Those who work or live in downtown Denver can’t help but notice the recent proliferation of 7-Eleven stores.
In an effort to grow market share and boost sales, 7-Eleven Inc. — owned by the private Seven & i Holdings Co. Ltd., based in Tokyo — has opened 54 stores in the Denver market over the last three years with plans to open 20 to 25 more in 2012. It plans to sustain that growth pattern for at least the next five years.
“We’re very aggressive and interested in finding new sites in the Denver area,” said spokeswoman Margaret Chabris from 7-Eleven’s headquarters in Dallas.
Out of the 146,000 U.S. convenience stores, 7-Eleven has about 7,100, a 5 percent market share, according to the National Association of Convenience Stores. There are now about 288 7-Eleven stores in Colorado, 202 of which are in metro Denver. The company has closed 15 stores in the state in the past three years, for various reasons, Chabris said.
“We’ve got a nice store base in Denver today,” said Dan Porter, vice president of development. “And Denver offers an opportunity to grow more stores. ....We’re looking at all areas there, suburban and urban.”
Company officials like the state’s growing population and strong business environment.
The stores are growing via ground-up leasing, acquisitions of other convenience stores and converting other businesses to the 7-Eleven model.
The company continues to aggressively court franchisees, who own about 80 percent of the stores companywide.
And even though it appears 7-Eleven might over-saturate the downtown market — four stores have recently opened in the five-by-four block area around 17th Avenue and Logan Street — Porter said that won’t happen.
“We do extensive research on all the sites and stores before developing them or acquiring them,” Porter said. “In an urban environment, we might be able to put a store two to three blocks from another ... It’s like a $1 million investment for those stores, so we take it very seriously.”
“We want every single store to be profitable,” Chabris said.
Porter said downtown Denver’s growing residential base, coupled with the fact there are no full-service grocers in the central business district, is a formula for profitable stores.
“We feel like we’re filling a void there,” he said, adding the urban 7-Eleven stores in other markets are some of the company’s highest-volume stores.
Joe Beck, state director for the International Council of Shopping Centers and vice president of Denver’s SRS Real Estate Partners, said establishing market share here squeezes out the competition.
“Every retailer tries to do it, so they’re not alone,” Beck said.
Expansion creates relationships with land and building owners so that 7-Eleven is the only convenience-store brand they use, Beck said.
Analyst Robb Brown, principal with the Denver Retail Group, said those building and land owners welcome the expansion.
“In a lot of ways, 7-Eleven is in the driver’s seat. There aren’t a lot of nationally based, creditworthy tenants a landlord can go to,” Brown said. “If 7-Eleven comes knocking, they want to do the deal ... They still have debt service, and this company is a known entity.”
Franchise owners like the business model 7-Eleven offers. They have to split the gross profits 50/50 in most cases, but the company builds the store, provides all the equipment, maintains it and handles much of the bookkeeping.
“Once I’m in the store, I pretty much just pay for inventory and labor,” said franchisee Xavier Castanon, who in the last year bought two 7-Eleven stores. “They do all the accounting and billing, so it frees me up from having to do all that. They’re probably taking a greater share of the profit, but they’re also taking care of a lot of other costs business owners incur.”
Castanon owns the stores at 303 N. Santa Fe Blvd. and 495 N. Sheridan Blvd.
He said the Sheridan store’s sales are up 20 percent since he took over.
Castanon doesn’t worry about too many stores opening near his existing locations.
“I know about the growth potential of having a certain number of stores and density in a marketplace,” said Castanon, a former corporate executive with McDonald’s Corp. “Initially there could be a cannibalization of sales, especially with some downtown stores. But with the population moving downtown, there’s room for a higher density of units.”
The brand recognition, and corporate marketing efforts, benefit his stores. Plus, as Castanon wants to own five or six stores, there’s more opportunities for him to grow.
“For long-term growth, it’s the right thing to do,” he said. “If 7-Eleven doesn’t take that corner, or dominate certain areas, someone else will.”
He also appreciates the company’s efforts to stock fresh food, delivered from local distribution centers and bakeries.
Having more stores to use those centers is good for them, too, Chabris said.
“There’s so much more efficiency for a company to have more stores,” she said. “When there’s more volume going through these support organizations ... they have a better chance of making more money and being profitable, too.”
The fresh foods, coupled with the company’s own brand “7-select,” have been good changes for the 85-year-old brand.
Said Beck: “7-Eleven has done a masterful job of evolving the convenience store.”
