Six Things to Know Before Your Next C-Store Purchase

Acquiring convenience stores and gas stations can be a major investment in time and money. Before you spend hundreds of thousands of dollars or more, Ken Watson, a financial services analyst with Cara & Associates in Atlanta, said there are six things retailers should focus on that should help make their investment worthwhile.

1) Financing. “In these challenging economic times, getting financing for your convenience store purchase can prove to be very difficult. If you have an ongoing banking relationship, you should speak to your banker about any specific business funding programs they offer,” Watson said. “It is in your best interest to know how much you can spend, before you go shopping for a store.”

2) Equipment Calibration. For a high percentage of c-store locations the fuel pumps are calibrated incorrectly. This could cost you money in profits lost in sales as well as in gas refunds from your jobber, Watson said.  If you are purchasing the c-store, have the seller calibrate the equipment as a condition of the purchase. If you own the station, have your MPD’s checked and calibrated.

3) Inventory. This can prove to be the most expensive hidden cost in any c-store. You can have too much inventory and lose money with product sitting on your floor. You can have too little inventory and lose money in lost sales, or you can have spoiled inventory and lose money from not tracking and rotating your on-hand quantities.

4) Purchase Contract. Do not assume anything when you acquire a convenience store. “All leases and paper work must be read and reviewed carefully before you sign anything,” Watson said. “An investment into a professional—a lawyer or realtor—to verify your contract would be money well spent.”

5) Down Payment. “When purchasing a c-store, never put down more than 20% and never, ever pay 100% cash,” Watson said. “In this case (UOPM)–use other people’s money.”  If you are owner financing, watch interest rates and loan terms. Prime rate plus one or two points is acceptable.

6) Technology. Retail technology saves money and reduces operating costs. Everything coming into and going out of the store should be scanned. Use scanning to manage inventory, reduce internal/external theft and ensure consistent product prices.

  • http://theblakefirm.com Austin Business Lawyer

    Good points. Additionally, there are other business sales, management agreements, franchising and business licensing structures that can be used to raise business financing – a phenomenon I see quite a bit right now.

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