the Top 10 Steps to Successful C-Store Retailing

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the Top 10 Steps to Successful C-Store Retailing According to NACS (the National Association of Convenience Stores), as of December 31, 2016, there were 154,535 convenience stores operating within

1 the Top 10 Steps to Successful C-Store Retailing According to NACS (the National Association of Convenience Stores), as of December 31, 2016, there were 154,535 convenience stores operating within the United States, and 80.1% of them sold gasoline. During the same year, according to Nielsen data, 7,477 locations closed, with at least 877 c-stores being replaced by another entity in its physical location. Economic factors, in addition to poor planning and operating choices, helped contribute to these failures. For anyone considering getting into the convenience store business, several best practices come into play, which, if followed closely, will increase your chances of opening a successful retail location. This white paper will walk you through some of the crucial steps to get a profitable convenience store up and running. Please keep in mind that many of these steps may occur simultaneously. Step #1: Know What You Are Getting Into Operating a convenience store can be an all-encompassing endeavor, and it is important that you have a firm understanding of what the job really entails before you make any decisions. Not only are there business and industry factors, there are personality factors that should be taken into consideration. Typically, successful retailers possess some or all of the following traits: Experience working in, or operating, a retail convenience store Great time management skills Flexibility to work long hours Ability to multi-task and take on several different roles Enjoy interacting with a wide variety of customers Skilled at motivating and building a strong team Capable of handling stress Adaptable to internal and external factors and market conditions How does your work ethic and personality fit into this formula? Step #2: Select Your Service Partners Building the best possible team of professionals to support you while you develop your business is essential. These individuals will share their broad range of knowledge and experience with you to help you plan for a variety of situations. Not only can they provide you with the best advice possible to start your business, your relationship with them can continue even after your business has opened. White Paper: The Top 10 Steps to Successful C-Store Retailing 2017 World Fuel Services. P. 1

What kind of supply and terminal options do they offer? What pricing plans are in place and what payment options do they offer? What vendors do they have special programs with?

2 Your Fuel Provider If your location will provide gasoline, hiring a fuel provider should be one of your very first steps. Choose a provider with a proven track record who is reputable and knowledgeable about the industry. The following questions can help you make the right choice: How long have they been in business? What kind of supply and terminal options do they offer? What pricing plans are in place and what payment options do they offer? What vendors do they have special programs with? What insights or knowledge could they pass on to you to make you a better and more successful operator? Your Accountant Since getting into the c-store business requires some serious cash flow, it is recommended that you find a financial services professional to offer you guidance early on in the process. There are a few things to keep in mind when selecting this key business partner. First, make sure that they specialize in c-stores, as it will save you some possible frustration with regard to P&L statements, sales tracking, inventories, and state and/or federal requirements and permits. Second, take time to ask for references from clients who are convenience store owners and contact them. The number one reason many businesses fail is because they have not spent the time to invest in a good accounting system. While this type of service might initially seem costly, having an expert in the business from the start will save you time and money down the road. Your Vendors From training to merchandising to fixing equipment, and providing food and beverage service, hiring the best vendors requires a bit of homework. The good news is that the professional team you have surrounded yourself with can help you get started! Ask your fuel provider for a list of preferred vendors with whom they have worked. Be sure to check references by contacting several of their current, and previous, customers to get an idea of how they might interact with you if you partner with them. Other professional service partners you may want to consider researching include an insurance agent, attorney, banker/ financier or real estate professional. Step #3: Choose Your Location Whether you plan to purchase an empty location, take over an existing one, or start from scratch, there are two key questions that should be answered to determine whether you should move forward: Is it a good location? Your fuel rep will help answer this question by conducting an initial site assessment. Common site attractors and detractors will be reviewed, including: proximity to the highway and commuter traffic; visibility from the road; ease of entry and maneuverability; availability of parking; and nearby competitors. White Paper: The Top 10 Steps to Successful C-Store Retailing 2017 World Fuel Services. P. 2

Will it be profitable? Once a site has been deemed favorable, your fuel provider can help you execute a site feasibility study or connect you to a third party who can execute one.

3 Will it be profitable? Once a site has been deemed favorable, your fuel provider can help you execute a site feasibility study or connect you to a third party who can execute one. A feasibility study examines many factors to forecast how profitable your location might be. This provider will look at local demographics, traffic flow, and other factors to predict the potential gallons you may sell. The benefits of investing in a feasibility study more than outweigh the cost of investing thousands of dollars into a location which may fail. Also note that many banks will require a feasibility study before they will secure your loan. If you are considering purchasing or taking over an existing site, it is important to review all historical data regarding its operations to predict how well you may do. It is recommended that your fuel provider evaluate this information with you to help identify the challenges you may face with the location, as well as to devise a game plan that will help you succeed. They may also be able to help answer why the site is for sale, and/or why it closed in the first place. After taking the above factors into consideration, your fuel provider will then run a performa. This report will help you determine expenses related to your operations, including shrink, shortages and payroll, as well as a five-year profitability forecast. They will also help you determine what additional profit centers you may want to provide to your customers, such as an ATM, car wash, or shipping services. Other options might include incorporating a liquor store or restaurant into the mix. Any of these value-added services can help boost your internal sales by attracting more customers into your store. Step #4: Create Your Business Plan and Establish Financing Now that you have your location, how do you start planning for profitability? First, you need a business strategy. Determine how you are going to drive business to your store, such as discounting car washes or gas, soliciting commercial business, or through other profit centers. Second, you need to develop a business plan with the assistance of your accountant and your fuel provider your two key partners in your business endeavor. What is a Business Plan? A business plan is a written management document which is used as a tool to develop, grow, and manage your business. It describes your company s current status, as well as plans for several years into the future. Your plan will not only help you formalize your strategy and objectives internally, it will validate these goals to potential investors. Key components of your business plan should include: Business analysis Products and services The market The competition Business strategy Financial plan Management plan Marketing plan White Paper: The Top 10 Steps to Successful C-Store Retailing 2017 World Fuel Services. P. 3

4 Your Financing Fundamentally, you should be able to pay for your fuel without subsidizing from your inside sales. This basic best practice ensures that you manage your inside sales and outside sales as separate profit groups and that they are both profitable. This is done by opening not one, but TWO accounts with your bank: a fuel account and a business account. While you are building your business, be sure to have enough money in each of these accounts to cover a minimum of six months of expenses to protect you. Be sure that you understand your break-even point for outside fuel and inside sales before you begin. Your fuel provider will work with you to explain blended margin for inside merchandise, as well as your fuel pool margin. Getting preapproved with your bank is advised to make things easier for you from the very beginning of the process. This is where your feasibility study, along with your business plan, come into play. Your Bank When applying for your bank loan or line of credit, consider more than just the purchase price of your site. Plan for your inventory, as well as your first year s lease payments, including taxes and insurance. Most start-up convenience stores require a minimum of $100,000 in working capital. Also keep in mind that fuel providers require security up-front as a way of protecting each party s interests in the event that unforeseen circumstances affect your operations. It is also good to remember that you will need to be able to support yourself during the development of your site, as well as have a working line of credit available for daily operations until you start selling gallons and begin to break-even on your investment. There are many different requirements in order to get your bank loan or line of credit, and your fuel provider should be able to provide you with a criteria checklist, as well as advise you on how you to make the best impression with your bank. Step #5: To Brand or Not to Brand Now that you have received financing, it is time to start thinking about how you want to represent your c-store to the general public. You may decide to brand your location to attract consumers with previous experience with, or fondness for, a certain brand. You may, however, feel that going unbranded works best for you. To help with your decision, try to evaluate the following factors: Projected gallons Types of fuel you plan to sell Whether your competitors are branded or unbranded Branding requirements (imaging, gallons, evaluations) Supply options nearby Pricing (branded vs. unbranded fuel) Brand incentive programs Credit card base by major brands within the area There are many brand options to choose from (some examples are, BP, Shell, Sinclair, Clark, Valero, Chevron, Cenex, CITGO, Suncor, Marathon, GULF, Phillips 66, ExxonMobil) and all offer some kind of incentive program to help you get your business started. The majority of these options are tied to the amount of gallons you are committed to selling, so some brands may or may not be available to you based on minimum contract gallon requirements. Your fuel provider should have established relationships with many of these brands and will make recommendations based on which options best fit your needs. Benefits of going branded include assistance with imaging costs and rebates on gallons sold. Many brands provide upfront funds to help set up imaging for your site. This may include a branded pricing sign, internal and external signage, pump decals and your canopy. In addition, you may be eligible to receive rebates (cents per gallon) on monthly sales a great incentive for maintaining the brand image. White Paper: The Top 10 Steps to Successful C-Store Retailing 2017 World Fuel Services. P. 4

5 If you do decide to go branded, you should be aware that there are strict requirements for maintaining your brand, and some additional training may be required. Most brands conduct quarterly mystery shops, which involve a third-party mystery shopper visiting your store to evaluate it based on established standards. Consistently low mystery shops scores (or failures) could result in the de-branding of your location. Therefore, some commitment will be required on your part to keep your location clean and well-imaged. Step #6: Stock Your Location By now, you have already selected your vendor partners and chosen the types of merchandise you will be selling. Not only can your vendors help stock your location, they can assist with merchandise displays and offer advice on setting up your store. Check with your vendors to see if they provide discounted programs due to their association with your fuel provider, as well as the requirements for these discounts. This can add up to significant savings on monthly operating expenses. In addition, some vendors have rebate programs available, but these need excellent management controls to make sure claims are submitted, tracked, and received. Another best practice is to complete a perpetual inventory every day and have it validated by an outside inventory service on a monthly basis. This ensures that you always have a clear idea of what inventory is coming in and going out of your store. By knowing what you have in stock, you can have more leeway in creating special pricing on select merchandise to increase your inside sales. You can also identify what items may or may not be selling so you can adjust accordingly, rather than having it sit on a shelf or in a back room. These items represent cash that could be used toward items that are contributing to your bottom line! Without a perpetual inventory control system on in-store merchandise, there is no way to produce an accurate P&L statement. Federal and state laws require these records be kept on fuel inventories as a matter of environmental control. Step #7: Hire and Train Your Team There are many federal and state requirements, as well as taxes, associated with hiring your workforce. It is essential that you research and understand these requirements before you open your location. What will you pay your associates (salary or minimum wage)? What types of insurance must you offer (medical, dental, life, etc.)? What else do you need to know? If you plan to work in your store, set yourself up as a salaried employee and draw your salary from your business account. Additionally, family members working for you should also be set up as official company employees to be paid for their contributions. Doing so will help avoid false profit and keep your cash drawer available for company expenses at all times. Invest in training for yourself, as well as your employees. Your fuel provider, along with your vendors, can help with training in these tasks: Working the cash registers and other equipment Stocking merchandise and creating displays Conducting perpetual inventories Ordering fuel Customer service Controlling shrink Robbery prevention White Paper: The Top 10 Steps to Successful C-Store Retailing 2017 World Fuel Services. P. 5

6 Teach your employees how to conduct themselves when representing your location as well as your brand. In addition to understanding operational procedures, show them how to make a good impression on your customers. From wearing uniforms, to smiling and providing courteous service, they can help you earn customer loyalty and repeat business which contributes to your bottom line. Above all, always make sure that your service personnel are visible at all times and available to continuously interact with your customers. Step #8: Keep Security in Mind You have spent a lot of time and money so far on your location. Therefore, you will want to safeguard it by investing in insurance and putting security systems in place. Secure Your Site First, there are the obvious security measures. Invest in video surveillance cameras that provide digital footage, both inside and outside your store. Ensure that front windows are unobstructed from signage and displays, keeping visibility clear to those inside, as well as outside. Make sure that you have PCI compliant equipment, both inside, as well as at your pumps, to safeguard customer credit/debit card data. Secure Your Merchandise Next, take measures to safeguard your merchandise by putting a POS/UPC system in place. This will track all inventory coming in and out of your store. Be sure to establish rules with your employees regarding consumption of your food and beverage products, as all contribute to your inventory levels and your bottom line. Put controls on your high price inventory items (lottery, liquor, and tobacco) by keeping them behind the counter. Employee theft can be a big concern for operators, especially with regard to these higher cost items. To combat this issue, tie your employees bonuses to cash overs or shorts and inventories, and establish guidelines regarding the handling of these items. Daily Deposits Make it a best practice to reduce your cash on hand by making daily deposits to your bank. This safeguards not only your location, but the accuracy of your books. A time-delayed safe on premesis will help secure your cash on hand until deposits can be made. Step #9: Understand Your Customer Keep in mind that your customers can make or break your business. Therefore, you need to understand the demographics of your community. Is your area heavily populated by one or more ethnic groups? How affluent is your customer base? What economic challenges do they face? Are they primarily older or younger? What part does religion play in their purchasing decisions? Talking to your customers, as well as doing a little research, can provide valuable insight into additional offerings that could result in increased traffic and a more loyal customer base. Identify what products your customers might like to see you carry, such as ethnic foods or other items. Just as important, know which items you might need to consider not stocking (alcohol or men s magazines, for example, if you are near a church), and the tradeoffs if you do carry them. Shop your competition to see what they are doing right and wrong and create competitive advantages to drive their customers to you! An additional issue to be aware of is that everyone has a different definition of clean. For some, a dirty restroom might not be such a big deal, but for others, it can turn them away, sometimes forever. Therefore, it is best to always assume that cleanliness is key at your location. Take measures to keep all areas of your store, including your restrooms, sparkling clean. White Paper: The Top 10 Steps to Successful C-Store Retailing 2017 World Fuel Services. P. 6

7 Step #10: Market Your Location Once you are ready to open your c-store, be sure to let your potential customers know about it! Use an Opening Soon banner while you are setting up; include your open date to create enthusiasm. Consider sending postcards with coupons for giveaway items to all residents within your immediate and surrounding zip codes to increase awareness. Your fuel provider and vendors can give you a variety of ideas on additional ways to promote your Grand Opening, as well as how to facilitate it. Another note on marketing: If you are a branded location, you may have advertising co-op funds available to use toward marketing to potential customers. This makes promoting your business even easier. Ask your fuel provider for more information on these types of programs. Summary Regardless of the circumstances, one thing is perfectly clear when planning for a profitable c-store business: you need to surround yourself with professionals who understand the industry, are able to provide valuable insights into your business, and can connect you with the people and resources needed to help you succeed. World Fuel Services has provided fueling solutions, as well as retail development services, to its customers for more than 50 years. To learn more about how World Fuel Services can help you, contact us at retailsolutions@wfscorp.com. Want to know more? Please contact us: wfscorp.com retailsolutions@wfscorp.com White Paper: The Top 10 Steps to Successful C-Store Retailing 2017 World Fuel Services. P. 7

How Consumers React to Gas Prices. Insights from NACS Consumer Fuels Surveys on consumer perceptions related to gas prices and the economy overall

How Consumers React to Gas Prices Insights from NACS Consumer Fuels Surveys on consumer perceptions related to gas prices and the economy overall May 2018 How Consumers React to Gas Prices Nearly 40 million