The World's Unsexiest Business
adding a little sizzle to the convenience store industry
It appears we're on the cusp of a major revolution in the convenience store industry. Maybe not a seismic shift but something closer to what might be considered an army of termites steadily eating away at the foundation of a very old house. Oh but remember this ancient relic of yesteryear has been on the verge of collapse for decades far before the pests grew such a voracious appetite for moldy timber. You see it's a matter of labor economics--once the republic of MINIMUM_WAGE_INCREASE-ISTAN starts realizing that the timed pay escalations have induced the deleterious effects of zero sum (to the earner) earnings, it's only a matter of time before those affected laborers usher in a revolution style massive rebellion.
Simply stated, minimum wage hand waving and eventual increases do little to help minimum wage workers. It kicks the sputtering inflation machine on which then has a very real effect of ultimately depressing purchasing power. Meanwhile on the media front, it keeps the economics illiterate public sated and the political rhetoric machine alive.
My view isn't political (I'm not a republican), it's 'straight up' factual.
Business Cycle Re-Ignition
By the time most owner operators acquired their fifth location or so, they started to realize hmm maybe they ought to start focusing more of their energy on having their money earn money instead of sweating it out day in and day out. Though I'm not referring to Einstein's compound interest assertion directly, I am highlighting the critical mass needed to consider the franchise business model. Not only does it actually inject some high octane into the American Dream by defining a clear pathway to economic mobility, it also just about solves the agency problem which has riddled corporate run convenience store giants since they evolved into organized corporation.
Imaging you're running Ginormous Convenience Gas, Inc. and you've managed to acquire well over a hundred sites. You've got a mixed bag of darlings, duds, freaks, and geeks. If you haven't considered equity participation or at least some sort of passive investment vehicle which allows you to collect a nominal fee from every location every month, I think you might need to re-evaluate your business model. At initial read you might think this nominal fee is merely paper shuffling between site and corporate accounts but think of it more as a reserve that looks and smells like an expense item. The only difference is it actually resides as an off balance sheet item. The only problem is that it's a violation of sound accounting practices so the folks at GAAP will most not likely give you the nod let alone a surreptitious thumbs up.
But for illustration purposes imagine that it was ok for you to have debited this periodic nominal expense amount.
Let's get one thing clear about every cent you earn or debit from your sites: you had to be engaged in the operations and management of toiling away for that very nominal fee. But what if you merely collected that without what I consider the only single point of failure in the CSGS (Convenience Store Gas Station) business model? Surely you'd know I would be talking about a franchise scheme. Collect an upfront fee, reduce buildout costs to a minimum which you shift over to the franchisee, then expect a monthly distribution of 4-6% with an additional 2-3% for marketing.
You know the drill.
But remember as an owner operator of a significant number of sites you simply cannot decide to become a franchisor without a coherent brand, procedures, policies, and at least a go-to manual in place. Then there's the legal bit to sort out with filings. But you've planned for this very moment and are now ready to cook with gas (umm but not the one you're selling!). So how well could this work for you?
Maybe consider working backwards. At minimum, you'll need to pay yourself, a CFO, a COO, a CMO (unless you don't plan on collecting the additional 2% marketing fee), part time legal, a skeleton office staff, some overhead, and an office itself. The aggregate of those expenses to be a cool million dollars a year or $85k monthly. Or how about $850 monthly from every site? That's not even a dent in the credit card fee monthly expense.
Now perhaps you structured it in such a way that's similar to how other franchise business models operate:
150k avg monthly gallons @ 2 cents / gallon ($300k)
$35k avg sales @ 6% monthly franchise / royalty + 2% marketing ($280k)
In aggregate that will passively gross $580k / month or $5.8k per site. That's nearly $5k more per every site you'd be making to break even on overhead. And that doesn't even take into account interest earned from the float of upfront franchise fees collected which
Of course you could be making a lot more actively managing the sites but semi-passively, it's a phenomenal return. On a break-even basis, it would only take 15 sites to operate under this business model.
The Upside: you empower your people potentially elevating their status from de facto managers to equity owners / franchisees.
The Downside: the semi long winded process itself and multiple sales pitches.
Call it maturity in the cycle or simply a redistribution of wealth.
Cannabidiol or CBD oil seems to have claimed a stake to the cannabis market in a way that other products with a similar look and feel haven't. Or so that is being indicated by the growing number of convenience retailers carrying the product on none other than 'spec'. Boosting its retail budding omnipresence, customers are asking for it alongside vendors willing to part with product shipments on a flexible consignment basis.
Though the ultimate medicinal benefit may be dubiously multitudinous, the mere association to marijuana along with a strong credibility inducing marketing push may just be enough to sway even the most skeptical buyers. After all, we're now living in the United States of Tokemerica.
Let's just be clear on one thing: marijuana in its original, synthesized, or veiled form isn't a cure-all. Nor was it ever meant to be. It's merely a supplementary aid among many.
Some facts and condensed research:
We're already getting a decent number of vendors stopping by to leave some small batches of product gratis. Similar to the Kraetom craze that swept through a handful of our stores, this may be the killer sales product of 2018 that separates strategically marketed stores from their kindergarten counterparts.
Let's set the scene, mood, and feel. Then just as you suspected--the smell of money in the air. A bunch of lawyers get together for a Sunday evening gathering at a downtown Los Angeles local watering hole down the street from the firm. (Partner note to self: best to minimize the distance between the mahogany paneled relics of the old boys club and the extracurricular activities.) The place where the lines between morality, justice, and capitalist self preservation become all too blurred.
And in the event an 11th hour class action directive heads their way? Rally the troops and wake the commander.
The direct purpose of such a weekend festivity could be summed up by what else but a heavy dose of inebriation with a dash of middle manager aspirational camaraderie. Consumption by means of intravenous injection not required. But highly recommended. Now the indirect purpose of such an impromptu soiree sits in a position that's anything but whimsical--a determined search for the next windfall sucker. A couple of hours into the extortion inducing drink-a-thon, the culmination of a "breakthrough" is reached. Though the sucker and bait might be different this time, what seems to never change is the nuisance lawsuit that eventually yields a billion dollar unicorn worthy business model.
Financier$ get your checkbook$ ready!
(Speculative immoral litigation needs funding)
A junior associate proposes the following:
Apple, Google, and Waze navigation applications are intended by alleged 'design' to guide drivers to their destination in the shortest period of time. The straightest path? Maybe. Or the least circuitous one? Perhaps. But that's up to the driver whose familiarity with toggling some lesser known option features can make the difference between the road less traveled and punctuality.
Now what happens when drivers are given an ever so slight run around only to add a couple of minutes getting to their destination? Perhaps coincidentally driving in close proximity to a retail establishment or two that may just need the kind of attention it normally doesn't. Or couldn't, for that matter. All without the help of, say a well planned detour?
Now how about a detour which takes driver past a generally low vehicle traffic gas station? Seems far fetched or even conspiracy theory laden? No way brah. The apps would never get you caught up on the wrong side of town without you realizing it almost immediately. But they might oh-so-subtly push you on the wrong side of the street. What about the perilous situation that follows of a U-turn being maneuvered while a negligent red light 'jumper' heading towards you. We all know how this story ends.
And to a heavy emotionally swayed grand jury it's an even more compelling sob story.
It doesn't matter whether the offending driver was far too blasted out of his mind on Jack, Johnnie, or Jose. All eyes, ears, money, and resources are narrowly diverted to how and then why the superfluous U-turn was made. Ambulance chasing hits the information highway. No scratch that. It's the biggest heist of the big data interstate.
Arriving at a courthouse near you...
See the following for more:
Globe and Mail
You clicked on the ultimate clickbait. The world that BuzzFeed created. The attention span you seemed to have lost on the way.
However, this time it's not a bait and switch tactic.
Sure these are just ideas and ideas mean a whole lot of nothing without execution but let's start the week with getting those creative marketing juices flowing.
Beam Me Up Walt (Doyle)
How about a GasBuddy feature that displays to potential customers a busy-ness and outage heat map. Don't feel like waiting in line or risk showing up to a site that's taken down for a SB-989 test? Get a better reading on where to fill up for the best price and the shortest wait time.
Left to Right. Side to Side.
Long hoses that allow for filling up the side of the car that may not be facing the pump. No more needing to clumsily dance the fueling dispenser hokey-pokey. ***YES THIS ONE EXISTS***. But how about some more adoption and less regulation?
Beep Beep. Drive-Off No Mo'.
A visual and highly suggestive audible device which lets customers know when they're about to drive away ("drive-off") with the nozzle still in their tank. There's no point complaining about distracted drivers when we're trying to distract them even more. Worse yet, equipment malfunctions can irritate drivers so much they're 76% more likely to commit a "drive-off" offense (albeit unintentionally)!
93 Octane Vending
Why ask the customer to head inside when the item is sold outside. Reinventing the modern vending machine. Your top 5 SKUs in each department can be sold in a 50 item futuristic vending machine that's built into the mostly hollow space in a dispenser. Check out these souped up vending machines being rolled out in Japan.
Escape from Inconvenient Convenience
Convenience stores have become anything but convenient with many operators forced into using snail paced legacy equipment they sold their left hand for many years back. Throw in EMV integration and what was formerly snail paced has become an exercise of sprinting in tar. Have customers pay for merchandise with an app (brand agnostic) but can be customized down to the site level. Then simply show proof to a door checker a receipt. Admittedly, the technology is easy to develop (we already have) but it's the operations 'shrink' checking line of defense that's more difficult to coordinate.
Why five? The human brain is capable of holding no more than seven things at one particular time in its short term memory. It's no coincidence that phone numbers are seven digits. Too bad you can't even remember what you did seven seconds ago.
This Monday morning five is good enough for you! :)
...ok one more though definitely not recommended:
Any c-store owners get caught up in a demand frenzied short stocked situation with Dunhill cigarettes? The unofficial word is a huge shipment from Dunhill manufacturing HQ got seized at a stateside port. An unconfirmed rumor further asserts that some illegal drugs had been randomly placed into Dunhill branded empty boxes and cartons. Whether it was DEA or another local drug enforcement agency ordering the seizure, it doesn't matter. I'm speculating another contraband shipment was able to make its way through while this lower value target had been given the all hands on deck scrutiny.
Government attention resource allocation aside, the scarcity has caused demand to surge in the Southern California market along with 'fever pitch' price levels for each pack. Some of our associates recently saw the 'Black' packs selling for as much as $20 each.
Any tips please send my way: hsmac at nexgence.com