Convenience stores are one of the most frequented shops by everyone for our groceries. They have a huge market share and great potential to be a lucrative business for the owners.
That’s why opening up and owning a convenience store is generally a good business idea, as it’s easier to succeed and make money.
If you’re considering opening a convenience store, you might wonder how much it will cost. The answer is not so simple.
There are many factors that can affect the cost of starting and running a convenience store.
In this article, we will give you an estimation of the costs involved in opening a convenience store, the average costs, and other details.
Average Cost to Open a Convenience Store
It’s generally really hard to figure out the costs required to open a convenience store because there are many variables.
A convenience store varies a lot in size, and the bigger the store, the higher the cost. According to some reports, it could cost anywhere between $50,000 to $524,000.
However, it could go well above $1 million, as well, if you go for the higher-end equipment, stock up a big inventory, and have a bigger store.
| Building | 0-$350,000 |
| POS System | $3,000-$10,000 |
| Licenses & Permits | $1,984-$2,100 |
| Inventory | $15,000-$20,000 |
| Equipment | $27,750-$141,800 |
| Insurance | $100-$150 |
| Total | $50,000-$524,000 |
Building
This is one of the most important decisions you will make, as it will determine how much traffic and sales you will get.
The ideal thing is that you should find a place that is close to residential or commercial areas, has high visibility and accessibility, and has low competition from other stores.
You also need to consider the rent or lease of the space, which can vary widely depending on the area and the building’s condition.
POS System
A point of Sale (POS) system is a system to track orders and help customers to have a seamless experience with each of their transactions. The cost of this system depends mostly on which hardware you choose.
However, a POS system is the most optimal system to have for your business, and it’s generally a must for a seamless operation.
Licenses & Permits
You will also need to pay for various licenses and permits required by your state and local authorities to run a convenience store.
The cost and process of obtaining these licenses and permits may vary depending on your location.
You should consult with your local government agencies or a professional advisor before starting your business.
Here are some frequent licenses & permits:
- Business license: This is necessary for almost all states to get to operate as a business.
- Occupancy permit: Also one of the most frequent permits, and you must get it as you are occupying a building with your business.
- Alcohol/liquor license: You need this if you are going to sell alcohol or liquor.
- Tobacco license: If you have tobacco in your store, you need to get this permit.
- Lottery retailer license: Same with alcohol and tobacco license, if you are going to sell lottery, then you have to get this permit.
Inventory
This includes the products you will sell, such as snacks, drinks, cigarettes, lottery tickets, magazines, etc., as well as the supplies you will need to run the store, such as bags, receipts, cleaning materials, etc.
The cost of inventory will depend on the type and quantity of products you choose to sell, as well as the suppliers you buy from.
Equipment
This includes cash registers, scanners, coolers, freezers, shelves, security cameras, signs, etc. The cost of equipment will depend on the quality and quantity of items you buy or lease.
You will also need to consider the cost of maintenance and repair of your equipment over time. Here is a small breakdown of the equipment:
| Drink Dispensers | $6,850-$53,300 |
| Refrigerated Display Cases | $7,000-$14,700 |
| Open Air Coolers | $13,900-$73,800 |
Insurance
Convenience stores have high liability because of the equipment and the inventory.
To protect yourself from unexpected damages, such as vandalism, natural disasters, water damage, fire, and other causes, you need insurance. Almost all states also make it mandatory to buy insurance.
Factors That Affect the Cost of Opening a Convenience Store
When you open a convenience store, even though the average numbers give you a glimpse of how much it will potentially cost, there are factors affecting the overall cost.
If you know these factors and can leverage them, you could manage your costs better, and this will affect your income later on.
Location
Where you are located is the number one factor affecting the cost. The rent or price of the building will go down or up depending on the neighborhood. Additionally, the people living there will also affect your customer type.
If you are living in a high-income neighborhood, your customers will likely spend much more, and they will be willing to pay higher prices.
Size of the Store
When your convenience store is bigger than the average size, you will require more employees, equipment, and security, and the rent will be higher.
That’s why the size of your store plays a crucial role in both startup and fixed costs.
Quality of the Equipment
There are a variety of equipment in every kind of business. It’s the same for convenience stores.
You have many options to choose from, starting from the lowest quality to the most luxurious one. Both have advantages and disadvantages, and they will cost different levels according to your choice.
Initial Inventory
A convenience store can technically sell anything. This might seem like it’s great, but it could create a problem ahead because you have to buy an inventory before you open the store.
And the initial inventory that you stack up could increase your costs exponentially if you buy too much.
Getting Financing for Convenience Store
If you are looking to find financing to cover the costs of your convenience store, that is possible.
This option is suitable for those that don’t have the cash to cover all the costs and looking to get a loan or investment.
You could find this financing in a variety of ways, such as small business loans, lines of credit, or simple loans from banks or financial institutions.
You could also opt for partnering with someone and getting investment, but that would require you to give up a certain percentage of the business.
That’s why for convenience stores, this is not the most popular option. A loan or credit fits better in most situations.
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How Much Does a Convenience Store Make?
The average income for a convenience store is around $1.7 million annually.
There are many factors affecting the income of a convenience store, such as location, demographics, profit margin, and other similar factors.
The net income of a convenience store owner is around $60,000 annually from this $1.7 million.
In normal cases, the average profit margin for a convenience store varies quite a lot by the products. Statista says that the products with the highest gross profit margin are health and beauty products, with 50%.
On the other hand, cigarettes have the lowest profit margin, at 15%. All the rest of the products fall within this range.
Conclusion
Convenience stores come in many shapes and sizes, whether with a gas station attached to them or in a small street with a very small building.
However, whatever kind of convenience store it is, they are generally lucrative businesses that are rather easier to succeed and generate profit. On average, opening a convenience store costs between $50,000 to $520,000.
Equipment, insurance, building, and licenses are all part of these costs, and some of these also affect your income later on.
If you don’t have the whole cash, you can also get financing through credits or loans to finance the opening of your convenience store.
If you are financially and professionally strong, you should consider opening a convenience store.
FAQ
Can I fail with a convenience store?
Though it’s easier to run a convenience store, you could still fail if you can’t manage it well.
Many factors are important, but overall, just like any other business, you have the chance to fail.
Can I get financing for a convenience store?
Theoretically, it is possible via financial institutions or banks, but your individual situation is very important.
If these institutions don’t see you as fit for financing, it won’t be possible to find financing.
How risky is it to open a convenience store?
It’s not riskier than opening a normal store or business. If you can’t find your customer base, manage the store well, and keep your prices high, you’ll increase your risks of failing. But you can reduce the risks if you can read the market well.
Sources
Amit Gupta is the founder of DrFranchises – a digital marketing agency that helps brands rank better on Google Maps through local SEO strategies. Amit has over 11 years of experience in digital marketing, SEO, email marketing, and social media marketing. He’s also the owner of multiple franchises and has helped countless brands achieve success online. When he’s not working, Amit can be found playing with his dog.