Starting a Convenience Store

This document is a guide prepared by the Canada-Saskatchewan Business Service Centre and is intended to provide you with general information and suggested resources to assist you in researching your project. The extent to which this information will apply to you is dependent upon the circumstances related to your project.

For further information on individual topics identified herein, contact the respective governing body or the Canada-Saskatchewan Business Service Centre. Because this document is only meant as a guide, the Business Service Centre will not accept responsibility for business decisions made based on the information provided.

Before proceeding, reference should be made to the Business Start-up Info-Guide , which covers the basic steps involved in establishing a new business in Saskatchewan; as well as the document titled A Current Index of Business Fact Sheets . These fact sheets cover a wide variety of business topics. Be sure and also request the Sources of Information and Required Licenses for your area or view these on our Business Fact Sheets Web site.

TABLE OF CONTENTS

• Industry Overview
• Licenses and Regulations
• Managing Your Operation
• Associations and Contacts
• Education and Training
• Resources
• Recommended Books in Our Library
• Video Collection
• Recommended Internet Web Sites

INDUSTRY OVERVIEW

Convenience stores offer quick and friendly service, handy locations, a variety of merchandise, and extended hours of operation. This publication focuses on starting an independent convenience store. However, many convenience stores are franchise operations.

Types of Operation

• Convenience Store - a small store that is open every day until late evening or 24 hours a day, and specializes in selling basic food items, such as milk and bread, and a variety of small dry-goods items.
• Convenience Store/Gas Station - a convenience store combined with a place for supplying motor vehicles with gasoline, motor oil, water, etc.
• Franchise - the privilege, often exclusive, of selling the products of a manufacturer or providing a company's service in a given area.

Franchising
As a potential business owner, you may be considering buying an existing or opening a new franchised store. As a franchisee, you enjoy the benefits of "Good Will" that the name and reputation of the franchise already possesses. You also have, in many cases, the support of the parent company in issues such as location selection, management training, free advertising and support during the start up phase of your operation. Also you have the advantage of capitalizing on an already profitable concept. However, as a franchisee, you must pay the franchisor for the benefits provided, and these costs come off the top of your sales revenue and may add up to more than 10%. Also your freedom is somewhat restricted when you own a franchise. You must adhere to the standards set by the franchise.

For further information regarding Franchising, see the document Checklists For Franchisees.

Choosing Your Location
Choosing a location for your store may be your single most important decision. Do your research. In particular, consider these factors:

• Population - The Grocery Trade Association states that to sustain a convenience store, between 500 and 1,000 people must live within a one-mile radius. If people have to travel more than a mile, they are more likely to go to a supermarket for a major shopping trip. Also check an area's future development plans and projected growth rates.
• Competition - Although a convenience store's competition is mostly from other convenience stores, it can also come from supermarkets. Study all competitors to see if the local market can support another operation.
• Traffic - Impulse purchases make up a good percentage of convenience store sales, so high volumes of pedestrian and vehicle traffic passing your store is critical. Try to locate near schools, parks, sporting facilities and other businesses to increase traffic.

For further information regarding Location, see the document Store Location - "Little Things" Mean A Lot

Layout and Design

• before ordering or installing equipment, design your store's layout;
• keep it simple to keep costs down;
• reserve the most space for products you will sell the most;
• place all products where customers can see and reach them;
• position products with the highest profit margins at eye-level;
• place high-demand products such as bread and milk at the back of the store to increase traffic. This encourages impulse purchases which can make up to 70% of your sales.

Selecting Your Inventory
Your product mix depends on your location and your target market's needs.

For example, a convenience store in a resort area will likely stock a more complete line of goods. Wherever your location, you must be able to estimate product demand. The Convenience Store Journal suggests a typical breakdown:

Keep ongoing, accurate inventory records in order to continually monitor the ratio between your stock and actual sales. This helps to minimize lost sales and money tied up in inventory, as well as determine the demand for different products.

Selecting Suppliers

• General line wholesalers - Join a cooperative of independent store owners to purchase in groups to gain volume discounts. Approximately 25% of Canadian grocery stores belong to such cooperatives which give advice in merchandising, management and finance.
• Speciality wholesalers - Bakeries, delis and produce suppliers often offer lower prices than general line wholesalers. They may also stock shelves and help you estimate demand.
• Service merchandisers - Non-food items, such as health/beauty aids, housewares and magazines are sold by service merchandisers. They can also deliver, stock shelves, price items and help estimate demand.

For more information, see the document Selecting Your Supplier, the document Profit By Your Wholesaler's Services or the document Finding and Selecting Wholesalers.

LICENSES AND REGULATIONS

Examples of licenses and regulations that could apply to you when starting your convenience store may include, but are not limited to:

• Lottery license. Contact Saskatchewan Liquor and Gaming Authority toll-free at 1-800-667-7565 or in Regina at 306-787-1740 or see the document Saskatchewan Liquor and Gaming Authority.
• Health Regulations and Requirements.

Convenience stores must all be inspected and meet standards of the Public Health Act. The parts of the Public Health Act that need to be complied with will depend upon the activities of the store. If the store is acting as a "traditional" grocery store (for example: only selling food meant for consumption off-premises), the store will not fall under the Public Eating Establishment Standards; whereas convenience stores that hold or prepare food for the public must comply with these standards. Convenience stores that house a bakery must comply with Bakeshop Standards. The best way to clarify the Public Health Act is to contact the local health authority and speak with the Public Health Inspector.

Visit the Public Eating Establishment Regulations Web site for more information.

Contact the Population Health Branch, 306-787-8847 (Regina), regarding the Tobacco Control Act, Saskatchewan Health - Act to Control the Sale and Use of Tobacco. You can also see the document Responsibilities Under the Tobacco Act.

For further information regarding Health Regulations and Requirements, see the document A Current Index of Business Fact Sheets and choose the Sources of Information and Required Licenses for your area, from which you can locate the Public Health Inspectors in your region, or contact the Canada-Saskatchewan Business Service Centre for the nearest provincial Public Health Inspector.

MANAGING YOUR OPERATION

Visit our Business Fact Sheets Web site sections on Retail Management and General Management.

Insurance
Insurance needs for businesses vary greatly. It is best to choose an insurance agent or broker familiar with your size of business and, in particular, an agent familiar with your type of operation. If you don't have an insurance agent, it could be a wise decision to ask other business owners in your area to recommend one.

The following list is included to remind you not to overlook the complex areas of business insurance . It is best, however, to discuss your specific requirements with your insurance agent.

Basic insurance:

• fire insurance (extended coverage on buildings and contents);
• liability insurance (depending on type of business);
• burglary protection (theft coverage);
• dishonesty insurance (covers thefts by employees).

Marketing/Advertising
Word-of-mouth advertising and good public relations are often the best ways of promoting a convenience store. Depending on your market and its size, also consider flyers, newspapers (especially for holiday promotions), radio, TV, the business pages of the telephone book and the Internet. Also bear in mind that a satisfied customer is good advertising.

• You should spend about 1% of gross sales on advertising to your target market.
• Install a brightly-lit sign to attract drive-by traffic.
• Create eye-catching window displays and point-of-purchase displays.
• Deliver or mail flyers to neighbourhood homes and place ads in local newspapers. Stress convenience, accessibility and extended hours.
• Offer additional convenience services such as fast food, postal services or video rentals. Consider installing a gasoline pump.

For more information regarding advertising and marketing, refer to the following documents:

Signs And Your Business
Plan Your Advertising Budget
Advertising Do's And Don'ts
Ways To Promote Your Product Or Service
Marketing Plan Outline
E-Business Info-Guide

For more information on marketing and advertising refer to our web site: Links Sectors  and Business Fact Sheets.

The Online Small Business Workshop - Marketing Basics listed in Session 2, covers the basics from developing your customer profile to promoting your business.

The federal Competition Act governs misleading advertising and deceptive marketing practices for all businesses in Canada. The Act defines which marketing practices are illegal and the process of complaint investigation. For more information see the document Competition Act - Misleading Advertising and Deceptive Marketing Practices or refer to the pamphlet on this subject administered by Industry Canada - Competition Act - Misleading Representations and Deceptive Marketing Practices or visit the Competition Bureau Web site.

Market Research
Successful businesses have extensive knowledge about their customers and their competitors. Acquiring accurate and specific information about your customers and competitors is a critical first step in market investigation and development of a marketing plan.

In developing a market plan, your primary functions are to understand the needs and desires of your customer, select or develop a product or service that will meet customer needs, develop promotional material that will make the customer aware and ensure product or service delivery.

For further information regarding marketing see the document Market Analysis, the document Guide To Market Research and Analysis, the document Marketing Plan Outline, or the document .

Visit our section on Market Development on the Business Fact Sheets Web site.

Accounting/Bookkeeping
A good record keeping system should be simple to use, easy to understand, reliable, accurate, consistent and designed to provide information on a timely basis. For more information see the document Basic Bookkeeping.

Note: All staff working with cash should be trained to recognize counterfeit currency.

The legal requirement concerning financial records specify only that they be a permanent, accurate and complete record of your daily income and expenses. There are many types of record books and bookkeeping systems available. For example:

• double entry bookkeeping;
• commercial bookkeeping systems;
• one-write systems;
• computerized systems;
• single entry bookkeeping.

Selecting Professional Services
The use of professional services is essential to the success of a small business. Professionals can provide knowledge and expertise in the areas where you may have little. They can round out your management team to ensure your business is operating efficiently.

As an entrepreneur, there are four main areas of professional services with which you may consult:

• lawyer (contact a lawyer about legal issues);
• insurance broker;
• accountant;
• banker - for tips and pointers on dealing with your bank, see the document Dealing With Your Banker & Other Lenders.

Furnishings and Equipment
The type, size and kind of service will determine the type of equipment you will require. There will be certain equipment and furniture you will need in your place of business which will allow you to perform your services. List that equipment and its cost to you. An important factor to consider, when choosing equipment, is the after-sales service and repair, and their affordability.

Used Equipment - Consider buying used equipment as a cost-saving measure. Sources of used equipment could be a convenience store that is closing or dealers in second hand equipment. The drawback to this approach is that, often, there are no guarantees with the purchase.

Leasing Equipment - Another alternative is to lease equipment to help keep start-up costs down. To obtain financing for capital leasing for new or used equipment for the creation of your business, see the document Capital Leasing Pilot Project.

For more information on parts and materials, overhead, stock control and pricing, see the document Business Plan For Small Service Firms.

Setting Up A Pay System
Pay administration is a management tool that enables you to control personnel cost, increase employee morale, and reduce work force turnover.

Setting The Right Price
Setting the right price can influence the quantities of various items that consumers will buy, which in turn affects the total revenue and the profit in the store. In the end, the right price for the product is the price that the consumer is willing to pay for it. Hence, correct pricing decisions are a key to successful retail management.

Prices should allow for sufficient gross profit to cover overhead expenses and a reasonable net profit. Choose one of two pricing methods:

• mark-up (based on cost); or
• margin (based on selling price).

Traditionally, convenience stores have had mark-ups of approximately 33% to 67%, margins of 25% to 40%. Convenience stores simply cannot buy in large volumes like superstores, so do not attempt to offer lower prices. Instead, stress service and convenience.

Cost Control
You must have procedures for controlling inventory and costs. Ask people in your industry for information about procedures for:

• Purchasing - Most of the time, purchasing is done over the telephone, by fax, or online. Therefore, often no contract is signed between the purchaser and the supplier; it is essential that you choose your supplier carefully.
• Receiving - Check all deliveries against the Purchasing and Receiving Form, in three ways: quantity, price and quality (that is, temperature: frozen goods must be frozen); packaging should be intact. Make sure specifications are met. Careful recording will show short shipments, price variations and weight differences.
• Budgeting and Projecting - Establish a cash budget and maintain cash flow projections on a continual basis.
• Storage - Ensure refrigerated and frozen products are quickly placed in a cold storage. Storage temperature for dry goods (between 10-21^oC), frozen goods (-18^oC or less) and refrigerated goods. Rotate your stock to ensure that oldest items are used first before the new stock.

Checklist For Profit Watching
Making a profit is the most important -- some might say the only objective of a business. Profit measures success. It can be defined simply: revenues - expenses = profit. So, to increase profits you must raise revenues, lower expenses, or both. To make improvements you must know what's really going on financially at all times.

Security

• Screen employees carefully. Check all references and work histories;
• Employee dishonesty can lead to cash register shortages, unauthorized discounts, pilferage, and the distribution of merchandise to friends;
• Deter shoplifting. Post warning signs, install mirrors to view all aisles and keep small items near the cashier. Train staff to watch for and apprehend shoplifters;
• Deter robbery. Make daily cash receipt deposits and keep a minimum of cash on-site during night hours. Train staff in procedures in the event of robbery.

For further information regarding Security, see the document Preventing Theft or the document Bad Cheque Control.

ASSOCIATIONS AND CONTACTS

There are many associations that may be of use to convenience store owners. Although it is not necessary to join a convenience store association, there can be advantages in becoming a member because they

• promote and exchange marketing and promotional ideas among members;
• establish and encourage high standards of quality and professionalism;
• represent and advocate on behalf of members.

Examples of associations include, but are not limited to:

• Association of Convenience Store Managers (ACSM)
• Canadian Health Food Association
• National Association Convenience Stores (NACS) (previously C-Store Central)
• National Convenience Store Distributors Association (NACDA) -http://www.nacda.ca/index2en_content.html
• Canadian Federation Independent Grocers , Phone 780-488-7184 or 416-492-2311, Fax 416-492-2347

For additional information see the document Selecting a Business Association.

EDUCATION AND TRAINING

The Saskatchewan Tourism Education Council document offers training programs that are appropriate for employees in the retail sector. These seminars focus mainly on customer service. STEC also offers a "Service Management Seminar" that covers topics such as hiring practices, employee training, customer service, etc. Contact STEC at 306-933-5900 in Saskatoon for further information or visit the Saskatchewan Tourism Education Council Web site.

Eligibility for bonding may be required. See the document Bonding. Cashiers need basic mathematical skills and the ability to cope well under stressful situations. Cashiers should also have good interpersonal and communication skills.

Source: HRSDC - Labour Market Information Services.

RESOURCES

The associations and distributors listed below may be useful contacts when sourcing distributors of certain products in your area:

• Canadian Council of Grocery Distributors Western Regional Office, 403-250-6608;
• National Convenience Store Distributors Association (NACDA) formerly known as NATCD (National Association of Tobacco & Confectionery Distributors), 450-967-3858 toll free 1-888-686-2823;
• Saskatchewan Food Brokers Association 306-652-9212;
• Saskatchewan Food Processors Association 306-683-2410.

Financial Performance Indicators
The CSBSC subscribes to this licensed database, published by Statistics Canada, which is used to determine the relative profitability of a particular industry in Canada/Saskatchewan and to compare financial ratios and balance sheets of a particular company with the industry average. See description under Industry Overview in this document to determine which type of business you will operate.

Contact the Canada-Saskatchewan Business Service Centre to obtain these reports.

Small Business Profiles -  Performance Plus
Performance Plus provides detailed financial and employment data on small businesses by industry for Canada, the provinces and territories. The Profiles have been produced every two years since 1985, with 1997 being the most current reference year available. The data provide performance benchmarks for the financial planning of start-up and established small and medium sized businesses.
Reports are available for:

• Grocery Stores (Excluding Supermarkets) SIC code: 6012

KOB Files
Saskatchewan Industry and Resources created "kinds of business (KOB's)" that include information on many different types of businesses. This information includes: product sources; fixture & equipment suppliers; trade shows; trade associations; trade journals; and other market data sources. Choose a KOB from the Table of Contents on the Kinds of Business Web site.

The CSBSC also has files started on various kinds of business topics such as restaurants, bars, coffee shops. Information located in these files includes possible suppliers, statistics, sample business plans, etc. To access the information in these files please come into the office and request the KOB file or speak to a Business Information Specialist.

RECOMMENDED BOOKS IN OUR LIBRARY

Canada-Saskatchewan Business Service Centre resource library search engine - Saskatoon Reference Library. Once you have located a particular resource you think might be useful, please contact us at the CSBSC office and we will discuss the material with you.

Some books of interest may include:

How to start a Convenience Food Store
SECTOR FOOD .018S
Entrepreneur Inc., 1988

Start and Run a Profitable Retail Business
BUSINESS RETAIL .017S
Self-Counsel Press Ltd., 1993

VIDEO COLLECTION

Canada-Saskatchewan Business Service Centre resource library search engine can be viewed at the Saskatoon Reference Library Web site.

Once you have located a particular resource you think might be useful, please contact us at the CSBSC office and we will discuss the material with you. Material is available to view in our Saskatoon office or regionalization site where available. Videos and audio cassettes may be loaned out to residents in the Saskatoon area.

We have many videos available in the following categories: aboriginal, customer service, sales, marketing, training, entrepreneurship, business planning, financing, e-business, starting a business, business skills, home-based, management, intellectual property, trade, quality, computer skills, and miscellaneous. Search the A/V Library on our web site for descriptions.

RECOMMENDED INTERNET WEB SITES

More links available on our web site - Links Sectors.

• Operation I.D. - is a positive-action program designed to help retailers and their staff uphold the law and put an end to the illegal sale of tobacco to minors. Operation I.D. is a commitment by retailers to be part of the solution, not part of the problem, when it comes to tobacco access by young people.
• Retail Trade and Online Catalogue: Wholesale Trade
• Quarterly Retail Commodity Survey
• Canadian Grocer
• Convenience Store Decisions
• Convenience Store News
• Canadian Council of Grocery Distributors
• Canadian Federation Independent Grocers
• Canadian Partnership for Consumer Food Safety Education
• Retail Council of Canada
• Food Recalls and Allergy Alerts

For further information regarding starting a business, contact the

Canada-Saskatchewan Business Service Centre
#2 - 345 3^rd Avenue South
Saskatoon, Saskatchewan
S7K 1M6
Phone: 306-956-2323
Toll-Free: 1-800-667-4374
E-mail: saskatchewan@cbsc.ic.gc.ca
Web site:http://www.cbsc.org/sask  

THE INDIVIDUAL/BUSINESS/CORPORATION/PARTNERSHIP (HEREINAFTER REFERRED TO AS THE CLIENT) ACKNOWLEDGES AND UNDERSTANDS THAT THE CANADA-SASKATCHEWAN BUSINESS SERVICE CENTRE DOES NOT WARRANT OR REPRESENT THE ACCURACY, SUITABILITY OR APPLICABILITY OF THIS INFORMATION AND ASSUMES NO RESPONSIBILITY OR LIABILITY FOR THE USE THEREOF BY THE CLIENT AND ANY THIRD PARTIES AND THAT THE INTERPRETATION, USE AND APPLICATION OF SUCH INFORMATION SHALL BE THE CLIENT'S SOLE RESPONSIBILITY.

DISCLAIMER
Information contained in this document is of a general nature only and is not intended to constitute advice for any specific fact situation. Users concerned about the reliability of the information should consult directly with the source, or seek legal counsel.

Links Policy
Some of the hypertext links lead to non-federal government sites which are not subject to the Official Languages Act and the material is available in one language only.