited competition between traditional convenience stores and major travel center brands, the situation is different for independent truck stop companies, which typically don't have fuel supply agreements.

“If a traditional convenience store player like Casey's, RaceTrac or QuikTrip opens across the street, I'd be scared because they'd have newer, nicer stores,” Rasmussen said. “They'd run more efficiently than I would.”

While there may not be much competition between traditional convenience store players and established travel center brands, Schulte believes that truck stop retailers like Pilot'sinvestments in store renovationsand ambitious growth plans in recent years are no coincidence.

He believes big players like Pilot and Love's will welcome the challenge brought by traditional convenience store operators like 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 deciding to invest in travel centers face other challenges.

First, travel centers are a completely different business from convenience stores, Strasburger said. Convenience stores have historically been designed for quick trips, while travel centers require amenities and space for truck drivers to stay for extended periods — requiring more resources than a standard convenience store.

“There are more moving parts to this business,” 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 complex from a management and organizational standpoint.”

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, the number of food options, and more, Schulte said.

“Once they start getting into the travel center space, they encounter many different challenges,” he noted.

Another challenge traditional retailers face when entering travel centers is staffing, Strasburger said. Such sites ideally need 50 to 60 people to operate, and they're often located in rural, sparsely populated areas, making it difficult to find suitable employees.

Additionally, Strasburger noted that bringing in the appropriate fueling equipment — such as high-speed diesel pumps and satellite pumps — can be quite costly.

“I think the two big challenges are capital and... keeping enough staff to ensure smooth operations,” he said.

Although Strasburger also foresees this trend continuing, he warns convenience store retailers joining the truck stop wave to make sure they don't cannibalize their own market.

“Convenience store operators tend to cluster their stores for management efficiency,” he said. “I think 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 under financial pressure — experts say retailers shouldprepare for inflation for the rest of the year. But as convenience store retailers continue to focus on network expansion, buying or building travel centers could be a solution to boost profits.

“If you only have so much capital each year for new stores, why not?” Rasmussen said.