BGR: C-Store

Ref: C-Store
Milk, Bread, Soda and Snacks

RoT: Rule of Thumb
15-30% annual sales + inventory
1.5-2 times SDE + inventory
5 times EBITDA less cosmetic renovation to receive nat'l brand of fule + inventory
2-3 times EBITDA + inventory (c-store only)
6-8 times EBITDA + inventory (real estate + business)

RoT for different types of C-Stores
Kiosk - 1-2 times EBITDA + RE & Fixtures/Equipment
Mini-CStore - 2-3 times EBITDA + RE & Fixtures/Equipment
Limited Selection C-Store - 2-3 times EBITDA + RE & Fixtures/Equipment
Traditional C-Store - 3-4 times EBITDA Includes RE & Fixtures/Equipment Less inventory
Expanded C-Store - 4-5 times EBITDA includes RE & Fixtures & Equipment Less inventory
Hyper C-Store - same as Expanded CStore

Looking @ c-store
- Look @ 4 primary profit centers in c-store including typical sales, cost, margins & cash flows
- Consider impact of real-estate ownership vs lease
- Review petroleum product supply agreements
- It is more profitable for store owner to own fuel equipment and by paying loan pmt to bank rather than receiving a limited commission from fuel supply contract
- Calculate with accurate books and record, a market value that can be financed

Petroleum Supply Agreement
How long does it have remaining
Are there financial strings (loans, unamortized rebranding costs, volume rebates, buyout penalties)
Financial strings such as loans, unamortized rebranding costs, volume rebates buyout penalties?
Is brand competitive in the area or should rebranding considered?
Are financial terms competitive or can they be renegotiated to take advance of current market practices? Eg: If sales volumes have increased that would qualify for better competitive allowances, prepayments etc.
Fire sites with petroleum sales greater than 1M gallons per yr (83K GPM) there are lucrative arrangements if supplier is "buying" market share
Don't take supply agreement as admin function. Its very important part of sale.

Check store for gross/traffic count. Compare to average hours that generate profit. Exclude 1am - 5am as most stores do not generate enough business at this time.

Small volume, marginal stores impossible to sell in bad-margin market

Note: Must know supply agrements and margin that operator is working on.. High volume/good margins. Important factor to determine justification of seller's asking price is the profitability of the business. A c-store working on high margin on inside sales and having high monthly sales will sell for higher price than high-volume store working on low margin.

C-store operating at 30% + gross profit & monthly sales over 50k is attractive to buyer and should sell for higher price.

PRICING TIPS
Average price is 2-3 times SDE, 3-5 times when real estate is involved.
Business with low revenue - average under 1000 per day is buying a job - with sale price of 1 - 1.5 - under the 2 times of SDE

Location of business. Competition in immediate area. Type of products sold. Lottery Commissions.

Korean rule of thumb: 20x average weekly sales

Industry expert: Strive for an overall weighted inside gross profit margin of 30%
Attempt to get margin of 50-60% for deli sales
Gas margins vary over competition

Ballpark figure: If you get a bottom-line profit of 6.5-7% of total sales after taxes, depreciation and amortization

Usually valued at 3-4 times monthly gross depending on age of structure, new vs mature business, location etc. Price does not include RE or inventory but would include fixtures and equipment at market value. Value of food inventory for super market is about $12 p sf

High sales volume with profit important; need loss leaders especially milk and bread, good personnel, customer service important; open early morning; clean facility

Interstate locations, other good location, brand of gas very important
Age and condition of petroleum equipment important
Environmental issues must be dealt with before closing
Phase I/II reports required for financing
Up-to-date current property appraisal is helpful

SELLER FINANCING
5 year all due payable with 15-year amortization
5 - 7 years

QUESTIONS TO ASK
If petroleum - any previous environmenal issue, current leak test result
3 year tax return, lease agreement
Amount of gross that is tobacco related
Lottery sales
Any employee or customer thefts
Location: traffic count and number of rooftops dictate best locations along with traffic patterns, red lights curb out access
Age and condition of other equipment important
What is the mixture of sales?
How do sales break down concerning gas, merchandise/cig, beer, grill, deli?
EPA requirements completed?
Robberies since buying store
Key people
Gas supplier
Gas equipment owner
Wholesaler who supplies majority of groceries
C-stores being built within two miles of store?

BENCHMARKS
Strive for average 30% inside margin on merchandise sales
Rental less than $15 p sq foot
C-store annual sales $767k
Foodservice annual sales $115k
High volume easier to sell. Small stores under $25k monthly very hard to sell
Secondary Income (1.7% of total sales; $250k > $4250 and $150k > 2550)
Secondary income avenues: rebates/allowances; product placement fees; special promotions; pay phones; car vaccum/air/water; ATM: money order; Lottery; Pre-paid cards

EXPENSE AS % of SALES
COGS: 50-60% or less - good store
Payroll: 20% (owner operator will lower)
Occupancy costs: 7-15% (rent or mortgage payment)
Profit (pretax) 10-15% gasoline profit should cover rent/mortgage