Convenience stores are a lucrative opportunity to consider if you are looking to run your own business. If you are thinking about purchasing an existing convenience store, there are a few things you should consider before you buy.
You'll want to learn all you can about owning a convenience store and if this is your first time it might be a good idea to network with other convenience store owners to get their perspective. Talking with people, preferably successful ones, is a great way to gain some insight. You may even find one willing to act as your mentor.
• Nuts and bolts of purchase
As you embark upon your journey to running your own business, there are several things you'll need to do. You'll want to establish a feasible business plan. When you start up any business, it's smart to establish a business plan which outlines your strategies, market analysis, projections, niche market, competitive analysis and any other constraints.
Convenience stores come in many shapes and forms. For instance some have gas stations, others do not; other stores are linked with a brand name such as "Subway" or "Baskin Robbins" as a service and you want to take this option into consideration and the details involved in this kind of partnership.
Next you'll have to look at the financial particulars. Do you have enough money to make a down-payment? How much will you need to borrow? You will undoubtedly need to get a lender to invest in your business and you will have to demonstrate you meet the criteria and can afford to pay back your loan.
• Franchise vs. independent store
When purchasing an existing convenience store you can opt to buy into a franchise or run an independent establishment. If you choose to go the franchise route, you will have to examine the chain's requirements and see if you meet their personal and financial criteria in order to apply to become a franchisee and buy from the current owner.
There are pros and cons to franchise vs. independence. If you buy into a franchise, you have the ability to capitalize on an already established name, but you also will be held to maintain specific standards and have to pay royalty fees to the corporation. In the independent convenience store you have the freedom to carry any kind of products you choose and any profit you make is yours to keep. The con to this is you will have to establish your own reputation since you aren't linking your business to an already well-known and publicized name.
If you do decide a franchise is along the lines of what you are looking to invest your resources in, make sure you understand the franchise agreement before making a commitment.
• Decision factors
It is important to carefully choose the geographical location of your convenience store. You don't want to buy a store which is so far away from other shopping that customers won't come out of their way to buy, unless there are a high number of residential homes in the area which will undoubtedly need to utilize your store due to, well, it's convenience.
You also don't want to be placed in an area where there are several grocery stores in the vicinity which would be highly competitive. Since convenience stores typically have to charge slightly higher prices than larger stores which tend to buy in bulk, the key to making your convenience store a success is finding the perfect location where you can fill a niche need and have the ability to grow your customer base.
A high traffic volume area is ideal and knowing the demographics of the local area is also important in helping you determine whether or not a store will be able to turn a profit.
• Once you've found a store
Research is critical when purchasing an existing convenience store. If you already know the location of the convenience store you want to buy, do your homework on the property before you invest money into it.
Convenience stores typically have a high turnover rate in ownership, so you want to dig around and find out why the current owner is selling. You don't want to invest your capital into a business which is having a difficult time turning a profit. If the reasons are due to mismanagement, you might be able to make a success if you change the current approach, but if the reasons are due to poor location or other variable factors, you may want to reconsider this property before you end up going broke too.
As you explore the store's history, it is vital to carefully examine the financial statements of the business to ensure all is in order and that the numbers equate. Financial statements are valuable documents to use when determining the viability, profitability and past successes of a business. These figures will also help you determine the business' future potential.
Buying an existing convenience store is good opportunity to become a successful business owner if the situation looks good. If you do your homework, digest the financial statements, understand demographics, location and the other variables with owning a convenience store, buying one can be a lucrative opportunity.