But much that hasn’t been discussed is likely hindering better outcomes for the c-store industry.  

Two missing elements we identify are marketing aimed at winning a greater share of the consumer’s foodservice spend and discussions of foodservice as a separate business within the retail business rather than as a category.  

NACS reports that foodservice in the U.S. convenience store industry doubled in the past 20 years, from 11.9% of in-store sales in 2004 to 27.7% in 2024. NACS further notes that foodservice sales, which NACS defines as prepared food; commissary; and hot, cold, and frozen dispensed beverages, accounted for 38.6% of in-store gross margin dollars at convenience stores in 2024, with nearly 73% of sales from prepared food.  

While those statistics are positive, market share growth within the broader foodservice landscape is a different story.  

Technomic reported that convenience stores captured 2.4% of the market in 2018 compared with 26.2% for their main competitors, fast-food/quick-service restaurants. Supermarket foodservice was 3.8%, per Technomic.  

Six years later, Technomic reported that QSRs grew to 29.1%, and supermarkets to 4.3% while convenience stores bumped only slightly to 2.5% market share of the retail sales market in 2024.  

We believe those numbers likely correlate with the amount of money c-stores spend on marketing their offerings compared with the other channels. For example, NACS State of the Industry data shows that c-stores spent about 1.3% of revenue on advertising and promotions of inside merchandise and food in 2024, up only 0.1% from 2023.  

Jed Brewer, CEO of Study Groups, said retailers who participate in Study Groups spend even less, at an average of 0.6% of total inside sales (merchandise + food). 

In comparison, the average QSR restaurant spends 4-6% of its total revenue on marketing, according to Toast, a point-of-sale platform used by many restaurants.  

A successful business plan for c-store foodservice requires marketing; considerably more marketing than is done today, to reach more consumers and raise brand awareness with the targeted goal of competing with QSRs and grocery deli.  

Retailers must ask themselves: What percentage of inside food and merchandise sales should be devoted to marketing? How does this/should this compare with marketing spent by QSRs and grocery? What does “marketing” include?  The list may include promotions, advertising, social media, food photography, loyalty, technology (ordering in-house, ordering ahead, scheduling exactly when to prep based on pickup time) and metrics. How will c-stores measure foodservice success?  

First of all, foodservice is a business. To succeed and compete, foodservice must be treated strategically as a separate and distinct business within the larger retail and fuel organization. Foodservice requires its own strategy and budget. Too many c-store operators still look at foodservice as a category to be managed with traditional category management processes. The industry will not optimize its success in foodservice with only a category management approach.   

Compare this with fuel. For those old enough to recall, think back to fuel circa 1970, when a good c-store fuel installation had two to four pumps and a little canopy over the pumps, not even over the island. At that time, retailers ran fuel as a category.   

Fast-forward to today. To be in the fuel business, the organization must have an operational structure that supports pricing, technology, forecourt design, loyalty, supply and more. The company also needs different metrics for fuel investment and profitability than it uses for retail/backcourt operations. 

The two entities roll-up to an overall company strategy but must live independently because the fuel and retail businesses are so different.   

Foodservice, like convenience retail and fuel, must be developed as a separate and distinct operating unit. This does not mean separate oversight at store-level, but it does mean separate infrastructure, organizational metrics, business plans, accounting, design, marketing and innovation.   

Buy-in at the top

Discussions of the strategic commitment to foodservice are often lacking. Cultural buy-in at the top is the first requirement of a strategic commitment. This is more than a desire. It must be backed by a vision, a detailed plan and a well-researched budget.  

Having the cultural fortitude to build a foodservice infrastructure is not easy.  In conversations with people like Louis Sheetz, circa 1987 and others today, leaders say the commitment to foodservice is equivalent to starting a brand-new business from scratch. This is because the foodservice business may be housed on the same real estate site, but it is a distinct business very different than retail and fuel, especially if the retailer wants to compete with other channels of foodservice and food retailing.   

Funding foodservice is usually far greater than most c-store retailers anticipate because credible, high-quality foodservice is often unknown territory for a convenience store. This is where a consultant with both traditional and convenience foodservice operations and marketing expertise may help, sharing insights or being devil’s advocate. 

Let’s acknowledge that many c-stores offer food products that rival fast feeders in quality.  From Weigel’s chicken tenders to KwikTrip’s bone-in chicken to the Wawa hoagie or SunStop’s meatloaf, the quality of the food today at many chains is as good or better than QSR or grocery deli.  Retailers face continual operational challenges to maintain standards and to keep the quality as good on day 500 as it was on day 1. The leaders in our industry are finding ways to succeed, but it is not for the faint of heart. 

A Culture of Food Safety

One key element that helps drive this success: food safety. 

As Kevin Smartt and Scott Zietlow noted in the July NACS article, food safety is a cultural foundation for their organizations to be in the foodservice business. For both companies, fresh-prepared foodservice now defines how their customers engage with their brands, and food safety is a core value. 

Food safety is not simply using safe practices, it is a culture built upon HACCP:  Hazard Analysis Critical Control Points. The HACCP system was first developed in the 1960s by  Pillsbury Co., in collaboration with NASA and the U.S. Army, to ensure the safety of foods for astronauts on space missions.  The main purpose of a HACCP program is to identify potential hazards in a food production business and set up controls to keep these potential hazards at acceptable levels. The program is applicable throughout the food chain process, from raw material production to finished product distribution.  HACCP became mandatory in 1995. HACCP can be applied to every aspect of the retail, foodservice and fuel business and is an absolute necessity for creating a foodservice culture.   

While no single company can achieve 100% risk mitigation of foodborne illness factors when selling food, Dr. Jay Ellingson, chief scientific officer at Kwik Trip Inc., and moderator at the inaugural NACS Food Safety Forum in 2022 said one of the best ways to minimize breakdowns in the execution of food safety policies and procedures is to have good retail practices ingrained in a store’s operations and employees.  He emphasized that leadership plays a major role in building a culture of food safety.  

What is Included in C-Store Foodservice?

Another issue is the industry definition of foodservice. NACS identifies five categories for foodservice: prepared food; commissary; and hot, cold, and frozen dispensed beverages. Perishable grab-and-go items, even if  packaged for use in the cold or hot display case, should be included as foodservice. Unlike the competitive quick-service restaurant channel, convenience is uniquely equipped to offer quick options for ready –to-eat, ready-to-heat and ready-to-prepare foods. Some of these sub-category segments compete with fast-food or quick-service restaurants (QSRs), while others compete with items found in the perimeter of the grocery store – deli/perishables, bakery and produce.  

Thus, even from the category management perspective, the category is larger than currently tracked.  

Consumers come to a c-store to satisfy their hunger, their thirst or perhaps a desire for a treat. C-store operators can capitalize on the opportunity to offer food and beverages by understanding the customer’s journey and missions.   

As an example, a hungry c-store or travel plaza shopper looking for healthy immediate consumption foods may select a two-pack of hard-boiled eggs and fruit – whole or cut – plus a fountain drink. This is not considered foodservice as NACS defines it today, but it is satisfying a consumer’s hunger and thirst, so it is foodservice.  

With an appropriate definition of foodservice, retailers can build out a total business plan, one that sets their offerings up for competing beyond the current customer base and beyond simply QSR. 

Retailers say they want to compete with QSRs and grocery retail, but do they identify what those competitive levers are and how to compete against each of them?   

Need to Attract New Customers

To be successful with foodservice, the industry must bring in new customers. It is difficult to bring in new customers without a concerted effort to market to the audience one wishes to attract. There are a host of specific tactics, from advertising to promotions to loyalty offerings, but these are tactics. Correlating again to the business mentality, everything must start with the vision and strategy. 

C-store operators need a strategy that takes into consideration its competition, including other c-store chains and especially QSRs and grocery deli. According to Restaurant Growth, a marketing company based in Tucson, Arizona, (QSRs) typically spend a higher percentage of their revenue on marketing and advertising at 3-6% vs. the c-store spend of 1-1.4%. This is a huge disparity.  Foodservice in the convenience channel does not have brand awareness with enough of the broader consumer base. Therefore, c-stores need to budget more to help legitimize the foodservice brand offer, build awareness and drive trial. 

A Review of Two Public Companies

Casey’s, a public company with a robust foodservice offer, especially its pizza offering, reports spending about $40 million on advertising in 2023. A specific budget for pizza marketing isn’t disclosed, but it’s known that Casey’s considers its pizza program a core element of its brand identity and business strategy and likely allocates a significant portion of its overall marketing efforts and resources to promote its pizza program. It also reports that prepared foods and dispensed beverages have represented 34% of total revenue for the past three years. In the third quarter of 2024, Casey’s reported sales in its prepared food and dispensed beverages program surged 11.4% year-over-year to $349.4 million. Using quarterly figures as an estimate would put Casey’s advertising expenditure on foodservice at about 3% of revenue. 

While Arko, parent of GPM Investments, does not break out its marketing budget, it reports it has foodservice offerings at approximately 1,070 stores. Per its annual 10-K reports, advertising expenditure grew from $5.1 million in 2023 to $6.8 million in 2024. Total annual merchandise revenue, which includes foodservice, was $1.9 billion, representing an overall marketing spend of less than 0.4%. While specific items are not identified, Arko also noted in its 10-K that it launched in-store promotions and a loyalty program in 2023 and invested $2.4 million in digital advertising. The company also unveiled an expanded foodservice offering at seven pilot locations.  

From food photography to promotional graphics to technologically enhanced ordering services, social media and loyalty, traditional foodservice outlets have set a high bar to reach and communicate with the consumer. If convenience retailers truly want to capitalize on the opportunity of selling food – for immediate consumption, ready to heat or ready to prepare – they need to tell consumers about their offerings.   

For a grab-and-go, ready-to-heat offer or “value added” ready-to-prepare items, retailers need to look at the same type of budget figures that the grocery industry uses for deli, perishables, bakery, etc. Technomic reported this ranges around 4%.  The c-store norm of about 1% of sales for marketing and advertising, per Technomic, falls far short of this competition too.   

A marketing strategy is a comprehensive, long-term plan.  It should outline how a business will identify, attract and retain customers to achieve its overall business goals. This again reinforces the need for different marketing plans for foodservice, retail and fuel.  Marketing for each business involves defining a target market, understanding their needs, differentiating products and services from competitors and planning the most effective methods for promotion and communication to build brand awareness, engagement and revenue.  

With the right strategy, technology stack, planning and organizational infrastructure, retailers can create a meaningful marketing, advertising and promotion budget to drive awareness and engagement.  Furthermore, technology can enable retailers to target advertising and promotion to the store offer at each location and customize to the specific trading area to better compete with QSRs and grocery.  

Looking at a more broadly defined foodservice business as a separate and distinct business from the retail store and fuel on the forecourt will drive a different culture, help retailers create a holistic plan and establish the overall structure for development and growth.   

Kay Segal started Business Accelerator Team in 2015 after working in foodservice and convenience retailing with companies such as Sky Chefs, 7-Eleven and Circle K, amongst others.  Kay can be contacted at 480-799-7623 or at kay@thebateam.com  

Article edited by freelance journalist Christine Lavelle