How to Start a Convenience Store: A Comprehensive Guide

  • By Matthew Davis
  • Mar 7, 2024
  • Customer Engagement
How to Start a Convenience Store

There are more than 150,000 convenience stores in the U.S. And, on average, corner stores pull in $1.75 million in revenue each year.

Even better, c store sales continue to improve. Nearly two-thirds of c-store retailers reported an increase in sales in 2023. That’s a lot of coffee, snacks, and quick trips!

Although the numbers sound great, before you get serious about starting a convenience store, take a quick breath. Opening a corner store can be a great way to be your own boss, but it also comes with its share of challenges.

Theft, low-margins, and inflation can make profitability elusive. Not to mention, corner store owners must keep up with changing regulations (especially if they sell alcohol or tobacco products).

However, if you create a sound c store business plan, and most importantly, have the capital to launch, starting a convenience store can be a fruitful endeavor.

Curious about the economics of opening a convenience store? Or do you have questions about where to get started? This guide covers everything you need to know about how to start a convenience store. From business planning, to estimating start-up costs, and everything in between.

Convenience Store Business Planning

Convenience Store Business Planning

Before you start slinging coffee and snacks, a well-crafted business plan is essential. Think of it as your roadmap to success.

Here are the three most important factors in your convenience store’s business plan:

1. What Makes Your Store Special?

In the U.S., there’s one c-store for every 2,225 people. If you want to succeed, you must stand out. Start by defining:

Your Store’s Vision

Are you a grab-and-go for busy commuters, or a neighborhood staple offering food service? Research your market and define your niche. This will help you attract the right customers.

For example, offering food service is one of the fastest growing trends in the convenience store industry. Do you plan to offer quick-service food? If so, this is one area where you create a differentiator that drives sales and foot traffic.

Who’s Your Audience?

Who are you serving? Busy professionals? Night-owl students? Your audience will guide your product selection, which can have a huge impact on your profitability.

For example, a convenience store near a college campus might lean into microwaveable grocery items and other grab-and-go essentials. But if you’re serving morning commuters, you’d want to focus on hot beverages to-go and grab-and-go breakfast options.

What’s the Competition?

Look at nearby stores. What do they offer? What are they missing? This will help you differentiate and identify potential gaps in the market. You should look at these points: their products, hours of operation, target customers, shopping experience, etc.

What’s Next?

Using these three criteria, define a USP (unique selling proposition) for your convenience store.

Your USP is the main reason customers should choose you. An effective USP for a corner store might be specific products (e.g., a wide selection of vapes), unique services (a deli counter), or a differentiated shopping experience (a strong emphasis on customer loyalty rewards).

2. Pick the Perfect Location

Location will make or break your store. But remember, this is one of your largest start-up expenses. A prime location can be expensive.

According to some estimates, a lease deposit for a high-visibility location might set you back $12,000 to $16,000. So, what should you look for in a location for opening a convenience store? Think about these factors:

  • Foot traffic is a must.
  • Choose a location with good access (for cars and pedestrians).
  • Ensure zoning lets you sell all your products.
  • Does the location align with your vision?

Also, consider the remodeling costs. Choosing a building that previously housed a convenience store can save you significantly. The average build-out for a new convenience store averages about $125 per square foot.

3. Secure Funding

Starting a convenience store is a capital-intensive endeavor. Some of the costs include:

  • Start-Up Inventory – $20,000
  • Equipment – Up to $30,000 (frozen drink machine, soda machine, coffee, coolers)
  • Lease Deposit – $12,000 to $16,000
  • Licensing – $2,000
  • Marketing – $1,500
  • Insurance – $1000-$2000
  • Renovation Costs – $250,000

If you aren’t purchasing an existing corner store business, start-up costs might rise to $325,000. On top of this, you would also need to factor in operating expenses, which could average up to $10,000 per month or more, depending on your rent and labor costs.

Therefore, you’d likely need investors. Having enough capital to launch (and power you through your first year) is essential for long-term success.

Creating a C-Store Business Plan

Once you’ve done this initial research, craft a compelling business plan. A business plan is your roadmap for success. It should include:

  • Your business and mission (USP)
  • Your audience
  • How you serve your audience
  • Operating and start-up costs
  • How you will pay your costs
  • Marketing plans
  • Key roles and responsibilities

Although a business plan might not seem necessary, it’s often a vital piece for securing funding. Plus, it lays out your plans and helps you define what it will take for success. Don’t neglect a sound business plan.

C-Store Business Planning

Equipping Your Store for Success

Running a convenience store requires the right equipment and the right team. Here’s a look at both of these categories:

1. Convenience Store Equipment

Your equipment will fall into two categories: Business tools and customer systems. Some systems you will need to invest in include:

These tools will help you improve operations. For example, a lottery management system helps you keep track of lottery inventory, track sales, and automate reporting for accounting purposes.

A POS system typically combines many of these tools. For example, FTx POS includes inventory, lottery, and scan data reporting tools.

Also, you must think about your customer-facing equipment. This would be systems like a soda fountain (a big revenue driver), coolers, coffee and cappuccino machines, and lottery vending machines.

2. Convenience Store Hiring

Staffing issues are a challenge in convenience stores, which traditionally face high turnover. Therefore, it’s important to have a sound hiring and employee retention strategy.

Starting wages are often a recruitment driver. However, you can use tools like upselling incentives to provide a financial incentive for cashiers. This can help you improve retention and reward high-performing staff.

In FTx POS, for example, you can add upselling prompts to your checkout screens. These prompts include scripts for cashiers, and they can log “wins” or “losses” during checkout. For example, if a customer checked out with a single beverage, the prompt might say, “You can save $1.99 if you add another beverage.”

convenience store POS system

Choosing Your Product Mix

Your product selection can make or break your store. First, start with the audience. What products do your customers want? Your product mix should be aligned with your target demographic.

For example, a convenience store near a campground would need to carry an assortment of camping essentials: Dried firewood, fire starters, flashlights, marshmallow roasting sticks, etc.

Start-up inventory can set you back $20,000 or more. Therefore, you’ll want to choose the right assortment of snacks, beverages, and convenience items.

One effective strategy: Choose a product category that you can “own”.

For instance, let’s say your competitors offer a very limited selection of disposable nicotine vapes. You can “own” this category by offering a wide selection and training your staff to be knowledgeable about your options. When effective, you become the local go-to source for a particular product category, which drives repeat business and word-of-mouth referrals.

Balancing Margins

Additionally, you’ll want to think about margins and balance high-margin and low-margin products.

  • Low Margin Products – Cigarettes, lottery, hygiene essentials.
  • High Margin Products – Alcohol, hot beverages, bottled water, energy drinks, vape products, snacks, and tobacco smoking accessories.

Create a marketing strategy that features higher margin products. This can help you increase sales and profits. You’ll also want to encourage customers to pair low-margin products with high-margin upsells.

For example, in convenience stores cigarettes have very low margins, most commonly about 4-6% margins. Upselling beverages, lighters, and smoking accessories (high-margin items) to this audience will help you increase profitability.

What Licenses Do You Need to Start a C Store?

Before you can open your doors, you need to secure the right business licenses.

The types of licenses you will need typically depend on your location. But in general, you’ll need standard retail licenses, and possibly, permits for selling specialty products (like alcohol, lottery or tobacco).

Some of the licenses you will need to run a convenience store include:

  • Sales tax permit
  • EIN employer ID #
  • Occupancy permit
  • Business permits (city and county)
  • Alcohol and tobacco sales permits
  • Lottery license

One Tip. In addition, be sure you understand your requirements to keep your license. Age verification technology, for example, can help you stay compliant for tobacco and alcohol sales.

Running a Successful Convenience Store

Even with a well-crafted plan and the perfect location, the true test of your convenience store lies in its daily operations.

Here’s how to keep your store running smoothly and your customers coming back for more:

Inventory Management

Stock smart, not just often. Implement a c store inventory management system to prevent stockouts and overstocking (both of which cut into your profit margins). Generally, inventory management tools will alert you to low stock levels and help you identify best-sellers.

Additionally, wholesale pricing is important. Generally, large convenience chains have higher profits, because they have strong purchasing power. They can negotiate the best rates. If you’re just starting out, look to build strong relationships with suppliers.

Consider the Shopping Experience

What’s the first impression customers will have of your business? First, focus on cleanliness. You don’t want to develop a reputation as the corner store with a disastrous bathroom.

In fact, a clean bathroom can drive sales. Customers associate a clean bathroom with safer food handling and storeroom policies. So, if you offer food service (and even if you don’t), make sure your bathroom is well kept.

Establish a Loyalty Program

Punch cards, coffee clubs, and shopping rewards are major drivers of sales. Once you’ve covered the basics, consider stepping up to add loyalty rewards. Some examples include:

  • Digital punch cards
  • Tobacco rewards
  • Soda discounts

Another option would be offering dual pricing or cash discounts, which can help you to lower credit card processing costs. Your POS system can help you to offer this with minimal accounting.

Customer Service

Provide the best service. That’s one area you can always beat your competition. Motivate your staff to provide friendly answers to customer questions and train your staff on customer service basics. A little can go a long way.

According to a NACS survey, 84% of customers look for stores with “friendly employees who make me feel welcome.” Think about this: 74% said they’d travel 5 minutes out of their way to visit the store they prefer.

How to Open a Convenience Store

Wrapping Up

Owning a convenience store can be a rewarding venture, but careful planning is critical. Follow this guide to navigate the process, from crafting a business plan to choosing a location.

Ultimately, your success will come down to a strategic product mix, your ability to draw walk-in traffic, and efficient operations. And one of the best ways to achieve that is using convenience store POS software with tools like inventory, lottery management and scan data reporting.

Need POS software? FTx POS offers a variety of solutions tailored to the needs of independent corner stores. Contact our team today to learn how we can help.

FAQs

The initial steps involve planning and preparation. This includes market research, business planning, and securing funding. Generally, funding is a big hurdle, as renovating an existing building may cost $250,000 or more.

Location is crucial for success. You should look for locations that meet these criteria:

  • High foot traffic: Busy intersections, near residential areas, or along commuter routes.
  • Visibility and accessibility: Easy to see and enter, with ample parking if applicable.
  • Limited competition: Avoid saturated areas with similar businesses.

Licensing requirements vary by location, but typically include:

  • Business licenses: General business license and potentially specific licenses for selling certain products (e.g., tobacco, alcohol).
  • Health permits: Permits for food handling and preparation, if applicable.
  • Zoning permits: Ensure your business complies with local zoning regulations.

Inventory selection depends on your target market and local preferences. Common items include beverages, snacks, personal care items, and household essentials. Grocery items are generally high margin, and therefore, it’s a good idea to carry the most essential groceries.

Several factors contribute to a successful convenience store. Some factors include:

  • Customer service: Provide friendly, efficient service to build customer loyalty.
  • Competitive pricing: Offer competitive prices on essential items to attract customers.
  • Clean and organized store: Maintain a clean, well-organized store for a positive customer experience.

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Business Experts & Contributors

A New Solution Coming To FasTrax

Danielle is a content writer at FTx POS. She specializes in writing about all-in-one, cutting-edge POS and business solutions that can help companies stand out. In addition to her passions for reading and writing, she also enjoys crafts and watching documentaries.

Danielle Dixon

Content Writer
A New Solution Coming To FasTrax

Matthew Davis is a content marketing specialist for FTx POS. With experience in marketing, brick-and-mortar retail, and ecommerce, Matthew enjoys writing about strategies and technology retailers can use to grow. Previously, he managed retail operations for a sports/entertainment facility and worked in marketing consulting.

Matthew Davis

SEO Specialist/Content Writer

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