Small Operators Face Major Decisions as Pressures Continue

The U.S. convenience industry store count now stands at 152,255 stores, with the majority (63%) falling in the "A-sized" operator category, defined as having one to 10 stores. By comparison, "E-sized" operators, with more than 500 stores, account for 22.4% of the total.

The consolidation happening across the industry is as strong as it is because of supply and demand, according to Terry Monroe, president of American Business Brokers & Advisors, headquartered in Fort Myers, Fla. While ballooning inflation and interest rates have created difficult economic conditions for smaller players, larger c-store companies have pricing power and economies of scale that make it easier to weather turbulent times — and they have the capital to execute a growth strategy.

"Larger operators want to expand their footprint and they know the best way to grow their business in numbers and return on their investment is through acquisitions," he explained. "But there aren't enough good stores for sale, which in turn has kept the value of stores in demand and at a premium price."

As the Federal Reserve began rapidly raising interest rates, the cost of investing in growth became prohibitive for some operators. That picture is shifting — albeit gradually, Traub said. Borrowing costs peaked in 2023, with multiple rate cuts throughout 2024 offering some relief. In 2025, the Federal Reserve's cautious stance has stabilized rates, signaling a departure from aggressive hikes.

"However, interest rates remain elevated compared to historical norms, posing ongoing challenges for operators seeking to finance growth through debt or sale-leasebacks, which are highly sensitive to interest rate fluctuations," he said. "While conditions are improving, operators must continue to be strategic and selective in their investment decisions, as borrowing costs are still notably higher than in the past decade."

Traub cautions that small operators should prioritize growing their portfolios until the right time for a strategic exit. "Maintaining the status quo without pursuing growth is rarely an effective strategy," he advised.

Which Path Should You Take?

How can small operators know when to go or grow? In addition to industry consolidation, Monroe points to several other factors that may drive the convenience channel's smaller players to sell: retirement; there is no succession plan in place; owners don't want to invest the time or money anymore; struggling with labor; or they simply cannot compete with new players entering their playing field.

"[Small operators should evaluate] and see what their situation is. Do they have a succession plan? If so, there is one solution. Did they not invest in their business during the time they owned the stores and is it going to cost too much to bring the stores up to speed? What is their market like?" Monroe posed. "In some states I work in, the competition has gotten so bad, there are new stores being built in the operators' territory and they don't have a choice whether to keep going or not because they have lost 40% to 50% of their business because of new competition and they are forced to sell."

If a small operator plans to grow or enhance, Traub offers up three key considerations:

1. Strategic plan: Do I have a well-defined, actionable plan to grow the business through new-to-industry development or acquisitions?
2. Capital resources: Are adequate financial resources available, including both equity and debt, to execute my growth strategy effectively?
3. Infrastructure and technology: Is the necessary infrastructure in place — including talent, systems and operational procedures — to support sustainable growth?

Monroe pointed out that there are advantages to being a smaller operator in the convenience channel, so he urges these retailers to proceed with caution when considering growth.

"Being small and in control of your business will make you very successful. Bigger is not always better," he said. "If an operator doesn't have the right people, controls and offerings to their customers, adding more stores only makes the situation worse."

Small But Mighty

Despite the challenges, the future for the convenience industry's small operators is not all doom and gloom. The way Monroe sees it, "there is a long life left for small operators — but there's a breaking point," whether that is five stores, seven stores or 10 stores.

Small operators can quickly adapt to market trends and customer preferences without the red tape that often slows down larger organizations. This allows them to implement changes, test new products or adopt innovative concepts more rapidly, Traub noted. With fewer layers of management, decision-making processes are streamlined, which helps optimize operations and reduce costs.

"Smaller operators often have closer relationships with their customer base, enabling them to tailor offerings and services to meet local preferences and build customer loyalty," he added. "Being embedded in the local community often fosters goodwill, allowing small operators to build a loyal customer base through trust and authenticity."