How to Start a Convenience Store

Part 1 - How to start a Convenience Store business - Background

Convenience stores are often characterized by their late hours, which is convenient for customers who may be passing through the area as they travel. The stores vary in size, ranging from small kiosks to deluxe convenience stores. Regardless of the size and what is sold on the inside of the store, many convenience stores rely heavily on selling gasoline as a source of revenue.

Our guide is in 3 parts:

• Part 1 - How to start a Convenience Store business - Background
• Part 2 - Our planner tool to see if this idea is the right fit for you
• Part 3 - Action plan to get started

What are the costs involved in opening a convenience store?

It can cost up to $50,000 to open your convenience store. Such an amount represents the cost of leasing an appropriate space, decorating the interior, and installing the point-of-sale system and any other technology you may require. You may need to purchase additional equipment based on any additional conveniences you wish to offer customers, from pay phones to fax machines and photocopiers. Depending on your state, lottery tickets often sell well, but carry an additional equipment cost. Finally, you will need to stock the store itself with the wide variety of goods that you intend to sell, which often comprises the majority of what you spend money on.

Read our convenience store purchasing guide to learn about the materials and equipment you’ll need to start a convenience store, how much to budget, and where to make purchases.

What are the ongoing expenses for a convenience store?

Some of the primary ongoing expenses for a convenience store include your monthly lease and the cost of utilities. Beyond that, the biggest chunk of your expenses comes from inventory (which some research estimates may be up to 70 percent of your monthly spending) and labor. The exact costs of all of these expenses vary due to location, store size, exact inventory, and how much you choose to pay your employees. Note that paying them more than your local minimum wage will likely result in better loyalty and performance, which translates to greater profit for you.

Who is the target market?

The stereotype of convenience store customers is that many of them only pop into the store when they need a specific item, such as when a significant other requests certain food or drink and the customer doesn’t want to deal with the hassle of a full-size grocery store. While these customers are good, they are more sporadic. As such, the preferred convenience store customer is the neighborhood regular who comes in every day or two and sees himself as supporting the neighborhood. As such, he will be both a regular and a friendly customer, which is a great combination.

How does a convenience store make money?

Convenience stores make money by buying goods and selling those goods to customers. Typically, convenience stores sell things such as snacks, soft drinks, car accessories, lottery tickets, tobacco, sometimes alcohol. Your profit represents the amount of money you have taken in after you have subtracted how much you paid for these goods as well as any operational expenses accrued throughout the month.

How much can you charge customers?

The somewhat open secret of a convenience store is that you are able to successfully mark many items up by a higher percentage than your local grocery stores or supercenters do. Customers are effectively paying for the convenience of not having to spend the extra time and effort to visit the larger store. Effectively, you can charge customers about eleven percent more than an independent grocery store does and about 20 percent more than a mass store like Wal-Mart does. Overall, this is very helpful for your monthly profit margin.

How much profit can a convenience store make?

Generally, convenience stores are profitable propositions, with average gross profit margins upwards of $450,000. Profitable ventures may result in an opportunity to open other locations within a city or area, increasing your potential profits that much more.

How can you make your business more profitable?

Ultimately, some of the best ways to make your convenience store more profitable are to find ways to reduce costs. This includes reducing the amount of staff necessary to prepare and sell any food that you sell on site and trimming your hours down to what is reasonable for your town (for instance, you should avoid being open 24 hours in most cases). Offering some kind of drive-through to sell food and coffee will give you an edge over the competition. Finally, always consider things that will save your customer time, such as providing an ATM in the store for their convenience.

Day-to-Day and Growth

What happens during a typical day at a convenience store?

Some of the daily activities of running a convenience store include managing the schedules of employees and scheduling, receiving, and unpacking shipments of inventory. You must be vigilant about the health and safety regulations regarding your store, particularly if you choose to sell food that you prepare yourself. You will be overseeing the payroll of your employees, and must monitor that there are no errors. A large part of any given day is spent setting up displays and straightening up shelves so that the store looks clean and organized for customers. And, of course, checking out customers throughout the day will consume much of your time.

What are some skills and experiences that will help you build a successful convenience store?

Experience in working or especially managing a convenience store can be invaluable in helping you to run a store. Similarly, a formal education in something like business can help you with some of the aspects of the job, ranging from managing to accounting. Having a solid relationship with the community you set the shop up in can also help you become a solid fixture of the neighborhood more quickly.

What is the growth potential for a convenience store?

The growth potential of a convenience store is relatively steady. In the last three decades, the industry has doubled in size, so these stores now represent about a third of America’s retail outlets. Recent research shows that it continues to grow as an industry, growing by one percent in 2015. And a successful convenience store owner may eventually branch out into owning multiple locations.

What are some insider tips for jump starting a convenience store?

One important tip is to make sure your store caters to women as well as men. Many convenience stores unintentionally cater primarily to men, which means they are losing a lot of potential business. Another tip is to research the competition, both within the city and throughout the state. Understanding what helps other convenience stores find success can help your own business be competitive.

How and when to build a team

As businesses go, a convenience store is pretty straightforward. Employees are necessary to ensure the store is properly staffed and able to cater to customers during all hours of operation. Your exact coverage will be determined by the size of your store and the hours that you keep. Beyond that, you shouldn’t need to expand the team unless you are expanding said hours or potentially opening another convenience store.

Read our convenience store hiring guide to learn about the different roles a convenience store typically fills, how much to budget for employee salaries, and how to build your team exactly how you want it.

Part 2 - Is a Convenience Store business the right fit for you?

Part 3 - Action plan to launch your Convenience Store business in 90 days