Ten Reasons to Unload an Unprofitable Store
Getting past emotional connections and other ifs, ands or buts
FORT MYERS, Fla. -- Over the course of the past 15 years, I have worked exclusively in the convenience store industry helping owners of multiple c-stores buy and sell sites. Because my clients and I are entrepreneurs, we tend to share stories about where we have made money and lost money while operating our businesses. And one of the ways we have lost money is hanging onto an unprofitable store even though we knew it was losing money.
I have heard all of the excuses: “I need to keep the store, because it helps contribute to the cost of my administrative overhead.” Or, “We are getting ready to add pizza or some other food product and then it will be profitable.” (This came even after I did the math and showed them that additional food sales are not going to make the store profitable). Or, “We are in the process of adding a rewards program, and that will give us the boost we need.” Or, my favorite excuse: “Well, my dad built this store, and we keep it open as a memorial to him.” (When their Dad built the store, it wasn’t on a one-way street and there wasn’t a Walmart down the road. If their Dad were alive, he would probably close it in a heartbeat.)
I am not being insensitive to the owner/operators I work with on a daily basis. I have great respect for all of the owner/operators who work in the convenience-store industry. It is a tough business given intervention from the government. And with everyone else with their hands out, it is getting tougher every day. But I am a realist and look at the facts. And the fact is that it is very expensive and dangerous to maintain the ongoing operation of a convenience store that is not contributing to the profitability of your company. Here’s why:
1. First of all, when you have a convenience store that is not contributing to the profitability of the company, it is losing money. Period. The first rule of business is not to lose money. So you can give a store the benefit of the doubt and blame it on multiple excuses, but if over the past 12 months if the store has not made a profit, you need to do something with it.
2. An unprofitable store is a distraction of your focus. One of the greatest pieces of advice I ever got when I had my chain of stores was from one of my vendors, who told me that I should be “working to make my good stores great and not spending time on trying to make my bad stores good.” It’s timeless advice even to this day.
3. An unprofitable store is a huge liability. It is a store that is not contributing to the profitability of your company, and it includes the liability of employees, which could involve theft, shortages or workers’ comp claims.
4. Don’t forget the liability from customers who visit the store. Who hasn’t had an issue of a customer filing a slip-and-fall lawsuit?
5. If we are selling petroleum products, we have exposure to environmental issues such as leaks or spills.
6. Don’t forget to figure in personnel costs from home-office workers, which adds to the cost of running a store.
7. Insurance costs will probably be more expensive, because your workers’ comp is usually figured on the total amount of monies spent for employee wages.
8. Employee morale will be down if the store is unprofitable. Who wants to work at a store that is losing money?
9. Customer perception of your company will probably be diminished, too, because the customer can tell if the store is successful or struggling.
10. It adds to the stagnation of your company’s growth. Try to borrow money when you are carrying unprofitable stores on your balance sheet. Guess what your banker is thinking?
There is no upside in keeping unprofitable stores in your business. Take action and remove these stores by selling or leasing, or just closing them and selling the real estate. You will glad you did in the long run. The only regret you will have is that you didn’t do it sooner.