Industry

HOME
ABOUT US
SERVICES
INDUSTRY
FAQ's
CONTACT US
LOGIN CENTER

The

Convenience Store Industry

Business Analysis

Convenience stores sell the majority of gasoline purchased in the country, more than 80 percent of all fuel sold in the United States in 2009. Of the 144,875 convenience stores in the United States, 115,157 sell motor fuels (81 percent).

2008 saw the most extreme price volatility for motor fuels in recent history. According to the Oil Price Information Service (OPIS), weekly average retail prices fluctuated from a low of $1.62 to a high of $4.11 for an annual average price of $3.24. During the first half of the year, when prices were rising, retail margins were shrinking. Average gross margins were 11.7 cents per gallon through June. As the crude oil price plummeted, retail gasoline prices also dropped and retailer margins improved to such a degree that the annual average margin was 18.0 cents per gallon. However, after incorporating expenses such as credit cards fees (which are 2.5 to 3 percent) operating expenses, depreciation, and taxes, profit margins in 2008 typically were about five cents per gallon (average break even on fuel sales is 12.8 cents). On a percentage basis, gross margins in 2008 remained very low at 5.5 percent, with actual profits of only 1.6 percent.

The convenience retailing industry has seen remarkable growth over the last three decades. In 1979 there were only 57,700 convenience stores in the United States. The industry has seen a complete reversal in the past two years. 2010 is expected to show a larger decline in store counts. This decline is driven by fluctuating gas prices and many retailers, especially single convenience store owners, not being able to keep up with the expense and operating at a profit. Consumer purchases with payments by credit cards and the associated interchange fees paid to the card companies by retailers, have been a real problem for the industry and for single-store owners.

The value of a convenience store today can vary between $1.5 to $2.5 million dollars when open for business. This includes the real estate and goodwill of the property. When the operation is closed down, the value of the business can plummet as much as 90% due to the loss of goodwill and asset deterioration, making the recovered value of investment as low as .10 cents on the dollar and continues to burden the property owners with additional monthly fixed overhead expenses such as (property taxes, environmental monitoring equipment, landscaping & aesthetic maintenance, and other liabilities up keeping cost).

Industry Links

When the operation is closed down, the value of the business can plummet as much as 90% due to the loss of goodwill and asset deterioration, making the recovered value of investment as low as .10 cents on the dollar and continues to burden the property owners with additional monthly expenses.

Closed locations are very difficult to sell.

CSP Magazine

Oil Price Information Service (OPIS)

NACS Magazine

Scope of Industry

Motor Fuels

Industry Issues

Merchandise & Services

Industry Resourses

The key element in the need for Retail Management Services is when the property owners are left with an abandoned convenience store due to a failing owner/operator who no longer wants to operate the business. It is at this moment, when our clients find themselves in desperate need for our services that they are impressed with our ability to respond within hours of the call anywhere in the U.S. It's been the regular industry practice for lending institutions or oil companies to allow the existing operator to continue operating the business until a solution has been decided. In most cases this gives the operator more time to pilfer through the business in an attempt to retrieve their losses.

The LPT Retail Management Service is a great alternative for its clients. LPT can not only help reduce this burden, in most cases depending on the location, the cost to keep the business open is significantly less than losing the depreciation value of 90%. Most importantly, by maintaining an open, successful business and increasing sales over previous ownership, as well as producing true credible sales numbers, increases the goodwill value substantially, making the location a lot more desirable to potential buyers.