How To Open a Convenience Store in Nine Steps

Writing a good business plan is crucial for anyone starting a new business. This includes opening a convenience store. The plan will provide a blueprint for the first few years of operation. You'll also need a solid business plan when approaching lenders and outside investors.

You can find industry statistics and research from the following organizations:

• National Association of Convenience Stores
• U.S. Bureau of Labor Statistics
• U.S. Small Business Administration (SBA)

A convenience store business plan should contain the following elements:

• A description of the store that includes your business goals and objectives
• A section identifying your target market and how your store will differentiate from competitors in the area
• A description of the services and products you will offer and hours of operation
• Whether your store will need licenses or permits to sell alcohol, tobacco products, or lottery tickets
• A financial plan laying out your startup costs, projected income, profit margins, and cash flow statements
• An outline of your store's business and management structure
• Marketing and sales strategy for your store, including how you will attract customers and identify their needs
• An executive summary of your plan (this should run no more than two pages and be written to attract interest from lenders and potential investors)

Before writing your business plan, research other convenience stores in your area.

The business name you choose for your convenience store should be unique and memorable. It should reflect your store's offerings and help it stand out. Short, simple names are often better. Think about how it sounds. It should be easy to pronounce. Consider how it will look in print and on your signage.

After choosing your name, you must ensure it is available in your state and does not infringe on another business's established trademark. This is important if you plan to operate your convenience store as a corporation or limited liability company (LLC). The state will require that you register using a unique name.

Most state agencies that register business names, often the secretary of state, have a search tool on their website that allows you to search for names already in use by another business.

In addition, you must check whether another business is doing business as (DBA) that name. Companies often use a DBA to run some aspects of their business under a different name.

Your state may not let you use your preferred business name if it's close to an already used name and could confuse customers. Check your state rules before registering a name similar to one already in use.

Even if your business name is available in your state, you should ensure an out-of-state business has not registered a federal trademark. You can do this online with the U.S. Patent and Trademark Office's (USPTO) trademark search tool.

Using a name that is federally trademarked can constitute a trademark violation. Consult an attorney if your name is similar to one already trademarked.

There is more than one way to structure a convenience store business. Nearly all convenience store owners structure their businesses as one of the following:

• Sole proprietorships
• Partnerships
• Limited liability companies (LLCs)
• Corporations

Each structure has advantages and disadvantages, as explained below:

Sole Proprietorship

Sole proprietorships are businesses with a single owner liable for the business's debts and obligations. This is a primary reason many convenience store owners choose a different entity. A benefit of sole proprietorships is that the company is not treated as separate from the owners for tax purposes. This means the business itself does not pay taxes, and the owner can declare any income or losses on their personal return.

Partnership

Partnerships are businesses owned by two or more persons who run the business together and are each personally liable for the business's debts and obligations. Like sole proprietorships, partnerships are pass-through entities for tax purposes, and the partners claim any income or losses from the business on their individual income tax returns. Unlike LLCs and corporations, partnerships do not need to register with the state.

Partnerships are not required to follow corporate formalities. A partnership agreement is essential to protect yourself in any partnership, even if you know and trust your business partner.

Limited Liability Company (LLC)

This is often the preferred entity type for convenience store owners.

LLC owners do not have personal liability for their businesses as long as they register with the state and follow the rules for operating as an LLC.

For tax purposes, LLCs are treated as pass-through entities like sole proprietorships and partnerships where the business pays no tax. This means the owner includes all its income and losses on their personal returns.

There are requirements to maintain status as an LLC. Failure to follow all state requirements can result in the LLC failing to protect your personal assets.

Corporation

Business owners can structure a corporation as a C-corporation or an S-corporation. Both types protect the owners from personal liability for the business's debts. States have numerous requirements to form C-corporations and S-corporations.

S-corporations are treated as pass-through entities for tax purposes. C-corporations must pay the corporate income tax on their income, and their owners must pay taxes on the amounts they receive as dividends.

Finding the right location for your storefront is paramount for the success of your business.

If you do not already own commercial property for your convenience store, consider the advantages of leasing your commercial space. Leasing the space ensures you can move on from an empty building should your business fail. Renting often relieves you of financial responsibility for significant repairs to the building.

Most commercial real estate leases fall into one of four categories:

• Base rent or gross lease: ​This requires the tenant to pay a fixed amount each month for the retail space. It determines how the property owner will calculate future rent increases.
• Triple net lease: This requires the tenant to pay monthly rent plus maintenance costs, building insurance, and property taxes.
• Ground lease: This allows the tenant to develop a property, but the building and any improvements revert to the owner at the lease's end.
• Capital lease: In this lease, the landlord agrees to transfer property ownership to the tenant after a long-term lease.

Most commercial leases will require you to put down a security deposit and the first and last month's rent.

Commercial leases often run for several years. Meeting with a real estate attorney before signing any commercial lease is a good idea. An attorney can ensure the lease terms are fair and lay out the obligations of both parties. They can also help you negotiate lease terms.

When researching commercial space, ensure the property is zoned for commercial use. Pay close attention to any zoning restrictions, especially for fuel storage.

Some of the most popular products sold by convenience stores are among the most highly regulated, including:

• Alcoholic beverages
• Tobacco products
• Lottery tickets

If you plan on selling any of these, there's a good chance you'll need a license or permit from your state or local government. Sometimes the government will require both.

In most states, you'll need to get the following licenses and permits before opening your store:

• Liquor license or permit
• License for selling tobacco products
• Lottery license
• Sales tax permit
• Health and safety permits
• Occupancy permit
• City or county business license
• Environmental and other fuel permits if you are selling gasoline

If your business has a car wash, you may need to look into additional regulations. The U.S. Environmental Protection Agency (EPA) and the Occupational Safety and Health Association (OSHA) have regulations affecting car washes. Your local and state governments may also have environmental laws that govern car washes.

Depending on where you operate, it can take weeks or even months to secure all required licenses and permits. To avoid delays in your business planning, begin applying for them as soon as you form your business and find a suitable location.

Finding our what business insurance you need is a necessity. When researching commercial insurance, consider your store's potential risks and liabilities. You should also think about your assets and how much financial risk you're willing to assume. In general, most retail businesses need the following types of insurance:

• Business liability insurance
• General liability insurance
• Workers' compensation insurance
• Commercial umbrella insurance

Your commercial lease may also require certain insurance coverage.

Opening a convenience store can have significant startup costs. In some cases, it can cost up to $50,000 to lease store space, remodel its interior, and purchase the necessary equipment. You may also need capital to cover some of your operating costs, like rent and inventory, until your store earns enough to cover these expenses.

Your commercial rent, renovations, and inventory often comprise the most significant portion of your startup costs.

Some can afford to pay startup costs out of pocket, or have a business partner who can help put up the money. Most new convenience stores will need to secure either a business loan or an outside investor to cover their startup costs.

Your costs will depend on the scope of your business and the size and location of your store. You will likely need to purchase:

• A fully stocked checkout area with cash registers and point-of-sale systems (POS)
• Initial inventory (like food items, beverages, and tobacco)
• Security system
• Fuel pumps and tanks

You will also need to account for staff payroll, insurance, business licensing, marketing costs, and utilities.

Loans guaranteed by the U.S. Small Business Administration (SBA) are a popular startup loan source. The SBA assures the lender it will repay up to 85% of the loan, so they're often available to borrowers viewed as credit risks by traditional lending institutions.

Another option is to use an online lender. Many offer short-term loans to purchase inventory, provide working capital, or help with cash flow.

Some business owners take out a line of business credit to cover startup and ongoing expenses. This works like a credit card.

Making the extra effort to seek out and hire qualified candidates can save you time and money in the long term, even in a candidate-driven job market. Hiring qualified candidates ensures your store can operate efficiently and that poor customer service will not drive your customers away.

Look for cheerful candidates who will ensure your customers have a positive experience when visiting your store. Backgrounds in customer service, hospitality, or retail are a plus.

Before posting job openings, write clear, easy-to-understand, and transparent job descriptions. Good job descriptions are not misleading and should give the candidate a good idea of what the job entails. Including a salary range can save time in the long run by ensuring that candidates who apply and interview are willing to work for the offered pay.

Federal discrimination laws affect what you can and cannot legally say in job descriptions and during interviews. Be sure you're familiar with these laws before you begin conducting interviews.

Many convenience store owners use online services like Indeed and ZipRecruiter to find employees. You can also use LinkedIn to find and recruit potential employees. It still pays off to focus on the word-of-mouth referrals or potential employees who have stopped in to inquire about job opportunities.

Upon hire, verify your employees' identities and eligibility to work in the U.S.

You should provide your employees with continuous training to help them understand their job responsibilities. Train them on all applicable health and safety requirements as well.

If you plan on selling tobacco products or alcohol and hiring employees under the age of 21, you must follow state rules and regulations regarding who can sell those items. In many cases, this means you can't have someone under 21 work shifts in the store by themselves.

If your business is a corporation or LLC, you will need an Employer Identification Number (EIN) from the Internal Revenue Service (IRS) before you can hire employees. If your business is a partnership or sole proprietorship, you will use your social security number.

You will also need an EIN to open a business bank account. You can get an EIN at no cost on the IRS website.

Even if you set up shop in an area with good vehicle or foot traffic, you will still need a comprehensive marketing plan. This will help attract customers and get the word out about your store and what it offers.

One of the simplest ways to market your store is to leverage digital marketing, particularly a strong social media presence. You can do this by:

• Building a user-friendly website that links to your social media platforms
• Investing in search engine optimization (SEO) digital strategies
• Creating social media profiles (especially Facebook and Instagram)
• Using email and SMS (text) marketing

You can offer exclusive discounts and promotions to your social media followers. The discounts do not need to be large. They only need to provide enough value that people will choose to follow your store's social pages.

Another way to increase customer traffic is by offering a digital loyalty program. Your loyalty program can reward customers with:

• Free car washes
• Gas discounts
• Complimentary soft drinks or food items

Several companies can help you set up and manage your digital loyalty program. Most loyalty programs are digital, without a physical rewards card. Loyalty programs may also help you collect customer information, like demographics and market data.

Another way to connect with potential customers is by community involvement. Consider sponsoring a local event benefitting a charity or nonprofit. Most organizations will give you sponsorship credit on their promotional materials in return for providing food or drinks for their event.

Be sure to review advertising laws that may impact your marketing strategies. This is important if advertising products like tobacco, alcohol, or lottery tickets.