Convenience store chain 7-Eleven said it will open 50 stores annually in the Baltimore-Washington area during the next three years as part of an aggressive expansion in some of its best-performing markets.
The Dallas-based chain is expanding in areas where it has a large concentration of stores that are doing well, said company spokeswoman Margaret Chabris. The top 10 markets for 7-Eleven include Los Angeles, New York City, San Diego and the Baltimore-Washington area.
The company believes that there is room to expand even in areas where it already has locations. It won't be unusual to see 7-Eleven stores a few blocks from each other, much like the strategy by Starbucks to open stores near each other. There are now 540 stores in the Baltimore/Washington area.
"Where we have more stores, they don't cannibalize each other," Chabris said. "They often reinforce the brand. People get more familiar with 7-Eleven as a product. As we put in more stores, typically sales increase for all the stores in the area."
Analysts said it is a good time to expand. Retailers can negotiate favorable deals because landlords are desperate for tenants as other retailers close stores. Starbucks, for instance, has shuttered locations across the country.
"Real estate is ample," said Mark Millman, president of Millman Search Group, an Owings Mills executive search firm specializing in retail. "Real estate costs are low or lower than they have been in years and it's a good time to get in and get a 10- or 20-year lease."
Said Chabris: "We see an opportunity for us in this down economy. ... Landlords want a nationally credit-rated tenant like us to be in their locations because they know we're going to pay our bills."
Millman also said that there is a need for convenience stores as people continue to live busy lives and look for quick shopping alternatives.
The convenience store chain has opened 20 stores in the area this year. One of those was a store at Centre and Calvert streets that opened last week, but sparked controversy when it was being considered. Many neighbors were concerned about what kind of crowd a 24-hour store would attract. A councilman even introduced a bill to block the store from opening.
7-Eleven - which operates, franchises and licenses nearly 8,000 stores in North America - has hired retail brokerage firm KLNB Retail to help it locate sites in the region.
"There is absolutely a market for this expansion," said Keith Barnett, a principal with KLNB and part of a seven-member team the brokerage has created to work with the retailer. Barnett said 7-Eleven has carved a niche as a nationally know convenience store that doesn't sell gas at all of its locations. This allows it to open in more urban locations, where national convenience store chains don't always move, he said.
The retailer will also use a "business conversion" strategy, where it turns owners of independent convenience stores and other small businesses into 7-Eleven franchise owners. Under that plan, the business owner would pay a franchise fee and share the profits with the 7-Eleven corporation, Chabris said.