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Convenience stores are among the most sold businesses in the Greater Toronto Area. Most convenience stores for sale are listed by real estate agents and a great majority are listed in MLS. This type of businesses is in great demand especially from recent immigrants to Canada. As a result convenience stores sell for higher multiples of the real profit figures. There are many reasons for that make these stores so attractive:
- Convenience stores are perceived to be easy to manage and not to require specific business skills such as marketing, finance, communication or human resources. They are perceived to be ideal for buyers lacking basic English language skills.
- Convenience stores have relatively stable revenues and are in general recession proof. They respond to consumers' need for convenience in the purchase of basic low cost everyday items and as a result are generally not subject to spending cuts.
- They utilize a lot of man power and can employ the whole buyers' families. New families coming to canada have hard time finding decent jobs. Buying a convenience store can solve this problem.
- Finally, convenience stores can be very profitable, especially for a hard working family who put in a large number of hours in the business.
However, convenience stores have dependant on their location and offer little possibilities for growth. They generally are not the best investment for business buyers with reasonable language and business skills. For the same investment, a buyer can purchase a much more profitable business withy more growth potential. Furthermore, if the buyer has to hire the necessary workforce from outside the family and has to pay them market salaries, he/she will end up with little profits. therefore, from an investment point of view, buying a convenience store does not always make economic sense.
Another disadvantage of buying convenience stores is that most of them lack proper financial records to prove their level of profitability. Buyers can only verify the profits by spending some time during the due diligence period and checking the cash register. This process might be adequate if the trial period is long enough and if it is in a non seasonal business where income are steady.
A business broker willing to work with business buyers can provide valuable help in selecting the right convenience store and going through the whole business purchase process.
Other businesses with similar characteristics include gas stations, laundromats fast food restaurants, pizzas, dry cleaning businesses etc.