IRVING, Texas — The sale of Speedway LLC certainly had its ups and downs.
In October 2019, Findlay, Ohio-based Marathon Petroleum Corp. (MPC) announced its intention to spin off its Enon, Ohio-based retail arm. Three months later, MPC began entertaining offers for the nearly 4,000-store convenience chain. Then, the world all but shut down as the COVID-19 pandemic spread across the globe. Even in the face of the challenges presented by the health crisis, MPC reached an agreement in August 2020 to sell Speedway to 7-Eleven Inc. for $21 billion — making it the largest transaction in the convenience channel in some time.
With an expected closing date of Q1 2021, the transaction was pushed back to the second quarter as both sides waited for the Federal Trade Commission to finish its anti-competitive review. Despite the starts, the stops and the delays, MPC and 7-Eleven officially sealed the deal on May 14, paving the way for Irving-based 7-Eleven to cement its place among the top chains in the U.S. c-store industry.
"We are very excited to welcome Speedway into the 7‑Eleven family," Joe DePinto, president and CEO of 7‑Eleven, said at the time of the closing. "Speedway is a great brand and a strong strategic fit for our business that significantly diversifies our presence throughout the North American market, particularly in the Midwest and on the East Coast. Together, we have the opportunity to redefine and enhance the customer convenience experience nationwide. This is a groundbreaking moment in our company's proud history."
Acquiring Speedway accelerates 7-Eleven’s growth trajectory while also strengthening its financial profile, the company has stated. The addition diversifies the convenience retailer's presence to 47 of the 50 most populated metro areas in the United States, and expands its company-operated store footprint as well.
According to the 2021 Convenience Store News Top 100 ranking, compiled using data provided by Nielsen TDLinx, 7-Eleven sits in the No. 1 position, boasting a total U.S. store count of 12,973 locations as of June 2021 — broken out to 5,282 company-operated stores and 7,691 franchise stores.
Contemplating the impact of this acquisition on the overall c-store industry, Terry Monroe, founder and president of American Business Brokers & Advisors, believes 7-Eleven’s takeover of Speedway is a positive move for the U.S. convenience channel.
“Speedway was a very good chain of stores and was in the process of building new stores with a good image. However, I think 7-Eleven brings more consistency and name recognition to the customer than Speedway or any other convenience store chain in the United States," he said. "7-Eleven is quickly becoming the McDonald’s of the convenience store industry."
Monroe went so far as to note that he sees nothing bad about the acquisition. "I am very bullish on this acquisition and see nothing but a positive outcome," he said.
In his opinion, having a dominant player could be a good thing for the industry — and the consumer.
"Contrary to what you hear, people don't like surprises. As a friend once told me, surprises are good for birthdays and Christmas, but not in business or when dealing with customers," he said. "Customers like for things to be consistent, meaning when they visit a store or a business whether in person or online, they don't want to have to be concerned about what the outcome is going to be."
He pointed to quick-service restaurant giant McDonald's as an example.
"McDonald's was the first to train America on this principle and they have been very successful over the world with their focus on consistency. The French fries and cheeseburger taste the same whether you are in Fargo, N.D., or Miami, Fla.; it doesn't matter, they are the same," he explained. "This same principle applies to the convenience store industry.
“…In Pennsylvania, Sheetz may be your convenience store of choice and further east, Wawa may be your local choice, but get out of their region and the customer wants consistency. And if 7-Eleven can continue to control its operations, it will be able to deliver to the customer the consistency they are looking for,” Monroe stated.
Seeing Exit Signs?
Even with the channel’s high rate of consolidation, the c-store industry remains very fragmented.
"Despite having large, dominant players, over half of all convenience stores are single-store operators. When large companies buy large companies, this dynamic doesn't change," said Scott Burchfield, chief operations officer at Impact 21, a retail consulting partner to c-stores. He leads the Acquisition Business Transformation practice at the Lexington, Ky.-based company.
"That said, there is often an opportunity during these acquisitions for other retailers to buy stores that the dominant player wants or needs to ‘spin off,’” Burchfield pointed out. “This provides other medium or small retailers a rare opportunity to expand [their] footprint in their existing and/or new geographies, often with quality assets that may not have been available otherwise."
The c-store industry still provides a compelling and profitable model, and will for decades to come, according to Burchfield. "This will continue to attract investors and new types of operators. So, large acquisitions alone should not be the reason that other operators exit the industry," he said.
Monroe echoes that 7-Eleven's acquisition of Speedway alone should not have an impact on more operators stepping away from the channel.
"You have to remember, no new stores came into the marketplace to increase competition within the existing marketplace; all you did was change who is now running the store," he said.
Of course, there are many other factors that come into play when a retailer chooses to exit the business, such as the age of the owners, succession plans (or lack thereof), and the financial investments needed to compete in today's marketplace.
"A business has to spend money to maintain the quality of their business and if one is not careful, they will keep making money and spending it on the stores and basically just keep trading dollars and not really improving their lifestyle. It becomes a treadmill with no end," said Monroe.