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Canadian Tire Corp. Ltd. plans to expand and improve convenience stores at its gas stations in a bid to shake up the so-called "c-store" market and pump up business.

Dubbed "Operation Leapfrog," Canadian Tire is looking at developing a totally new format for its convenience stores in a market that is "underdeveloped" in this country, company president Wayne Sales said yesterday.

"You will see a new format for convenience stores going forward," he told a CIBC World Markets Inc. conference in Toronto.

He said the company is closely studying other c-store models, and pointed in particular to the Sheetz Inc. chain of family-owned convenience stores.

Based in Altoona, Pa., the 280 Sheetz outlets in five states are known for their award-winning food, innovative technology and attentive customer service, industry watchers said.

Observers said Operation Leapfrog could put a dent in rivals' c-store businesses.

"It definitely is going to steal away from the typical corner grocery store," said analyst David Schroeder at Dominion Bond Rating Service Ltd., who sat in on Mr. Sales presentation.

Canadian Tire's aggressive c-store plans come at a time when gas stations have been chasing that retail business as they face increasingly slim profit margins from gasoline sales.

Stations run by Imperial Oil Ltd.'s Esso division, Petro-Canada and others have been racing to polish their c-stores, adding food and auto services, bank machines and clean washrooms.

Now, with Canadian Tire set to raise the ante, the industry might feel some pain, said Jane Widerman, editor of industry publication Your Convenience Manager.

She said Canadian Tire already has an edge on competitors because of its high profile and 450 namesake stores across the country.

"Canadian Tire has already been a force to be reckoned with," she said. "I would definitely think that this would be something that other gas retailers should take notice of."

Scott Bonikowsky, a spokesman for Canadian Tire, said later that the chain now operates 212 gas bars and "eventually" wants to have as many stations as stores.

Almost all the gas bars have a small kiosk selling chocolate bars and lottery tickets, but the overall selection is extremely limited and the space is tiny.

He said the new c-stores will not necessarily be on the site of each Canadian Tire store and gas station "but certainly in the same community."

He would not elaborate further on the new c-store offering, rollout schedule or revenue potential.

"There is significant growth potential by capturing similar convenience sales per site as other gasoline retailers, such as the integrated oil companies," Mr. Bonikowsky said.

Last fall, Toronto-based Canadian Tire teamed up with Quebec convenience store retailer Alimentation Couche-Tard Inc. to open co-branded gas stations with convenience stores in western Quebec and Ontario.

Under that deal, Canadian Tire is changing four existing Couche-Tard gas stations to its Canadian Tire Petroleum brand, while Couche-Tard is switching four c-stores at Canadian Tire gas stations to its brand.

Couche-Tard runs c-stores under such banners as Mac's, Becker's and Mike's Mart.

The retailers also said that they planned two more gas station sites and two more c-stores for a total of 12 sites in the pilot program.

Yesterday, Mr. Bonikowsky said the agreement with Couche-Tard is a "stand-alone" one and "our review of the convenience business might potentially include partnerships, but certainly isn't driven by our existing relationship with Couche-Tard or anyone else."

As for Sheetz, industry observers praised Canadian Tire's decision to single out that c-store operator.

Ms. Widerman said Sheetz pioneered pay-at-the-pump technology, which allows customers to pay in cash.

She said Sheetz is known for high-quality prepared takeout foods and "we're not talking Swanson Hungry Man . . . Their sites are absolutely beautiful, well lit with an extraordinarily effective use of signage. They're appealing places to shop.

"If Canadian Tire is modelling on the Sheetz format, then that's certainly a good way to go."