Selling a convenience store in Canada

A convenience store looks simple from the outside: shelves, coolers, a till and long hours. A buyer looks closer. They want to know which sales earn real money, how much of the day depends on you and your family, and whether the lottery terminal and tobacco sales will still be there after closing. Some of those permits do not move to a new owner on their own, so a little planning goes a long way. Here is what to expect and how to prepare.

What buyers look at first

Most buyers of a convenience store ask the same questions early. Have clear answers ready before you list:

• Sales and profit. Two or three years of numbers, split by category if your till can do it.
• Margins. What you earn on snacks, drinks, groceries and coffee compared with lottery, tobacco and phone cards.
• Hours. Who works the counter, how many hours you and your family put in and what it would cost to staff them.
• The lease. Rent, years left, renewal options and whether the landlord will agree to a new tenant.
• Stock and equipment. Roughly what is on the shelves and the age and condition of coolers, freezers and the coffee bar.
• Permits and accounts. Lottery, tobacco, vape products, ATM, bill payment and money transfer services.

Buyers will check these during due diligence, so it helps to gather them now. Our list of documents needed to sell a business is a good start.

Sales by category and real margins

A store that rings up a lot of sales is not always a store that earns a lot. Lottery tickets, tobacco and prepaid cards bring people in but pay the store a small commission or margin. Coffee, food to go, snacks and cold drinks usually earn much more. Show the buyer two years of sales by month and by category, with the gross margin on each, and make sure the totals match your bank deposits, your sales tax returns and your tax returns.

Lottery commissions and any bonuses for selling winning tickets should be shown on their own line. If you work long shifts yourself, list your wage and any personal costs run through the store as add-backs with proof, and be honest about what it would cost to pay someone for those hours. A buyer who plans to work the counter will value the store differently from one who plans to hire. If sales have slipped, say why; see selling when sales are down.

The lottery terminal

For many stores the lottery counter is a big reason customers come in. In British Columbia, the store sells lottery products under a Lottery Retailer Agreement with BCLC. The agreement says the retailer may not assign it without BCLC's consent, and a new owner must be approved, complete BCLC's training and be registered with the Province's gambling regulator before the terminal is activated in their name. BCLC asks sellers to contact their territory manager or Lottery Retail Support as soon as they are thinking of selling.

Agree with the buyer what happens to the ticket stock. BCLC's new owner manual describes a transfer of Scratch and Win tickets from the old owner to the new one, and gives options for pull tab tickets, such as returning sealed boxes for credit or selling them to the buyer. Other provinces run their own lottery corporations with their own rules, so check with yours early. If the lottery is not in place on closing day, the buyer may ask for a lower price or a later closing.

Tobacco and vape products

In British Columbia, a store needs a tobacco retail authorization to sell tobacco. The Province says it is not transferable, is issued to a specific business at a specific location, and that someone who buys a business that sells tobacco must apply for a new one. Approval takes about 10 business days, so the buyer should apply well before closing. In a share sale the company keeps its own authorization, but check with the Province about any change it needs to report.

Vape products have their own rules in BC. A business owner must file a notice of intent with the Ministry of Health at least 6 weeks before first selling e-substances, submit product reports, and renew the notice before January 15 each year. A new owner who wants to keep selling vape products should file early so there is no gap. Tell the buyer about any warning letters or tickets from tobacco and vapour enforcement officers, because a history of sales to minors can affect permits.

Stock, suppliers and service accounts

Stock is usually counted on or just before closing day and paid for at cost, on top of the price for the business. Agree in writing who does the count, how damaged or expired stock is treated and how tobacco and lottery tickets are handled. See selling a business with inventory.

A convenience store runs on many small accounts: the wholesaler, the drink and snack distributors who deliver direct, the coffee supplier, the ATM, bill payment and money transfer services, prepaid card programs, the point of sale system, payment terminals, the alarm and cameras, and insurance. Some equipment, such as branded coolers or the ATM, may belong to a supplier rather than to you. Make a list of each account, who owns each piece of equipment and whether the agreement can move to the buyer. Our guide to transferring contracts, licences and permits has a checklist. If your store is part of a banner or franchise, its approval comes first; see selling a franchise business.

Staff and the lease

A buyer will want to know who works in the store, their pay and hours, and who is likely to stay. In British Columbia, section 97 of the Employment Standards Act says that when a business is sold, the employment of an employee is considered continuous, so a buyer who keeps your staff takes on their years of service. See what to tell employees.

The location is much of a convenience store's value, so the lease matters a great deal. Check how long is left, the renewal options, any limits on what you can sell and whether the landlord must approve a new tenant. See your commercial lease when selling. If you own the building, see selling a business and the building.

Customer and staff information

Staff files and any customer accounts or loyalty lists include personal information. In British Columbia, section 20 of the Personal Information Protection Act lets a business share personal information with a prospective buyer without consent, but only if it is needed to decide whether to go ahead and the buyer agrees to use it only for the deal. Share totals and summaries first, under a confidentiality agreement, and hand over full files at closing.

Tax on the sale

How the sale is taxed depends on whether you sell assets or shares and how the price is split between goodwill, equipment and stock. See asset sale vs share sale, goodwill when selling and taxes when selling a business. If you run the store on your own without a company, see selling a sole proprietorship.

When a registered buyer acquires all or substantially all of what is needed to carry on the business, the section 167 election on Form GST44 can often remove GST/HST on the sale. In British Columbia, PST generally applies to taxable goods in the sale such as coolers, shelving and fixtures, but not to inventory bought for resale or to goodwill, and the Province says a buyer should get a PST clearance certificate before buying a business. Alberta has no PST. See GST and PST when selling.

A simple worked example

These numbers are made up and rounded for illustration only. Your own deal, timing and tax will differ.

Questions to take to your lawyer and accountant

• Should this be an asset sale or a share sale, given my lottery agreement, permits and tax?
• Which permits and agreements need the buyer's own approval, and should they be conditions of closing?
• How should we count and price the stock, lottery tickets and tobacco?
• Which equipment do I own and which belongs to suppliers?
• Will the landlord consent, and on what terms?
• How should we split the price between goodwill, equipment and stock?
• Can we use the section 167 election, and how does PST apply to the equipment?

For more, read what your lawyer and accountant do. Selling a different kind of shop? See selling a retail store or boutique in Canada. Running a café or restaurant? See selling a restaurant in Canada. Selling a private liquor store? See selling a liquor store in Canada. Running a drugstore? See selling a pharmacy in Canada. Selling fuel too? See selling a gas station in Canada. This guide is general information, not legal or tax advice for your situation. Questions about listing with us go to hello@sellmybusinessdirect.com.