The ability to offer fresh food daily is a result of the company's combined distribution center (CDC) in Seattle, which opened earlier in the year. By partnering with suppliers, several stores in the Pacific Northwest region are now able to order and receive fresh-made-daily and delivered-fresh-daily pastries, gourmet sandwiches, wraps, entrees, as well as other ready-to-eat foods.

To meet the challenge of delivering a daily selection of foods, Keyes said 7-Eleven has upgraded its infrastructure, from new store displays to a proprietary network of a bakery, commissary, and the distribution center, which is equipped with a 22-truck fleet. Once clerks are trained, a store can place an order, have the items prepared fresh and on its store shelves in less than 24 hours.

In early April, 7-Eleven also negotiated a two-year extension on its service agreement with McLane Co., which supplies approximately 5,300 7-Eleven stores in the United States. (The retailer has a total of 5,809 stores in the United States and Canada with the global 7-Eleven-store count reaching 28,064 stores worldwide.) 7-Eleven and McLane agreed to terms that provide enhanced benefits and improved service to 7-Eleven's stores, including requirements designed to improve on-time deliveries and in-stock levels.

"Critical mass in fresh food works," Keyes said. "The bigger we get the easier it is to grow the fresh food business."

Capitalizing on its team-merchandising philosophy, 7-Eleven has also been successful in uniting with suppliers to co-develop products, including the joint branding venture with Hershey's. Extending from the successful Take 5 candy bar, 7-Eleven now sells the Take 5 brownie—a move that has increased brownie sales by 50%.

Keyes also noted that for stores with a gasoline component, stores reported 544.5 million gallons for the first quarter, essentially showing no change from the same time last year. Average gallons sold per store for the quarter grew 0.8%, on top of a 6.5% increase in the first quarter of 2004. Total gasoline revenues for the quarter were $1,074.3 million compared to $923.2 million in the same quarter a year ago. The 16.4% increase in gasoline revenues is principally due to a 27 cent-per-gallon increase in average retail gasoline prices year over year.

"In the face of a difficult wholesale market with significant cost increases in the second half of the quarter, we were pleased with our cent-per-gallon margins," Keyes said. "As we begin the second quarter, we have seen a decline in wholesale costs which has contributed to higher cent-per-gallon gasoline margins in April."