M&A Specialist | Advisor | Author | Consultant

Are You A Convenience Store Owner Who is an “In Between”? The story of an over achiever who lost their way.

To begin with what is an “In Between”? It is a term that is used to describe a business owner that is no longer a 1 or 2 store operator, but because of the number of stores they own or the overall industry they are not longer considered a big player either.

Most convenience store owner operators started out in business by either building their businesses from the ground up or by buying or building one or two convenience stores. Then after a while they get the hang of operating stores and understand the nuances of the business. What vendors to use, what prices to charge to get the best gross profit margins and what items generally they should be carrying for sale in their stores.

If luck is with them and they are pretty good at what they are doing and they work hard they will have a profitable business. Then the proverbial light bulb will come on. Wow, they will say to themselves. We have worked our tails off and now we have 2 stores that are making money and it really isn’t that hard so we can only imagine how much more money we could make if we had more stores. So the game begins. It becomes evident in their mind that to be really successful like the Wal-Marts of the world all they need is more stores. It becomes an obsession and their focus begins to slowly change from the operations of the 2 stores to the finding of possible locations to build another store. Forget the fact that they have never built a store from the ground up before, but they have decided that this is the way to go so they search and search until they find the ultimate piece of property for the perfect store they have been fantasying about.

Alas, they finally do find the location and since they have never built a store before and they are  uneducated about the process that will need to take place for this creation to happen they somehow manage to convince a bank to loan them the money based on the success of their other two stores and for the construction of their new store. Of course they have put the equity of their two stores and everything else they have up for collateral so that they may build the new store, but that is OK, because they are going to be wildly successful with their new venture. Their vendors are on board with the new project since they want to sell more products so they are forthcoming with advice and constructive criticism. Finally after all of the construction delays and cost overruns the store is finished and opened to crowd of new customers who are thrilled to spend money at the new store. Or at least that is what they had envisioned during time they were building the new store, because that is what they have needed to make this new venture work.

The truth of the matter is that with the new store they have hocked everything they own and a good portion of their future to build this new store and the new store is not performing like they thought it would. Sure it makes money, but nothing like it was supposed to in their mind and as a matter of fact even though it is growing its sales every month it is not always profitable and actually takes some of the income from the other two stores to help it along some months. Egad, what is a person to do? Well the solution is really quite simple. We need more stores. We could never sell the new store, because we just paid an outrageous tuition to get this thing built and it is not reached its full potential in profitability and now we know how to do build stores. Since now we know how to deal with the bureaucracy of the local and state governments to get permits and plans approved for construction and how to deal with those greedy contractors who keep coming up with different ways to add costs to our project and invent those things called “change orders” which add more to the overall cost of our project and now we know how to present the financial proformas to the banker so that they will loan us more money and we will not have to explain what a veeder root or Ruby system is for the 10th time and now we know that we don’t need to allocate all of that space in our store for the new product lines that the vendors said that all new stores need to get the extra profit that the big guys are getting. No, now we know how to build stores and that is what is needed to fix this little issue of the new store not performing like we thought it would.

Yes, we need more stores. But building new stores is not the complete answer. Yes, building new stores will help our situation, but that will take a long time and we don’t have a long time. Sure we can build one when we find the perfect property, but to fix this issue now we need more stores so we need to go on the hunt to find more stores to buy. Since we know how to build and operate stores based our first two stores we started with (both which are still profitable) we believe in our minds that any stores we should buy whether they are great stores or not great stores will be great stores after we get a hold of them. So we begin the pursuit of finding stores to buy.

You see, building and searching for stores to buy is a whole lot more exciting and fun than managing and operating a store. Heck, we already know how to manage and operate a store and that is old stuff and on top of that we have a couple of good managers who are watching the stores for us and who are keeping all of the employees in line and making sure that things aren’t walking out the stores without being paid for. We have got things covered so we can focus our time and energy on the big picture of becoming a multi store operator just like the big boys and we will be in the big money and we will have a general manager to watch over the employees and the payroll and the marketing and hiring and firing and ordering of fuel and merchandise. That is how it is supposed to be done.

Now, before I go on with this story you are probably wondering why don’t we just stop right there and get these 3 stores all lined out and get everything under control before even contemplating growing this business. Well, the reason why, is the desire to grow and make a business larger can be a sickness and sometimes can develop into a disease if the desire to acquiring more stores and growing the business becomes the drug of choice. Never mind all of the reasons and justifications you may want to apply to this sickness when an individual has the desire to grow the only drug that will satisfy the urge is the growth of the company and more stores.

Now they are on the hunt and are out to buy more stores and guess what they find? More stores to buy and they begin to acquire more and more through different and sometimes creative ways of acquisition and before too long we now have 17 stores. Not bad for only starting with two stores to now have 17 stores. Never mind the fact that there is very little if any consistency in the floor plans or sizes of the stores or the type of equipment by manufacturer to help conserve costs for maintenance and repair. And never mind the fact that some of the ones we acquired had a franchise food service program, which we can’t get out of and is not profitable. We can justify that by saying we needed to test these kinds of programs anyway for future use. And never mind the fact the stores are not all located in the same market and now cover a minimum of 3 different markets and require us to have a regional manager who may spend 35% of their time just driving from location to location instead of being on site at a location to help improve sales.

Basically, we have situation where we have a chain of stores that are generally out of control in regards to ultimate profitability on a per store basis. The chain was grown to satisfy a need of the owner and even though it may be profitable it is not at its fullest capability and while the chain was being put together the original two stores are no longer the most profitable stores of the bunch instead what has happened is the sales of the two original stores has been reduced to the average of the other stores which is not the greatest either. Alas, the first 2 stores are average. And we all know the definition of average.  “Average is the best of the worst and the worst of the best”.

So now we have what I call an “In Between”. The owner of the 17 store chain got what they wished for (more stores), but they are not a small owner operator with a couple of stores nor are they a big chain of stores, because since the time they got into the business the industry has changed dramatically due to rising costs of products, employee costs, lack of capital in the market place to assist in buying or building new stores and the overall economy has forced operators to be extremely efficient or perish. What they are is an “In Between”. They are “In Between” the big and the little and they have an infrastructure for this 17 store chain that could easily accommodate more stores by only adding another person in the office or another person in operations to oversee the new stores, but guess what? They are tired and they have burned through a lot of time to get to the 17 store size and they know that it will take more time and more money to get to the next level. But the question is. What is the next level? Is it 30 stores, 50 stores, 100 stores and even then will they not be facing the same thing that they are facing now? Will they still be an “In Between” and still chasing the proverbial carrot at the end of the stick. Deep down in their heart and mind they know that some of the stores need replaced or sold or closed, but that would be admitting defeat and they are not a quitter. No we need to keep those stores open, because they help pay the administrative overhead and we don’t want to have to face the people who have worked for us for many years and tell them that we don’t need them anymore. Yet, we don’t have the ambition or time or money to go out and build or buy more stores. At this point in the game when it should be about maximizing the stores and making them as profitable as possible even if that means we should be closing and selling off underperforming assets it is instead about maintaining. Working to maintain the quality of life that we worked to grow accustom to. It may not be the jet setting type of lifestyle that the proverbial big boys probably enjoy that we read about in the trade magazines, but it is a good life with all of the amenities that an independent business person could ask for and there are the occasional trips to some wonderful places for get togethers with other people in the industry and trade shows and sometimes maybe a vendor will spring for a trip or an outing that is fun and free. So why rock the boat? Why not let things continue on and just enjoy the ride. Heck, we deserve it. We worked our tails off to get what we have and we are going to enjoy it.

You want to why this isn’t going to work? Because “nothing stays the same”. Businesses, relationships, cities, and people. Everything changes. Things are either going forward or going backwards. Growing or dying.  It is doing anything, but staying the same. It is an undisputable law of the world. “Nothing stays the same”.

And therefore by one’s own account they have become an “In Between”. Please do not take the term “In Between” as a negative comment, it is merely a term to describe a situation that unfortunately is very prevalent in the business world and can apply to many different industries, but it is a fact and can be considered by some a sickness. Fortunately there is a cure for this sickness. By taking the antidote called “reality check” and admitting that you may have some form of this sickness a cure can be implemented. The cure is to assess our present situation and decide that being an “In Between” is OK and accept the fact that we are never going to be the biggest guy on the block, nor are we going to go back to working behind the counter standing on our feet for 8 to 10 hours a day. No, instead we are going to do what we started out intending to do, but got sidetracked along the way and that is to be the best at what we do by making our stores the most profitable and successful stores they can be for what and where they are. And if they are not going to be profitable enough to justify themselves we are going to either close them or sell them off, because we are first and foremost a business person. And a business person runs a profitable business to the best of their ability and does not operate a charity facility. Charity is what one does with their time, talent and treasure and not what they do by keeping an unprofitable store open or part of the multi store operation when there better ways to capitalize on this asset rather than just operating it at a loss or breakeven. That is dumb. Just plain dumb and I don’t know any other way to describe it. There are always different situations to justify the reason to keep an unprofitable store open or in the mix of other stores, but even in those situations it is generally temporary.

So if we are to be an “In Between” congratulations, because we have made it farther than most people in business, but let’s make sure that we are going to be the best we can be and not just flounder around with the concept of owning a lot of stores. We don’t make any money from our ego and we can’t take our ego to the bank. So we may need to order ourselves some of the drug called “reality check” and take a big gulp to get us back in line with the world and onto the road to maximum profitability. Take a hard look of where we are in the market place of today and make the needed decisions that will give us our ultimate profitability.


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