August 3rd, 2009 by Bruce

Several decades ago, a gas station was a gas station, and a convenience store was a convenience store. If someone had predicted back then that these two very different businesses would join in holy matrimony and become a fixture on America’s highways and byways, I wouldn’t have believed them.

But when you stop to think about it, it’s a marriage that makes a lot of sense. When people pull in for fuel, why not provide them with the opportunity to spend even more cash on the items that they may also want – coffee, soft drinks, snacks, and other low cost items? Maybe even a pair of sunglasses to cut the glare of the road?

So, why not jump at purchasing a convenience store when you purchase a gas station?

Well, perhaps… But before you choose what you’re going to do, you should answer these two fundamental questions:

• Question #1. If a convenience store is already part of the gas station business, is it profitable? If it’s not currently profitable, can you make it financially worth your while?

• Question #2. If a convenience store isn’t already part of the business you’re considering, does it make sense for you to add one? Bear in mind that you need not hurry to add one, if none is present. You can add one later, when it makes financial sense.

Estimating Potential Costs and Profits.

Whether or not a convenience store is currently part of the business you’re thinking about buying, here is a checklist of expenses that can assist you with evaluating the additional costs. Compare these expenses to the profits (or potential profits) and you will be able to roughly estimate a convenience store’s possible profit potential. Never accept the Seller’s figures regarding these expenses. You’ll have to look everywhere you can to produce cost estimates that you can personally verify.

Insurance – If there is already a convenience store, how much does insurance cost? Keep in mind, the level of insurance that’s already in place may not be sufficient. Speak with an insurance broker to determine what kind of coverage you really need along with the overall cost. You’ll rapidly realize that if a convenience store is part of the deal, you’re going to need quite a bit of extra coverage for liability, workers compensation for employees, and more…

Payroll – You’ll have to hire and pay employees to staff your convenience store. You may also have to pay out for benefits. Ask the Seller of the business about who staffs the store. If he or she is using underpaid relatives to staff it, it can be difficult to arrive at an accurate picture of what your payroll will be once you are the owner.

Utilities – Convenience stores need to be well lit. They also need to be heated in winter and cooled in summer. Those costs can really add up.

Retail Payment Systems – These include accounts to process credit cards, cash registers and more. If up-to-date systems aren’t in place, you will need to upgrade all of them.

Lottery Terminals – Many shoppers buy lottery tickets when they buy gasoline. Adding a lottery terminal might seem like a great way to generate income, but before you start counting on this extra income, check with your local state lottery authority to learn about the costs involved with owning a terminal.

Signage – To maximize profits, you’ll need high-visibility signage to show customers that a top quality convenience store is part of your business. If signs aren’t there, you’ll need to purchase them and put them up yourself.

Paving, Snow Removal, Landscaping and Other Associated Costs – Customers need to be able to park in convenient locations and walk safely to your store. Those points make it quite a bit more expensive to run a gas station and convenience store combination than it otherwise would be to run a gas station by itself.

Questions to Ask the Seller If a Convenience Store Is Already Part of the Business You’re Buying:

• What is your current inventory and what is it worth? (Remember not to count perishable items such as dairy products or returnable products such as magazines.)

• How much profit have you been generating from convenience store sales?

• Please provide an approximate breakdown of your revenues between gas sales and retail, and a further breakdown of the retail sales.

• Is your convenience store a franchise that is separate from your fuel operations?

• Do you operate the convenience store as well as the gasoline station part of your operation – or is the business split? If the operations are divided, how is that structured?

• Do you have automated inventory tracking and control systems in place?

• What products are you selling in your convenience store, and how much volume/profit is tied to each of them?

• Who are your suppliers for tobacco, beverages, coffee and all of the other retail offerings?

• Do you sell lottery tickets? What are the costs and profits?

• What hours are you open? Which hours of operation are the most – and least, profitable?

So, should a convenience store be part of the deal when you decide to purchase a gas station? Should you think about adding one, if none is already there? To find out what’s best for you, you should get a good pen and go through the checklist above. You should ensure you’re buying a station that’s profitable not only at the moment, but for many years to come.

Richard Parker is the President and founder of the Diomo Corporation – The Business Buyer Resource Center. His inspiring materials, seminars and consulting have assisted thousands of business buyers with achieving their life long dream of buying a business.

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August 2nd, 2009 by Bruce

If you’re considering purchasing a gas station, great idea! But should you buy a franchise or an independent? To ensure you’re making the best choice, take a bit of time thinking about comprehensive answers to questions similar to these . . .

Question #1: Who is on the hook for environmental problems?

Environmental compliance issues are the biggest difficulty in buying a station. If you run into problems with environmental laws, and have to pay out for expensive clean-ups or brand new equipment, it could mean closing your business. I’m not exaggerating! Here are some situations that you might not have thought about . . .

• Underground leaks. If one of your tanks springs a leak, who pays out for the cleanup – you, or the gas company you purchased the franchise from?

• New equipment. If every station across your state is immediately required by law to hook up a new kind of vent for underground tanks, you’ll have to pay out for that new equipment if you’re an independent station.

• Site remediation. If you sell your station, who pays for removing the underground tanks, cleaning up the soil and getting the certification that states your property’s remediation (clean up) has been approved by the state?

Question #2: If you buy a franchise, can you stop worrying about environmental problems?

In general, the answer to this question is yes. Your parent organization (Exxon, Mobil, etc.) will provide and install any new equipment that the state demands, and will come in to do the clean-up if one of your tanks starts leaking underground.

However, you should never make any assumptions in this area. You and your attorney have to comb through your franchising agreement to understand exactly what’s covered, and what’s not!

Question #3: If I’m buying an independent, what do I really own?

If you purchase an independent station that has no ties to a major brand of gasoline, the answer to this question is reasonably clear. You’re probably buying the business as an entity, as well as the real estate where the business is located, along with the tanks, pumps and other equipment that you’ll need to sell gasoline. Although, this situation can become more complex if you’re buying the business, but not the real estate (land, buildings). You and your attorney should really pin every detail down.

Question #4: If I am buying a franchise station, what do I really own?

The answer to this question can actually be quite a bit more complicated than you’d think. After you purchase, for instance, you may find that you own the building – but not the land and equipment, which are still owned entirely by the parent organization. Or you could lease the building and the land, but have the canopies, pumps and other equipment owned by the parent company.

Remember, different franchising organizations set up their ownership packages in entirely different ways. To discover whether or not the deal is good for you, you should study all franchise plans and documents very carefully with your attorney.

Question #5: If it’s a franchise, who pays for what?

If you purchase a franchise, you will likely be more than surprised to discover all the things that your parent organization expects you to pay out for. Some or all of these items might not be covered, so be sure to ask ahead of time:

1. Insurance and Repairs – You may have to pay to insure and maintain the parent company’s pumps, signs and canopies.

2. Rent Increases – If the parent company leases you the premises, be prepared to get socked with large rent increases every two or three years. Try to get these terms spelled out in the franchise agreement.

3. Promotional Items – When the parent company decides to sell a new kind of coffee in your convenience store, or to offer special gas discounts on Tuesdays, and decides to advertise those offerings with special signs – will you be required to pay for them?

4. Payroll and Benefits – Don’t expect the parent company to pay salaries or provide benefits for your employees. It’s the one area where you’ll find that you’re suddenly operating like an independent business.

Richard Parker is the President and founder of the Diomo Corporation – The Business Buyer Resource Center. His inspiring materials, seminars and consulting have assisted thousands of business buyers with achieving their life long dream of buying a business.

Business Marketing Gasoline, Gas Station Business, Gas Station Marketing