A trip to the convenience store used to mean filling up the gas tank, grabbing a canned soft drink and maybe a candy bar if you had enough spare change.

These days, a visit involves much more — nitro cold brew coffee on draft, thin-crust pizza and chicken curry rice balls, just to name a few menu items that seek to appeal to price-conscious consumers frustrated with inflation.

Growing sales from prepared food is one reason why convenience store chains are rapidly expanding and buying rivals, with the parent of Circle K's unsolicited offer this week to acquire 7-Eleven just the latest example. Total U.S. sales in 2023 were a yearly record of $859.8 billion, according to the National Association of Convenience Stores, an industry trade group.

Convenience store sales are also desirable because they tend to withstand economic downturns by offering essential goods and maintaining steady foot traffic, according to a Colliers report. Average daily visits to all U.S. convenience stores rose 1% in 2023 to a record 378,700, compared to 2022. And the chains have adapted to changing consumer behaviors by adding digital payment options along with the grab-and-go food, making stores more appealing to customers as well as investors, Colliers said.

Ready-made food is now the most profitable part of a convenience store and, with greater scale, those profits can be even higher, retail real estate executives say.

"The days of hot dogs on the broiler wheel for 12 or 18 hours and, frankly, being disgusting, that’s largely in the past," Barry Wolfe, senior managing director of investments at brokerage Marcus & Millichap, told CoStar News.

As Chandler Dignam, vice president at Anchor Point Capital, put it, “More units, more stores equal better margins.” He should know: Anchor Point Capital represents buyers and sellers of convenience stores who scrutinize store sales.

While convenience stores aren’t getting out of the fuel business, sales of gasoline have been in decline for years as vehicles have become more fuel-efficient, Wolfe said. And electric vehicles aren’t replacing gas-powered cars or gas pumps any time soon.

“Gas to some degree is a bit of a loss-leader,” said Wolfe, who represents buyers and sellers of convenience store properties. “They’re trying to use it to drive c-store sales.”

The potential combination of 7-Eleven and the various brands owned by Quebec-based Alimentation Couche-Tard, including Circle K and On the Run, would create the largest single convenience store company in the United States by far. Together they would control about 20% of the U.S. convenience store market, according to retail industry data tracker GlobalData. Independently owned stores, however, represent the largest portion of the U.S. sector with about 92,300 stores, according to the National Association of Convenience Stores, about five times bigger than the proposed combination of the U.S. stores of Couche-Tard and 7-Eleven.

Globally, the combination of Circle K and 7-Eleven would create an entity with about 100,000 stores, becoming the world's fifth-largest convenience store operator, according to Colliers.

The proposed 7-Eleven acquisition could face regulatory challenges, according to GlobalData and recent history, namely the antitrust concerns raised over supermarket giant Kroger's $24.6 billion proposed acquisition of Albertsons Cos. The Federal Trade Commission and several states have sued to block that deal. The grocers contend they must merge to effectively compete against Amazon, Walmart, Target, Aldi and smaller regional and ethnic-food chains.

Last month, Kroger and Albertsons temporarily paused their proposed deal, agreeing to a temporary injunction tied to a lawsuit filed by Colorado Attorney General Phil Weiser on the grounds that it could impede competition and harm consumers, workers and suppliers. Kroger and Albertsons have agreed to divest nearly 600 stores to allay government concerns.

The best way to profit from prepared food sales is for a convenience store company to control every phase of the process — from making food at industrial-sized kitchens to distributing the products to stores via company-owned trucks, said Dignam with Anchor Point Capital.

Couche-Tard has not commented on the reasons behind its bid for 7-Eleven. But 7-Eleven, owned by the Japanese company Seven & I Holdings, is ramping up its prepared food offerings. In April, 7-Eleven acquired 204 stores owned by Sunoco operating under the Stripes and Laredo Taco brands for about $1 billion.

7-Eleven both makes its own food and contracts with third-party suppliers. One supplier to 7-Eleven, Warabeya Nichiyo Holdings, makes food at commissaries in Stafford, Virginia, and Lewisville, Texas.

“We will accelerate our investments expanding our food and beverage modernization platforms in our stores,” Joe DePinto, CEO of 7-Eleven, said in an April conference call. The investments will be targeted at fresh foods, grab-and-go hot items and 7-Eleven-branded food items.

Stores that already have these upgrades, DePinto said, “have significantly outperformed stores without them."

For other convenience store owners, they'll need to make sure they're keeping up, said Wolfe with Marcus & Millichap.

Rival c-store chains are racing to bulk up their portfolios to get a piece of the pie. Last year, BP spent $1.3 billion to purchase TravelCenters of America, and regional c-store chain Casey’s General Stores recently reached an agreement to buy CEFCO for $1.15 billion. Meanwhile, Sheetz, Wawa and other chains are entering new states through ground-up construction.

As convenience stores expand offerings of prepared food, executives acknowledge they’re coming into more direct competition with fast-food restaurants. C-store executives want to strike a balance between selling high-quality prepared food and lower prices than fast-food rivals. That’s an especially important topic when consumers are worried about inflation and Democratic presidential candidate Kamala Harris has proposed a ban on price-gouging, according to media reports.

“Inflation is real and remains impactful to our customers,” Andrew Clyde, CEO at Murphy USA, said during an Aug. 1 conference call. Murphy operates 1,120 convenience stores in the U.S., according to the National Association of Convenience Stores.

Clyde noted that fast-food restaurants have recently offered more discounts to combat the perception of price inflation.

Casey’s General Stores, which operates 2,642 stores primarily in the Midwest, recently added a new thin-crust pizza and improved its sandwich offerings. While prepared foods carry higher margins than packaged foods, Casey’s still needs to be seen as cheaper than fast food, CEO Darren Rebelez said during a June 12 conference call.

“With respect to the value, what we’ve seen, and I think it’s been broadly recognized in the restaurant industry, that restaurants have [raised prices] over the last couple of years and we’ve probably taken a little bit more measured approach to that,” Rebelez said.

Casey's is joined by rival chain QuikTrip, which has been selling nitro cold brew coffee on draft. 7-Eleven, for its part, is countering with chicken curry rice balls, all part of the focus on undercutting those higher food prices elsewhere as a result of inflation.

When BP acquired TravelCenters and its 280 U.S. locations across 44 states, the companies noted that about 70% of TravelCenters’ total gross margin is generated by its convenience store business, almost double that of BP’s global convenience gross margin. TravelCenters’ portfolio included more than 600 full- and quick-service restaurants.

The large c-store chains are also investing in industrial real estate. Kwik Trip, a Midwest-centered regional chain, recently started construction on a new distribution center near Madison, Wisconsin, to supply about 350 stores.

Casey’s maintains three distribution centers, including its largest, a 340,000-square-foot facility in Terre Haute, Indiana, according to its 2024 annual report. Its other distribution centers are in Ankeny, Iowa, and Joplin, Missouri. Casey’s also maintains a fleet of about 420 trucks.

"The smaller format and essential product mix of convenience stores make them less vulnerable to challenges faced by larger retail formats, driving strong consumer demand for quick, accessible shopping experiences," Colliers said in the report.

CoStar News' reporter Linda Moss contributed to this article.