"It could be that many, based on the area's population size and density," Tom Nelson, retail specialist for Colliers International, told the newspaper. Colliers is representing the Dallas-based retailer that operates, franchises or licenses nearly 37,000 stores worldwide, including 7,900 in North America and 450 throughout [image-nocss] Northern California.
Nelson said 7-Eleven, which generated nearly $54 billion in sales for 2008, is seeking nontraditional locations for its new stores, including "endcap" spots in strip malls and in former gas stations. Some new stores will be built from the ground up.
7-Eleven officials said they would spend up to $50 million to acquire new locations nationwide, including up to 50 stores in Northern California, mostly in the Bay Area and greater Sacramento. The company will also spend from $150,000 to $200,000 per store to remodel all of its Northern California locations over the next three years, Marc Clough, real-estate manager for 7-Eleven's Northwest region, told the paper. It will add new paint, lighting, technology and safety equipment.
Nelson said real-estate prices in the Bay Area, higher than most other parts of the country, are on average one-third below what they were at the height of the land boom a few years ago, depending on the location. He said the company is most interested in high-profile locations along busy thoroughfares with nearby high-density housing developments. Even with the recession, Nelson said that is still not an easy task, especially in Santa Clara County.
"The vacancy rate is not as high here as in some surrounding areas," he told the Business Journal. "A lot of good properties are still leased here."
If rents continue to stagnate in the area, it may provide more growth opportunities for 7-Eleven, said the report. Nelson said the store is viewed favorably by landlords seeking stable, long-term tenants for their properties.
Clough said the real-estate expansion is also motivated by a company objective to saturate leading markets with its stores to spur revenue growth. "Our focus is opening stores in densely populated, high-traffic areas, but we are very flexible," he told the paper.
The company looks at build out space in shopping centers where there is sufficient parking for customer use, the report added. The retailer favors downtown storefront space with no parking, but significant foot traffic from customers who live or work in the immediate area. The third dynamic that makes a building attractive to the retailer is being able to build a store from the ground up if the demand is there.
Both Nelson and Clough said the chain is also evolving its merchandise mix, adding more freshly prepared foods and fresh produce to its shelves. Neil Stern, partner at Chicago-based retail consulting firm McMillan-Doolittle LLP, told the paper that 7-Eleven has developed a system of a dozen centralized distribution centers nationwide to help it provide fresh food on a daily basis to nearby outlets.
Clough said the store's target demographic group continues to be male shoppers from 18 to 49. But, he added, that does not mean 7-Eleven is standing pat, either in real estate or merchandise, which could help it in a diverse, fresh food-oriented region like Silicon Valley. "We are really focused on differentiating ourselves from our competitors to try to draw in other demographic groups that we have not been particularly strong with in the past, like the Millennials."
Also known as Generation Y, the Millennials include about 80 million Americans born between 1980 and 1995.
Another avenue of growth for 7-Eleven is its business conversion program (BCP), Clough said. He said the company recruits the owners of independent convenience stores to become 7-Eleven franchisees, allowing them to retain ownership of their shops. He told the paper that 10 such conversions have occurred so far in Northern California, with another 15 to 20 expected this year.(Click here for previous CSP Daily News coverage of 7-Eleven's real-estate developments.)
CSP is actively tracking how market domination is driving some retailers to grow in key cities and states. Watch for an in-depth report in the February issue of CSP magazine.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.