The Basics of Starting a Convenience Store

Here are the most important things to know about when starting a convenience store:

1. Location — Choose a location near busy streets, transit hubs, or areas frequented by pedestrians to attract more customers.
2. Licenses and permits — If you intend to sell alcohol or tobacco products, these licenses are mandatory and can be quite stringent. They involve background checks and strict compliance with local laws. If you plan to sell lottery tickets, you will need a separate license from the state lottery commission.
3. Security — Install CCTV cameras both inside and outside the store to monitor activity and deter shoplifting and burglary. An alarm system can provide an added layer of security during non-business hours by alerting local authorities to any unauthorized entry.
4. Register your business — A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple. Form your business immediately using ZenBusiness LLC formation service or hire one of the best LLC services on the market.
5. Legal business aspects — Register for taxes, open a business bank account, and get an EIN.
6. Inventory management — Use inventory software to track stock levels, sales patterns, and reorder times efficiently. This can prevent overstocking or stockouts.
7. Online presence — Take your business online and get listed on Google Business, Yelp, and local directories, and encourage your customers to leave positive reviews.

Step 1: Decide if the Business Is Right for You

Pros and cons

Starting a convenience store has pros and cons to consider before deciding if it’s right for you.

Convenience store industry trends

Industry size and growth

• Industry size and past growth – The US convenience store industry is worth $35.6 billion in 2022 after expanding 37% in the last decade.((https://www.ibisworld.com/industry-statistics/market-size/convenience-stores-united-states/))
• Growth forecast – The US convenience store industry is projected to grow 2.4% in 2022.
• Number of businesses – In 2022, 40,576 convenience store businesses are operating in the US.((https://www.ibisworld.com/industry-statistics/number-of-businesses/convenience-stores-united-states/))
• Number of people employed – In 2022, the US convenience store industry employs 149,425 people.((https://www.ibisworld.com/industry-statistics/employment/convenience-stores-united-states/))

Trends and challenges

Trends in the convenience store industry include:

• Contactless payments and self-checkout are becoming more common in convenience stores.
• Convenience stores are partnering with companies like DoorDash to offer home delivery.

Challenges in the convenience store industry include:

• As the convenience store market grows, more stores than ever are opening, creating intense competition.
• Employee turnover in convenience stores tends to be high, which is an ongoing challenge for store owners.

Demand hotspots

• Most popular states – The most popular states for convenience store managers are New Jersey, New York, and California.((https://www.zippia.com/convenience-store-manager-jobs/best-states/#vermont))
• Least popular states – The least popular states for convenience store managers are Idaho, Vermont, and Montana.

What kind of people work in convenience stores?

• Gender –  54.8% of convenience store managers are female, while 45.2% are male.((https://www.zippia.com/convenience-store-manager-jobs/demographics/))
• Average level of education – The average convenience store manager has a bachelor’s degree.
• Average age – The average convenience store manager in the US is 44.2 years old.

How much does it cost to start a convenience store business?

Startup costs for a convenience store range from $65,000 to $100,000. The costs include the store rental and preparation, inventory, equipment, and a labor and operating budget. 

You’ll need a handful of items to successfully launch your convenience store business, including: 

• POS system
• Lottery machine
• Shelving units
• Coolers

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$150 - $200	$175
Business licenses and permits	$100 - $300	$200
Insurance	$100-$300	$200
Business cards and brochures	$200 - $300	$250
Website setup	$1,000 - $3,000	$2,000
Space rental	$2,500 - $5,000	$3,750
Space preparation with POS and lottery equipment	$5,000 - $10,000	$7,500
Inventory	$30,000 - $50,000	$40,000
Labor and operating budget	$25,000 - $35,000	$30,000
Total	$64,050 - $104,100	$84,075

How much can you earn from a convenience store business?

Prices for items in a convenience store vary greatly. These calculations will assume that the average customer spends $10 per visit. Your profit margin after all costs should be about 10%. 

In your first year or two, you might have 200 customers a day, bringing in $730,000 in annual revenue. This would mean $73,000 in profit, assuming that 10% margin. As your store gets more well known, you might have 500 customers a day. With annual revenue of $1,825,000, you’d make an outstanding profit of $182,500.

What barriers to entry are there?

There are a few barriers to entry for a convenience store. Your biggest challenges will be:

• The startup costs of inventory and an operating budget
• Drawing clients away from other convenience stores and gas stations

Step 2: Hone Your Idea

Now that you know what’s involved in starting a convenience store, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.

Why? Identify an opportunity

Research convenience stores in your area to examine their products, price points, and what sells best. You’re looking for a market gap to fill. For instance, maybe the local market is missing an independent convenience store that sells a wide variety of lottery tickets or a large selection of baked goods or dairy and grocery items. 

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine the range and type of products you’ll offer

You could sell any number of items in your store, from snacks and beverages to health and beauty products. You could also sell freshly prepared foods like sandwiches and coffee. 

You should also offer lottery tickets to bring in more traffic. Tobacco products, beer, and other alcoholic beverages are also commonly sold in convenience stores. You could also make your store a convenience store and gas station, but you’ll have the added expense of the gas pump system. 

How much should you charge for convenience store items?

Your prices will depend on the items you sell. You’ll need to markup the wholesale costs of the items to make a profit but make your prices competitive in your market. After all your costs of goods, rent, labor, and overhead, you should aim for a profit margin of about 10%. 

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market could be anyone, so you should spread out your marketing to include sites like TikTok, Instagram, Facebook, and LinkedIn, as well as local media outlets.

Where? Choose your convenience store location

Choosing the right location for your convenience store is essential for attracting customers and ensuring its success. Look for a spot in a high-traffic area with good visibility, such as a busy street corner or a popular shopping district.

Consider accessibility and convenience, ensuring that the location is easily reachable by foot, car, or public transportation. Additionally, assess the local demographics and aim to select a location that caters to a wide range of customers, from commuters to residents.

By strategically choosing the right location, you can establish a profitable and popular convenience store that offers a variety of products and services and stands out in the competitive retail industry. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

Step 3: Brainstorm a Convenience Store Name

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “convenience” or “24/7 shop”, boosts SEO
• Name should allow for expansion, for ex: “One Stop-Shop Corner” over “Student Stop”
• A location-based name can help establish a strong connection with your local community and help with the SEO but might hinder future expansion

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Convenience Store Business Plan

Here are the key components of a business plan:

• Executive Summary: A concise summary outlining the core elements of the convenience store business, including its mission, vision, and key objectives.
• Business Overview: An overview providing a snapshot of the convenience store, its location, size, and primary offerings, emphasizing what sets it apart.
• Product and Services: A detailed description of the products and services the convenience store will offer, such as snacks, beverages, household items, and possibly services like a small deli or quick meals.
• Market Analysis: A thorough examination of the target market, identifying customer demographics, preferences, and trends that will inform business strategies and decisions.
• Competitive Analysis: An assessment of competitors in the local area, outlining strengths, weaknesses, opportunities, and threats to anticipate and address in the convenience store’s business plan.
• Sales and Marketing: Strategies for promoting the convenience store, attracting customers, and increasing sales through advertising, promotions, and customer engagement.
• Management Team: Introduction of key individuals responsible for running the business, highlighting their expertise and roles in ensuring the store’s success.
• Operations Plan: Detailed information on the day-to-day operations of the convenience store, including hours of operation, staffing requirements, suppliers, inventory management, and other operational processes.
• Financial Plan: A comprehensive financial projection detailing startup costs, revenue forecasts, and expense estimates to provide a clear picture of the financial viability and sustainability of the convenience store.
• Appendix: Supporting documents and additional information, such as resumes of key team members, market research data, and any other relevant details that strengthen the overall business plan.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to convenience stores. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your convenience store will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a convenience store business. 

Step 8: Apply for Convenience Store Business Licenses and Permits

Starting a convenience store business requires obtaining a number of licenses and permits from local, state, and federal governments.

You’ll need to obtain alcohol and tobacco licenses if you’re going to sell those items. 

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your convenience store business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks. 

You may want to use industry-specific software, such as PDI, CStoreOffice, or LSRetail, to manage your purchasing, inventory, and invoices. 

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.

You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

Marketing

Here are some powerful marketing strategies for your future business:

• Professional Branding — Ensure your branding reflects convenience, reliability, and a community-centric ethos through thoughtful design in signage, store layout, and interior aesthetics.
• Website & Local SEO — Develop a professional, easy-to-navigate website that details your products, special offers, and store information, optimizing for local search terms related to quick shopping and convenience. Regularly update your Google My Business and Yelp profiles to strengthen your local search presence.
• Community Engagement — Increase local engagement by participating in community events, sponsoring local initiatives, and forming partnerships with nearby businesses.
• Social Media Presence — Utilize platforms like Facebook and Instagram for regular updates on promotions, new products, and store events, fostering a strong community connection.
• Content Marketing — Create a local community blog that covers store updates, local events, and promotions, while highlighting customer testimonials and local products or initiatives.
• Interactive Online Campaigns — Engage customers with social media contests or polls to boost online interaction and store interest.
• In-Store Experiences — Host in-store events such as product tastings or community gatherings to attract and engage customers physically.
• Local Collaborations — Partner with adjacent businesses for cross-promotional efforts, such as discounts to mutual customers, enhancing local network strength.
• Customer Loyalty Programs — Implement a loyalty program offering rewards or discounts to frequent shoppers, encouraging repeat visits.
• Targeted Local Advertising — Use local media, community bulletin boards, and direct mail to promote special offers and highlight store events.
• Email Marketing — Build a customer email list to share information on new products, special deals, and upcoming events, enhancing direct engagement.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your convenience store meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your convenience store business could be: 

• Snacks and drinks for your life on the go
• Need a few quick items? Stop and shop fast!
• All your lotto and lottery options in one place 

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a convenience store business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in convenience for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in convenience stores. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a convenience store business include:

• Store Clerks – make sales, customer service
• General Manager– ordering, inventory management, accounting
• Marketing Lead – SEO strategies, social media

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Convenience Store – Start Making Money!

Convenience stores are a part of our daily lives, whether we’re grabbing a cup of coffee or looking to get lucky with the lottery. You could ride the industry’s growth wave with your own convenience store and make good money while providing people with the goods they need without the hassle of going to the grocery store. 

You’ve learned the business launch process now, so it’s time to find a great location and get your successful convenience store up and running!

Common Questions

How much does it cost to start a convenience store?

You can start a convenience store for about $65,000. Costs include a space rental and preparation, inventory, and a labor and operating budget.

Are convenience stores profitable?

Yes, convenience stores can be very profitable. You’ll need to offer a good variety of items and provide great customer service and you can be successful. 

How should I price items in my convenience store?

Your prices will depend on the items you sell. You’ll need to markup the wholesale costs of the items to make a profit but make your prices competitive in your market.

Is it easy to run a convenience store?

Running a convenience store can have its challenges, but the difficulty level can vary based on factors such as location, competition, and management skills.

How do I become a successful convenience store?

To become a successful convenience store, focus on strategic location, a wide product selection, competitive pricing, excellent customer service, convenience and accessibility, and effective marketing and promotions.

What makes the most money in a convenience store?

Profitability in a convenience store can vary, but items like beverages, snacks, cigarettes/tobacco products, lottery tickets, and prepared food items often generate higher profit margins.

How can I improve my customer service in a convenience store?

Improve customer service by hiring and training friendly staff, maintaining a clean and organized store, offering a variety of products, implementing efficient checkout processes, listening to customer feedback, personalizing the shopping experience, implementing loyalty programs or promotions, optimizing store layout and signage, and fostering a culture of exceptional customer service.