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  • Writer's pictureJSO Valuation, Ltd.,

The chipping away and the underlying value of the Convenience store.


Gas stations and convenience stores — a retail segment with more than $650 billion in sales — are coming to terms with a world where significantly fewer people smoke, more are buying less fuel with less stops to the filling station and finally their need to ask for directions. All very 1960s and 1970.

In recent times however, most significant change to the landscape just occurred when California regulators on Thursday (August 26, 2022) voted to enact a sweeping plan to first restrict and ultimately ban the sale of gasoline-powered cars. This is a move that the State of California has described as the beginning of the end for the internal combustion engine. It was also a move that will over the next decade change the face of the average gasoline station in the United States.

The rule, issued by the California Air Resources Board, requires that all new cars sold in the State by 2035 be free of greenhouse gas emissions like carbon dioxide. However more importantly, rule sets interim targets, requiring that 35 percent of new passenger vehicles sold by 2026 (three years from now) produce zero emissions. That requirement climbs to 68 percent by 2030.

California is a world-leader in[1]:

  • strict emissions legislation

  • significant incentives to promote the sale of low emission vehicles

  • strong support for public and private EVSE installations (through the US$2 billion Electrify America campaign kindly provided by VW as their mea-culpa for Diesel-gate) and

  • a broad public EV information and education campaign (again, via Electrify America).

Here were the top five best-selling cars in California in 2021[2]:

  1. Toyota Camry: 61,599 units

  2. Tesla Model Y: 60,394 units

  3. Honda Civic: 59,818 units

  4. Toyota RAV4: 59,153 units

  5. Tesla Model 3: 53,572 units

To make this work however, automobile prices for the ‘Average Joe’ need to be significantly below the Tesla Model three which is selling for $53,500. There will need to be a significant push towards the price tag hovering between $20,000 and $30,000 per unit.

In addition to this sweeping new legislation, more than a dozen other States - which, together with California, represent roughly one-third (c. 4.62M units) of the American auto market - typically adopt California’s stricter standards on car pollution. Many have signaled that they will follow suit on the new rule, and five states are already actively preparing legislation to do so. But the speed and sweep of those decisions could further complicate the rollout because scale matters: A larger market could push down prices for electric cars because of manufacturing efficiencies. It on the other hand could force prices higher if it causes more production bottlenecks like those that are already plaguing the auto industry[3].

Then there is the question of charging stations, which has seen some more of a push back our recent years. The idea of making a coast-to-coast road trip in an electric car still seems for the typical person just a little bit out of reach. It’s our understanding that the current administration is focused on these charging stations. The idea however that older gas stations are going to become simply new charging stations is a little bit rich. They would still have the convenience store, and by the fault a little bit of extra parking… It would all come down to the highest and best use of the actual site itself. Many suburban and definitely many rural filling stations would not be under such pressure to demolish and rebuild. However urban settings where the land is typically significantly more valuable, would have a completely different highest and best use that in all likelihood would not be compatible with the automobile industry.

After the recently signing of the expansive climate legislation, President Biden and his administration are now planning a series of executive actions to further reduce greenhouse gas emissions and help keep the planet from warming to dangerous

temperatures. The President is on track to deploy a series of measures, including new regulations on emissions from vehicle tailpipes, power plants and oil and gas wells, the officials said.

However, even with what is going on in California and the other states that will in all likelihood follow, by 2030 the United States will still be approximately 8% above its target emission output levels which are 50% below those of 2005. The year 2030 is still a relatively long way off and one can expect some new technological breakthroughs in the coming years that will have a significant impact on achieving the 50% goal.

Greenhouse gases trap heat and make the planet warmer. Human activities are responsible for almost all of the increase in greenhouse gases in the atmosphere over the last 150-years. According to the EPA, the largest source of greenhouse gas emissions from human activities in the United States is from burning fossil fuels for electricity, heat, and of course transportation.

The transportation sector generates 27% and has the largest share of greenhouse gas emissions. Greenhouse gas emissions from transportation primarily come from burning fossil fuel for our cars, trucks, ships, trains, and planes. Over 90% of the fuel used for transportation is petroleum based, which includes primarily gasoline and diesel. So even if every single state had a similar goal as California, transportation pollutants will never hit zero.

Interestingly enough France is in the process of banning private aviation for short haul travel, A report from Transport and Environment (T&E), the European federation for clean transport, found that private jets are up to 14 times more polluting than commercial flights per passenger mile, and 50 times worse than trains. France however is unlikely to impose a total ban on these jets. Private jets had become a major source of outrage lately, as the city-hopping exploits of celebrities and billionaires came to light. Cited was a jet belonging to Steven Spielberg that burned around €117,000 worth of fuel in the two months since June, according to flight tracking data. But a lot more interesting is under the current climate bill approved in April, France banned domestic flights to cities which are just two and a half hours away by train. Transport minister Clément Beaune is now considering outlawing private flights to destinations that are well served by trains or commercial airlines.

As much as Europe has the ability to control short haul flights, in the United States these are the main-stays for so many smaller communities being connected to the major hubs. Without these connections, the smaller Tier 3 towns could well be meaningfully economically disadvantaged, unlike Europe the US do not have the same type of passenger train network or even a single high-speed line connecting major point-to-point destinations. Therefore, there is appreciably more interest trained on gas-fired cars and then by extension the fueling stations to keep them going.

Finally in the last seven days of August 2022 Honda Motor Company, Ltd and LG Energy Solution of South Korea reached an agreement to build a $4.4 billion factory within the United States for the mass production produce lithium-ion batteries electric batteries to supply the power for the Honda motor company within the United States. LG Energy Solution which employees personal 20,000 people were spun off from South Korea biggest chemical plant LG Chem. This cannot be considered a chump change investment, and it was only in January of 2022 that Honda was looking at 2040 for the conversion of its entire flight to electric within the United States. Well the location of the new facility has not been revealed, groundbreaking is set for early 2023 with mass production started in 2025.

We have covered a brief outline of the effect over the next decade on the type of cars to be sold within the United States. The state of California is very good at enforcing its own rules, so one can expect that while the exact targets may not be met, it is safe to assume that they will be close. This of course has been coupled with extra credit to automobile maker’s (Original Equipment Manufactures - OEM) who meet their sales quota. This is also coupled with the fact that recent consumer reports have found that 14% of Americans would definitely buy or lease an electric vehicle (EV.) This is a 4% increase from 2020 and if you consider the other 22% who are currently on the fence regarding EV transportation, the consumer numbers are therefore closer to 30% of all purchases already (assuming the OEMs can supply the cars.) Which one of the main Original Equipment Manufacturers, Ford, already moving to Electric transportation, it will not be too long before General Motors moves in the same direction. It is safe to say at this point that the current administration along with individual State requirements and investment from large corporations are rapidly changing the landscape for the internal combustion engine.

Where are we going?

What happens to all of these gasoline stations throughout the United States of America? Currently there are 148,006 (2022 – source NACS) retail locations in the US that sell fuel oil (gas) to the public. At a glance, the number of outlets has been declining over the past five-years where it hit a high is 154,958 (2017 – definitely pre-pandemic) with stricter competition, stricter environmental regulations, changing retail designs and a shrinking margin on the actual sale of gasoline. However, there are many more influences that may well shrink the overall number of stations even further over the next decade. Some of these gas stations are located on prime property, and with the shrinking margins and the myriad of other issues that are affecting them, their highest and best uses are likely to change with demolition and reconstruction in a different direction most likely.

Convenience stores are now so common across the United States that 93% of Americans live within just a few minutes of one. One out of every three locations in America is a convenience store. And most of them sell fuel. About 80% of convenience stores in the U.S. are also gas stations, and 80% of the fuel sold in the U.S. is sold at convenience stores. It is assumed that there is an urban – rural curve in these statistics.

More than 60% of convenience stores are independently owned. Companies with more than 200 locations grew in 2019, while companies with fewer than 200 locations shrank their store counts, according to the National Association of Convenience Stores, a trade group.

The Economy.

It used to be - when gasoline sales declined - it was an excellent indicator of a contracting economy. However, this is going back almost 20- and 30-years where there were no other major influences on the sale a fuel oil. Back in 2012, The Insider noted that over the past 10-years the year over year sales of fuel oil had been declining. Therefore, a contracting economy can only be considered to be one of many influences but not the major one where sales reflected economic recession and growth. The writer is not dismissing this as a less relevant indicator, it’s just that there are many other indicators that are now part of the overall mix.

Types of stores

Almost every single gas station has converted it’s building into some type of C-Store (convenience store.) Today, convenience stores have six identifiable formats (NACS.)

The kiosk, mini and limited selection are those that are most likely to have difficulty competing with the expanded and hyper convenience stores that are being developed across the nation. In cities such as Chicago, there are a myriad of convenience stores between 11,000 ft.² and 15,000 ft.² of land area. For the most part these either have a kiosk or mini convenience stores on site. The kiosk and the mini convenience store are the stations that are in the highest risk category of closure. This is not a hard and fast rule as we have been in several mini convenience stores that have been able to adapt, increased SKU lines in different areas, and have stayed relevant in their own neighborhoods. But the decline in convenient stores which is expected to continue (and unfortunately potentially accelerate) will be mainly in this category. The kiosk which is less than 800 ft.² simply does not have the ability to develop a robust retail trade. As we have mentioned before, their actual locations are going to affect their demise based on the highest and best use of the underlying land.

As we stated there are 148,026 convenience stores operating in the United States. Close to 80% of these convenience stores (116,641) sell fuel oil. The industry continues to be dominated by single-store operators, which account for a shade over 60% of all locations.


What are some of the main obstacles that are currently leaning in and affecting the overall process of gas stations?


In Chicago because of local taxation policies there is approximately an additional dollar of tax on the sale of a gallon of fuel. The immediate collar towns have been able to take advantage of this tax with their own levies. The Village Skokie being one of the worst offenders. Nevertheless, the southern portion of the city that borders State of Indiana have to compete with this tax and also have to compete with significant lower prices across the State line. This tax, and their proximity is an excellent indicator as to the negative effect of local taxes on the sale of fuel oil sales and especially on gas stations. Therefore, while economic indicators such as the ebb and flow of the national economy affects sales, so does local taxation.

In Cook County Illinois, the current property tax Assessor had no knowledge of real estate prior to being elected to this position three-years ago. This lack of knowledge and his reliance on statistics as a means to creating value for taxation purposes has added to the stress of all of the independent owners of gasoline stations. There is also no acknowledgment from the Assessor’s office in Cook County that many of these independent stations are under severe financial pressure. There is also no acknowledgment that their policies are having a direct effect on their demise. It’s really a department that has subscribed to absolutely no newspapers whatsoever.

Fuel efficiency.

How does fuel-efficiency change the dynamics of the sale of fuel oil within the United States? First of all, on the most basic level, fuel efficiency refers to the distance you can travel on a defined amount of gasoline. This can be measured as gallons per 100 miles or miles per gallon. On first blush one could say sadly since the current fuel-efficiency is stuck on 24.9 miles per gallon. That really is unchanged from 2019 even with all of the advances in technology that have taken place. One can assume that efficiencies within the internal combustion engine are yet to come? If you are very wealthy and can afford either a Bentley or a Rolls Royce, you can expect 14 miles per gallon. Back to realism, on the hybrid side, the Toyota corolla weighs in at 52 miles per gallon, the Toyota Prius has 56 miles per gallon and a Hyundai Ioniq Blue is reporting 59 miles per gallon. Other examples are the subcompact Chevrolet Spark weighing in at 33 miles per gallon, the Mini-Cooper convertible, 32 miles per gallon and the Volvo V90CC V6 AWD is achieving 25 miles per gallon[4]. The EV are pulling up the numbers the range of 79 miles – 231 miles per gallon. But since they don’t use gasoline, I’m not quite sure how that number is achieved[5]. Blended miles over the entire US fleet? Nevertheless, automobiles are achieving more miles per gallon, and this is certainly having a direct and tangible effect on gasoline sales.


There are fewer teenagers are getting licenses (as of 2012), "with the decline accelerating rapidly since 1998 – Time." There’s a smaller proportion of 20-somethings on the road nowadays as well. In recent times, 22% of drivers were under age 30, compared to roughly one-third of the licensed-driver population in 1983. This is a significant shift akin to when Malls closed the food courts and chased teens way from their properties. That worked out stunningly well for them as teenagers grow up without a mall experience and therefore were just not inclined to visit these types of properties. As these teens who are not driving age, they will not be using the services of convenience stores. But what else is behind this shrinking population of drivers?

1. Teens experience severe testing anxiety.

2. Teens want to protect the environment from pollution and reliance on fossil fuels

3. Teen parents make them anxious in undermine their decision processes while driving.

4. Teens are more likely to get into an accident and they do not care for the trauma this inflicts on them.

5. Teens lack interest in learning how to drive especially with all of the other options available to them today. It’s ranges from Uber/Lyft rides, scooters, bicycles and expanded public transportation that has incorporated the latest technology. If one wants a bus today, just check on the telephone as to when the next bus will pass your stop.

All of these reasons may seem trite, but it is a further nail in the coffin of convenience stores that specialize in selling fuel oil.

Trip compression.

In response to the spike in gasoline prices since the start of the Ukrainian war with Russia a very high percentage, potentially as high as 70% of consumers are combining errands and trips result of these gas prices. The same is true for multivehicle household who are also making strategic allocation of vehicle use. An example of this is where adults who are not working from home are more likely to take public transportation to work.

Staying relevant

The smaller kiosk and mini stores will always find it difficult to stay relevant since they simply don’t have room for additional SKUs. Staying relevant however is potentially the key to survival. There are approximately 289 million cars on the road today and the average age is 12.1 years. However, over the next few years this age is going to grow simply because there have been so few new cars available for sale in 2021 and 2022. 2023 is not looking much better. One can say that the used car market is hyperactive with many irrational prices being paid. Therefore, even with hundreds of thousands of EV vehicles coming online, clearly the local gas station is here to stay for many more years. But they still have to make money.

The effort to stay relevant is narrowly focused on staffing levels. In 2021, full-time store associate turnover was 118.8%, and part-time associate turnover jumped to 181.6%,

according to the NACS State of the Industry Compensation Report of 2021 Data. Both of these turnover rates represent significant increases from the prior year.

There is almost no way to reinvent your retail space if you have all new and different employee every month. Staff training, familiarity, etc., are all going to affect how the C-Store is operating. Restaurants have had some of the same issues, but the turnover in gas stations especially has to be having a significant effect on their profitability. The effect on the profitability is going to filter down to ability to stay relevant within their neighborhoods.

There have been many changes over the last 10- to 20-years with the biggest being the size of the buildings growing to +4000 ft.² and having additional components attach them such as telephone stores, banks, quick service restaurant, etc. Those components are on a lease bases, but clearly they are adding to their revenue pool and shrinking their overall risk. The sites which are in excess of 50,000 ft.² also had ability to put in EV charging stations without actually changing the overall composition of the site layout. Within the C-Stores themselves there have been the greatest changes. No longer are they relying on cigarettes and soda to cover their costs and make a profit, but there are sandwich bars salad bars fresh food including vegetables, a myriad of frozen products, sale of alcohol – which has been a significant benefit, etc. The layout, the lighting, the cleanliness and the lack of any smell of fuel oil has propelled sales in these stores to almost $700 billion a year. However not everyone has been able to take advantage of this. Again, if you are in Chicago on the 13,000 square-foot side and a 1,200 square-foot building, one has limited options. Even alcohol sales are not allowed.


Many of these convenient stores with a fuel oil component were build at the time when gas guzzlers ruled the streets. It certainly is not uncommon to have two- or three-underground tanks, what is different however is the size of these tanks. In a property that we recently were involved with they had two 10,000-gallon tanks and one smaller diesel tank. The two large tanks carried premium and regular gas, but within the neighborhood it was located the only type of gas sold was regular, therefore the 10,000-gallon tank carrying the premium supply was barely used. This is not uncommon, but there is constant need to monitor all of the underground tanks and at some stage they will have to be dug up and replaced. This is where on these smaller sites in urban areas the highest and best use may currently be an interim use, what developments in a different direction sometime in the future.


We have covered several areas that are exerting pressure and not just a major chain gasoline fueling stations, but the 60% of the total inventory that are independently owned. In our interviews with owners there is almost a uniformity in their responses. They range from customers not filling up the cars anymore, decline and customers due to their inability to fuel their cars due to the price of fuel oil. They talk about the influence of EVs, ride sharing, expanded public transportation, bicycles both privately owned and those for rent on the street, fewer teenagers, taxes on what would be ‘sin products’ such as cigarettes and alcohol, the inability to get a license in Chicago to sell alcohol because they also sell gasoline.

Published margins which are average for the country have topped $0.20 per gallon. However, in Chicago most operators that we talk to has stated that their margin is still between 12 ½ cents and $0.15. The margins within the C-Store itself still ranges around $0.35, but now the issue as we saw above is finding employees, where nobody wants this type of job, especially the third shift.

We have not interviewed a single person who is bullish on the industry. As a general rule they have seen fuel oil monthly sales declined anywhere from 10% to 20%. This can range from 5,000 gallons per month to as high as 20,000 gallons per month. In simply doing the math on this using the lowest possible margin, the revenue number highlights distress these independent operators especially are under. The larger owners, +200 stores etc. are somewhat insulated due to the amount of additional revenue sources they have been able to generate.

As you can imagine the California EV law will have yet another significant impact simply due to the number of States that will follow California and enact similar regulations and legislation. Detroit also looks to California and tends to tailor their cars to that States requirement. Some Republican governors in southern and middle America States trying to sue the federal government, but it is unlikely that the US Government will not issue the same waivers it is always issue to the State of California when their environmental laws are stricter than those of the federal laws. The prior president came right up against this very same problem when he believed that he could force lower omission standards on California.

While the local convenience store that sells gas will be around for several more years or even longer, the operators of these particular establishments are going to see their values in their real estate decline. Some a little, some by a lot. The pressures we observed above, simply are coming from too many directions and from our interviews gas revenue has taken a significant downward turn. At some stage the owners of these convenient stores selling fuel oil you need to do some kind of analysis, such as a feasibility analysis, as to their long-term prospects and alternative uses for the particular site. One suspects an excellent place to start is to review with the revenue sources over the last 10-years and the cost of creating that revenue.

Many operators will hang on, but those who bought at the height of the market are potentially less likely to ever recover their equity. They will simply have a return on equity but no return of equity. Their sale maybe just the vacant land.

[1] California Car Stats – and what they mean for the rest of the world, August 20, 2019, Bryce Gaton, The Drive-In [2] Fred Lambert - Feb. 9th 2022, Electrek [3] Here Are the Challenges Ahead for California’s Ban on Gas Cars, Lisa Friedman and Brad Plumer, August 26, 2022 [4] [5] US Department of energy, energy efficient and renewable energy, government source for fuel economy information.

John O'Dwyer is the president of JSO Valuation Group, Limited. This is a national appraisal firm located in Evanston Illinois. JSO specializes in valuations of low-income limited-equity cooperative housing, self-storage warehouses, community or club swimming pools, convenience stores along with the traditional commercial buildings such as offices, retail and industrial properties. The firm has an emphasis on property taxes appraisals, estate valuation and insurance valuations. In addition to position papers on the commercial swimming pool industry, Mr. O'Dwyer has also written on the automobile industry, convenience stores with gas stations, death industry, automobile dealerships, and the early stages of the coronavirus and its affect on real estate, to mention a few.

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