Starting a Convenience Store

T he following is intended to provide an understanding of potential license, permit or registration requirements when considering the establishment of a convenience store in Canada. This document was prepared by Canada Business and contains a series of possible steps and issues to consider in carrying out your project. The extent to which the information will apply to you will depend on the circumstances related to your situation.

BASICS TO GETTING STARTED
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Before proceeding, you should make reference to the Business Start-up Info-Guide for your region. It offers information on the steps involved in establishing a new business.

• Alberta -  Business Start-up (Alberta) Info-Guide
• British Columbia - Starting a Small Business in British Columbia (in PDF* format)
• Manitoba -  Business Startup Checklist and Pathfinder
• New Brunswick - Business Start-up in New Brunswick
• Newfoundland and Labrador - Business Start-Up Info-Guide
• Northwest Territories -  Business Assistance Programs Info-Guide
• Nova Scotia - Business Start-Up Info-Guide
• Nunavut - Business Start-Up Info-Guide
• Ontario - Business Start-Up Info-Guide
• Prince Edward Island -  Business Start-up in PEI
• Quebec - Info-Guide - Start-Up and Expansion
• Saskatchewan -  Business Start-up Info-Guide
• Yukon - Business Start-Up Info-Guide

Starting a business can be a rewarding venture, but it comes with its challenges. Before starting a business in Canada, it is wise to do your research. You should also make sure you are suited for entrepreneurship, and understand that a lot of effort may be required. As such, you should fully enjoy the field you are getting into, and you must believe in your product or service as it may take up much of your time, especially in the start-up phase. There are many things to think about such as regulations, financing, taxation, managing your business, advertising, and much more. For more information, see the document  Checklists for Going Into Business. 

The following is additional information to consider.

INDUSTRY OVERVIEW
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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.

Checklists for Franchisees
As a potential business owner, you may consider buying an existing or opening a new franchised store. As a franchisee, you enjoy the benefits of Goodwill that the name and reputation of the franchise already has. 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 stick to the standards set by the franchise.

Store Location - "Little Things" Mean a Lot
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.

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
• place 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 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 Your Supplier

• General line wholesalers -  Join a cooperative of independent store owners to buy in groups to gain volume discounts. Approximately 25% of Canadian grocery stores belong to such cooperatives which give advice in merchandising, management and financing.
• 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 Profit by Your Wholesaler's Services.

LICENSES, PERMITS AND REGULATIONS
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One area of rules and regulations that all new businesses must comply with is that of licenses, permits and regulations. When creating a business, you must contact the municipality involved, along with the provincial/territorial and federal governments.

Each municipal government has the authority to issue its own business licenses within its jurisdiction. Since there is no uniformity throughout the country regarding municipal licenses for businesses, you should consult with the appropriate local officials to determine whether your business will be affected by local regulations and licensing requirements. Businesses (including home-based businesses) must also meet the zoning by-laws that control property uses in their municipalities.

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

Licenses

• municipal business license
• video rental license
• food service establishment license
• tobacco retailer's license
• garage license
• gasoline retailer's license
• gas plant propane license
• petroleum storage system license
• service station license
• Need a Music License?

Permits

• building permit
• vendor permits
• compressed air/boiler permit
• refrigerants permit

Regulations

• zoning by-laws
• packaging and labelling
• tobacco regulations
• fire safety standards or regulations
• health regulations and requirements
• weights and measures of products
• petroleum products
• hazardous waste/air quality
• retail sales tax
• personal information protection

You can get permit, license and regulation information by contacting your province/territory, local city hall, town or village office or rural municipal office. Contacts for local, provincial/territorial and federal governments can be found in the government listings of your telephone directory or on the Provincial/Territorial Web site.

The Guide to Canada's Personal Information Protection and Electronic Documents Act (PIPEDA) helps businesses understand their obligations and comply with the Act. Since January 1, 2004, the PIPEDA covers the collection, use or disclosure of personal information in the course of all commercial activities in Canada, except in provinces which have enacted legislation that is deemed to be substantially similar to the federal law.

For more information, call 1-800-282-1376, see the document Protection of Personal Information - Your Responsibilities, or visit the Privacy Commissioner's Web site PIPEDA Guide for Businesses and Organizations.

BizPaL

BizPaL provides Canadian businesses with one-stop access to permit and licence information from all levels of government. This online service is offered by Industry Canada in partnership with provincial, territorial, and municipal governments.

MANAGING YOUR OPERATION
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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 should reminde you of the complex areas of business insurance. It is best, however, to discuss your specific needs 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 to promote 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.

• 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, see 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

The Online Small Business Workshop -  Marketing Basics 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, consult the Competition Act - Competition Act - Misleading Advertising and Deceptive Marketing Practices, administered by Industry Canada or visit the Competition Bureau Web site.

Guide to Market Research and Analysis
Successful businesses know a lot about their customers and their competitors. Getting 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 wants and needs 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.

Basic 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.

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
There is some 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 get 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 enough gross profit to cover overhead expenses and a reasonable net profit. Choose one of two pricing methods:

• markup (based on cost); or
• margin (based on selling price).

Traditionally, convenience stores have had markups 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.

You can find additional information on managing your operations, by viewing our Fact Sheets indexed by Popular Business Topics.

ASSOCIATIONS
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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:

• Canadian Health Food Association - http://www.chfa.ca
• Refreshments Canada - http://www.refreshments.ca/en/home/default.asp
• National Association of Convenience Stores - http://www.nacsonline.com/
• National Convenience Store Distributors Association - http://www.nacda.ca/index2en_content.html

RESOURCES
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Additional resources which may help convenience store owners include, but are not limited to:

Publications
You may find books, magazines and other relevant print material at any Canada Business service centre and/or business service organizations in your community that provide Canada Business information. Contact the Canada Business service centre in your region for the location nearest you.

Statistics

• Retail Trade and Online Catalogue: Wholesale Trade Sales - Statistics Canada

Magazines

• Canadian Grocer
• Retail Council of Canada
• Convenience Store Decisions 
• Convenience Store News

Related Web Sites

• Canadian Council of Grocery Distributors
• Canadian Federation Independent Grocers
• Canadian Partnership for Consumer Food Safety Education
• Retail Council of Canada (RCC)
• Food Recalls and Allergy Alerts (CFIA)

ADDITIONAL INFORMATION
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When seeking business information, feel free to visit the Canada Business Web sites for the Business Start-Up Assistant and the Online Small Business Workshop. You may also want to check with your local library, the major chartered banks, your local Chamber of Commerce, educational institutions and business development organizations - some of which offer courses, seminars and workshops.).

• Checklists for Going Into Business

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.