How to Start a Convenience Store in Ontario

General information for potential entrepreneurs wishing to start a convenience store. Contains various useful Web links. 

TABLE OF CONTENTS

1. Basics To Getting Started 
2. Industry Overview 
3. Regulations 
4. Financing 
5. Taxation 
6. Managing Your Operation 
7. Associations 
8. Other Resources    

1. Basics to Getting Started

Starting a business can be a rewarding undertaking, but it comes with its challenges. Before starting a business in Ontario, it is wise to do your research. There are several issues to consider such as regulations, financing, and taxation, managing your business, advertising and much more.

• Business Start-Up Info-Guide
• Financing for Starting a Business Info-Guide
• Taxation Info-Guide
• Employment Regulations Info-Guide

2. 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.

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, a variety of small dry-goods items, and often including movie rentals.

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.

For further information:
please call 905-625-2896 or 1-800-665-4232
visit the web site:  Canadian Franchise Association
see the document Checklists for Franchisees

3. Regulations

Business Regulations Info-Guide

This document will assist you in navigating federal, provincial and municipal regulations that apply to a number of industries and businesses in Ontario.

For further information:
see the document  Business Regulations Info-Guide

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

Canadian Food Inspection Agency (CFIA)

Canadian Food Inspection Agency contains a lot of information on food safety, including food safety tips.

For further information:
please call 1-800-442-2342 or 613-225-2342

Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA)

The Ministry of Agriculture, Food and Rural Affairs web site contains a lot of information on food safety, including information on the  Food Safety and Quality Act, 2001 .

For further information:
please call 1-888-466-2372
visit the web site: Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA)

Ontario Ministry of Health and Long-Term Care (MOHLTC)

The Ministry of Health and Long-Term Care web site contains a lot of information on Health Issues, including locations of Public Health Units and publications on food and water safety.

For further information:
please call 416-314-5518 or 1-800-268-1154
visit the web site:  Publications: Food Safety

Video/DVD Rental License

Businesses selling or renting videos directly to the public (including by vending machines) require a Film Exchange Retail Licence. Businesses distributing videos to other retailers require a Distributor's Licence.

To obtain an application form, clients should contact the Ministry of Government and Consumer Services (MGCS), Theatres Branch at 416-314-3626 or toll-free 1-800-268-6024.

Music License

Performances of music in public, i.e. offices, stores, etc., require a licence. This licence is necessary whether the music is performed by live or recorded means.

For further information:
please call 416-445-8700 or 1-800-557-6226
visit the web site:  Society of Composers, Authors and Music Publishers of Canada (SOCAN)

The Smoke-Free Ontario Act

As of May 31, 2006, the Ontario government is prohibiting smoking in all enclosed workplaces and enclosed public places. The legislation will also strengthen measures to ensure only those 19 years of age and older can buy cigarettes and will phase out the display of tobacco products, with a complete ban beginning May 31, 2008.

For further information:
please call 416-326-4846
visit these web sites:
Ministry of Health Promotion
Smoke-Free Ontario Act

Related legislation:

Health Protection and Promotion Act  
Food and Drugs Act  

4. Financing

The Canada-Ontario Business Service Centre has created documents, which provide an overview of some of the main financing options for individuals starting and operating a business in Ontario, including programs offered or supported by the government.

For further information:
please call: 1-800-567-2345
see these documents:
Financing for Starting a Business Info-Guide
Financing for Established Businesses Info-Guide

5. Taxation

Dealing with Business Taxes

All businesses must be aware of the various taxes that may apply to their product or service. Depending on the type and location of products or services being offered, federal, provincial and/or municipal business taxes may apply.

For further information:
see the document: Taxation Info-Guide

Below are links to publications that cover some of the tax requirements for convenience store owners in Ontario.

Convenience Stores
This Pointer provides basic Ontario retail sales tax information relating to items sold by a variety or convenience store, a smoke shop, a gas bar that sells other goods, or a kiosk.

Basics of Retail Sales Tax
This Pointer explains the basics of Ontario retail sales tax to those starting a small business in Ontario or who are already operating one.

Snack Foods, Beverages and Candies
The information in this guide explains how Ontario retail sales tax applies to snack foods, beverages, and candies.

Overview of Tobacco Tax
In addition to providing general information on the application of Ontario’s tobacco tax, this bulletin outlines the specific registration, reporting, remitting and record-keeping requirements of Ministry-designated and non-designated tobacco wholesalers, retailers, importers, exporters, interjurisdictional transporters and consumers.

Application for Vendor Permit (PDF - 371 KB)
This form is to be completed when applying for a retail sales tax Vendor Permit, for purposes of charging and collecting retail sales tax.

Purchase Exemption Certificates
The information in this Guide explains the use of Purchase Exemption Certificates (PECs) and valid identity cards to claim exemptions from Retail Sales Tax (RST).

Discount Coupons
The information in this guide explains how Ontario retail sales tax applies when various types of coupons are redeemed towards the purchase of goods.

6. Managing Your Operation

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, you may wish 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:

Marketing/Advertising

Word-of-mouth advertising and good public relations are often the best ways of promoting your business. Depending on your market and its size, also consider flyers, business cards, brochures, newspapers, radio, TV, the phone book and the Internet. Also bear in mind that a satisfied customer is good advertising. Referrals are also a valuable way of making customers aware of your products or services.

A web site is also a good marketing tool. It should have details to describe the location (your address, telephone and fax numbers, and directions on how to get to your establishment), hours of operation, services offered, credentials and anything else you think may be of interest to potential customers. However, once you launch a web site, you should update it on a regular basis.

Participating in community events is another way of advertising your business. You may also hold events that will promote your business. No matter how you choose to market your business, it is wise to track how your clients became aware of your establishment - this may help determine your future advertising strategies.

For more information:
see these 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

The Marketing Basics section of the  Online Small Business Workshop  covers the basics from developing your customer profile to promoting your business.

The Competition Act governs misleading advertising and deceptive marketing practices for all businesses in Canada. The Act, which is administered by Industry Canada, defines which marketing practices are illegal and the process of complaint investigation.

For more information:
please call: 819-997-4282 or 1-800-348-5358
visit the web site:  Competition Bureau
see the document Competition Act - Misleading Advertising and Deceptive Marketing Practices

Market Research

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

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

For more information:
see the document  Market Research for Your Business

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.

For further information:
see the document Selecting Professional Services

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

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

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.

For further information:
see the document Setting Up a Pay System

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.

For further information:
see the document Setting the Right Price

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 there 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; and
• single entry bookkeeping.

For further information:
see the document Basic Bookkeeping

Employing people

What are the rules on working conditions in Ontario?

The Employment Standards Branch of the Ontario Ministry of Labour is responsible for the administration and enforcement of the Employment Standards Act, which provides for minimum terms and conditions of employment in most industries.

For further information:
please call 416-326-7160 or 1-800-531-5551
see these documents:
Employment Regulations Info-Guide
Employment and Training Assistance Programs Info-Guide

Choosing a Location

Choosing a location for your store may be your single most important decision. Do your research and 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 1.6 kilometre radius. If people have to travel more than this distance, 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:
see the document Store Location - "Little Things" Mean a Lot

Selecting Your Inventory

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.

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, however, your own mix will depend on your location and target market needs.

Groceries	26%	Cookies/Snacks	7%	Ice Cream	4%	Candy	3%
Soft Drinks	12%	Frozen Snacks	5%	Health/Beauty	4%	Meat	2%
Dairy	10%	Non-foods	5%	Produce	3%	Tobacco	2%
Deli Items	7%	Magazines	5%	Baked Goods	3%	Other	2%

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 further information:
see these documents:
Profit by Your Wholesaler's Services
Selecting Your Supplier

Packaging and Labelling

Businesses or individuals wishing to buy bulk foods for resale must comply with packaging and labelling regulations. These regulations are administered by the Canadian Food Inspection Agency (CFIA).

For further information:
visit the web site:  Canadian Food Inspection Agency
see these documents:
Food Labelling
Labelling Fact Sheet

Selling Lottery Tickets

Selling Ontario Lottery Gaming Corporation (OLGC) tickets

On June 28, 2007, the Government of Ontario announced that it was establishing new regulations to strengthen the integrity of the lottery system and assigned responsibility for administering the regulations to the Alcohol and Gaming Commission of Ontario (AGCO). These new regulations include:

• A lottery retailer registration program;
• Enforced rules of conduct for lottery retailers.

As a result of these changes, beginning January 1, 2008, all retailers selling Ontario Lottery and Gaming Corporation (OLG) products must be registered by the AGCO. In addition, individuals or managers employed by a lottery retailer and who act on behalf of the retailer by overseeing, coordinating or exercising significant decision-making authority over lottery product sales and/or managing compliance issues with respect to the sale of lottery products will also require registration.

For further information:
call: 1-800-522-2876
visit the web site : Notice to Retailers Affecting The Sale of Ontario Lottery and Gaming Corporation Products (PDF 17.62 MB)

In order to become a lottery retailer, a request must be made directly to the OLGC by using one of the following methods:

• by mail: OLGC Contact Centre, 70 Foster Drive, Suite 800, Sault Ste. Marie, ON P6A 6V2;
• by e-mail: OLGCinfo@OLGC.ca; or
• by fax: 705-946-6788.

For further information:
visit the web site:  Ontario Lottery Gaming Corporation (OLGC)

Selling Break Open tickets - Alcohol and Gaming Commission of Ontario (AGCO)

A license is required from the Alcohol and Gaming Commission of Ontario in order to sell Break Open tickets.

For further information:
please call 416-326-8700 or 1-800-522-2876
visit the web site:  Alcohol and Gaming Commission of Ontario - Break Open Ticket

Selling Tobacco products

In order to sell tobacco products, retailers are required to have a retail vendor permit by the Client Accounts and Services Branch (CASB).

Ontario levies a direct tax on every consumer of tobacco products. Tobacco tax is collected by retailers from their customers and is remitted through their supplier. Retailers must ensure that they purchase tobacco products only from a wholesaler who has a valid wholesale dealer’s permit or from an importer who has a registration certificate, issued by the Client Accounts and Services Branch (CASB). If a retailer is operating as an importer of tobacco products, the retailer must have an importer’s registration certificate issued by the The Client Accounts and Services Branch (CASB).

The stocking or selling of cigarettes that do not bear an Ontario tax mark (yellow tear strip) is prohibited. Unauthorized possession of unmarked cigarettes may result in penalties, fines, imprisonment and forfeiture of the product.

For further information:
please call 1-800-262-0784
visit these web sites:
TT 2-2000 - Selling Tobacco Products in Ontario: Information for Retail Dealers
Overview of Tobacco Tax
TT 5-2001 - Cigar Tax Changes
TT 2-2002: Cigar Tax Changes: Invoicing Requirements for Retailers
see the document Vendor Permits and the Retail Sales Tax

Tobacco Tax Legislation

Tobacco Tax Act
GENERAL - R.R.O. 1990, Reg. 1034
REFUNDS - R.R.O. 1990, Reg. 1035
RETURNS AND REFUNDS - R.R.O. 1990, Reg. 1033
SALES OF UNMARKED CIGARETTES ON INDIAN RESERVES - O. Reg. 649/93

Retailers of tobacco products must also contact the municipality in which the business will be operating.

Tobacco Products - Related Regulations

The Tobacco Act - Health Canada
Tobacco - Legislation & Regulations
Smoke-Free Ontario Act

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 (temperature); 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 should be between 10-21^oC, frozen goods should be -18^o C or less, and refrigerated goods. Rotate your stock to ensure that oldest items are used first before the new stock.

Making a profit is the most important 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.

For further information:
see the document Checklist for Profit Watching

Furnishings and Equipment

There will be certain equipment and furniture you will need in your place of business which will allow you to perform your services. It is suggested to make a list of the required 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. 

For further information:
see the document Business Plan for Retailers

7. Associations

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

Refreshments Canada

Ontario Convenience Stores Association

National Association Convenience Stores (NACS)

National Convenience Store Distributors Association

Retail Merchants' Association of Canada (Ontario) Inc.

The Retail Merchants' Association is run by retailers for retailers, and offers a broad range of programs designed to keep independent retailers strong and profitable and provides an online advertising initiative called Real Time Merchant Advertising. Association members can also be eligible for lower credit card merchant discount rates.

For further information:
please call 416-293-2100
visit the web site:  Retail Merchants Association of Canada Inc.

Retail Council of Canada

Retail Council of Canada’s mission is to be the voice of retail in Canada by providing advocacy, research, education and services that enhance opportunities for retail success and increase awareness of retail’s contribution to the communities and customers it serves.

For further information:
see the document: Retail Council of Canada

8. Other Resources

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

Winning Retail  is a self-assessment and instructional guide for independent retailers.

Canadian Grocer

Canadian Retailer Magazine

Convenience Store Decisions

Convenience Store News

You may find books, magazines and other relevant print material at business service organizations in your community that provide COBSC information. Contact the COBSC at 1-800-567-2345 for the location nearest you.

Statistics

Retail and Wholesale Sales - Statistics Canada

Retail Trade
Wholesale merchants' sales, by province and territory
Quarterly Retail Commodity Survey -Statistics Canada
Average weekly earnings (including overtime) in the trade, transportation, storage, - Statistics Canada

Web Sites of Interest

Canadian Council of Grocery Distributors

The Canadian Council of Grocery Distributors (CCGD) - Publications

Canadian Federation of Independent Grocers

Canadian Federation of Independent Grocers Newsletter

Canadian Partnership for Consumer Food Safety Education

Ontario Convenience Stores Association

Food Recalls and Allergy Alerts

Need more information?

Click: Canada-Ontario Business Service Centre
Call: 1-800-567-2345
Visit:  visit our  Regional Access Program Locations page to locate an office near you

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Some of the organizations listed above are not subject to the federal Official Languages Act or the French Language Services Act of Ontario. Their services may not be available in both official languages.

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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.