Delis, milkshakes and liquor: How gas stations aim to survive in Michigan
Gas station expansion is happening across Michigan, with local and multi-state operations seeking to open stores. Station profitability is expected to increasingly come from non-fuel sales. Paper and Lens Co / Shutterstock.com.
by Paula Gardner (Bridge Michigan)
Will electric vehicles and other mobility changes kill Michigan’s 5,000 gas stations?
Some larger chains are betting that custom deli counters, milkshake machines, 24-hour kitchens, additional vape flavors — and perhaps even liquor sales — will forestall the demise of gas stations as they evolve into larger, more innovative convenience centers.
Five years ago, a national report by the Boston Consulting Group estimated that 80% of retail fueling would be unprofitable by 2035, predicting that one-fourth of the world’s gas stations would close by that time frame as a transition to EV’s accelerated.
Instead, in Michigan, handfuls of gas station operators say they are seeking to open new stores, including regional superstores that are looking for sites in the state.
They include the third-largest national convenience store chain, Casey’s General Stores, which plans to add 350 stores — some by acquisition — in Michigan and other states over the next three years. The company opened a store in southwest Michigan’s Watervliet in 2018 and another in Bridgman along Lake Michigan in 2022.
Sheetz, the 24/7 chain based in Pennsylvania, is planning sites in Romulus, Fraser and Rochester Hills. Romulus is approved, though Fraser planning officials voted to deny site plans in that city and the company has withdrawn a proposal in Rochester Hills, the city told Bridge Michigan.
Cult-favorite and Texas-based Buc-ee’s massive travel centers, the size of a big grocery store, are not yet in Michigan but is moving into suburban Dayton, Ohio this year.
Michigan’s gas station expansion comes as the national number of gas stations has declined over the past 30 years, including since 2017 when fuel economy increased, leading to lower fuel sales. Fuel itself generates low profit margins, as little as 2% of a convenience store’s profits.
The expansion also is taking place as the auto industry expects EVs to eventually overtake gas-fueled autos, though the pace of that change may be slower than anticipated.
While the newer stores are built around fuel sales, they also call for a freshened business model: amped-up convenience stores, new product pairings and increased attention to serving customers who may not even want gas or a charge-up.
They also are more likely to be chains. (Most Michigan gas stations are independently run.)
“Retailers understand their survival depends on expanding (their) value … far beyond their core business,” Boston Consulting wrote about gas stations in 2023, updating the earlier report and noting that fueling centers and their convenience stores have strong assets: great visibility, many repeat customers and locations that could allow them to remain transportation hubs as mobility shifts to shared platforms.
The most innovative gas stations, the report said, “are pursuing everything from mobility ventures and battery-management systems to food delivery and carpooling services.”
Chain operators “think there’s an opportunity to come in (to Michigan) and kind of show the market that they can do things differently and better,” said Kraig Elliott, president of Michigan-based FastLane, which it operates for Corrigan Oil of Brighton. FastLane is focusing on its own improvements at its 11 gas stations with convenience stores, including finding the right mix of hot food, with some thought to adding more car washes to gas stations.
Fueling EVs
Many newer gas stations are at least preparing to answer the question of where to put EV chargers as demand grows. Slower-than-forecast EV sales are giving operators more time to figure that out.
“There’s no question that EVs are the future. What is the question is when that future will be?” Jeff Leonard, spokesperson for the National Association of Convenience Stores (NACS), told Bridge Michigan.
More than 1.4 million electric vehicles were sold in the United States in 2023, a 50% increase from 2022. That means about 3 million EVs are on U.S. roads, Leonard said, compared to 290 million vehicles with internal combustion engines.
The slower pace of EV sales offers a bit of a reprieve for the petroleum industry. There will be other consequences as well. A planned investment in thousands of EV-related production jobs is also anticipated to come more slowly. And state lawmakers may also have more time to find a solution as they mull whether to de-couple state road repair funding from gas purchases.
Environmental concerns about continued gas-fueled transportation remain. Michigan continues to build an electric vehicle charging network, while Gov. Gretchen Whitmer is again proposing EV subsidies to make the vehicles more affordable.
Some gas chains, like Sheetz, are adding EV charges to all of their fueling centers. Michigan-based Fastway tried it, company president Elliott said, but very few drivers use them.
Adding a fast-charging station to a gas station costs about $100,000, said Mark Griffin, president of the Michigan Petroleum Association and the Michigan Association of Convenience Stores.
Across most of the industry, including at Corrigan, “owners who put the money into the (EV) infrastructure I don’t think are necessarily seeing the return,” Elliott said.
Coffee bars and hot foods
Food sales may account for up to 40% of a gas station’s profits today, so that’s the first place convenience stores are looking to boost sales.
Today’s twist, Ellott said, is “make-it-your-way” customization, already in play with coffee bars at stations like Speedway, “roller bars” of hot foods, or made-to-order foods at an adjacent restaurant.
Next up, Elliott said, is “more of a premium experience with cold brew and nitro brew coffee and some of the specialty beverages that are now hitting the marketplace.“
The new Sheetz in Romulus will feature touch screen ordering at a custom deli counter, milkshake machines and a 24-hour kitchen when it opens by the end of this year.
Iowa-based Casey’s in southwest Michigan offers delivered pizza, which reaches more than traveling customers — food delivery allows the company to bring products into nearby homes, which could be a growth area for gas stations.
Across the state, gas stations may offer liquor along with beer and wine — but only if convenience stores can change state rules that require a $250,000 deposit by a station seeking to sell spirits, said Griffin of Michigan’s petroleum industry association. Today, few can manage to pay that amount, he said.
Griffin said the convenience store association is working with the Legislature to allow liquor sales at gas stations without a steep deposit.
Meanwhile, new gas station plans are getting mixed reactions in Michigan communities, some of which are balking at proposals for larger stores. Eastpointe, Fraser, and Attica Township, near Lapeer, are among the communities that have rejected proposals.
Genesee Township, Flushing Township, and Union Township near Mt. Pleasant have approved recent proposals. More are expected, Griffin of the Michigan petroleum industry said.
Griffin said station plans will continue to evolve, as they have since earlier changes, such as pay-at-the-pump systems. Station owners have evolved to adjust to revenue hits, such as a sharp drop in profits from cigarette sales. The focus will remain on how to offer more options, and convenience to customers.
“Convenience stores are unique in that they are the only retail format that’s defined by a concept and not a product,” said Leonard of the NACS. “Grocery stores sell groceries, drugstores do drugs … right down the list. “
When it comes to convenience stores, they’re built on a concept, Leonard said, “and it’s always evolving. It’s whatever the customer says is convenient.”
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