The cost of operating a convenience store is up significantly thanks in part to a number of factors, the most glaring being interchange fees and credit card costs. But labor and utilities also experience significantly higher year-on-year gains.
The industry’s operating expenses on a per-store, per-month basis rose across the board in 2007, according to the 2008 NACS State of the Industry (SOI) report.
Total wages plus benefits increased 11.3% to $17,809 from $15,996 in 2006. Utilities were up 9.4% to $2,578 from $ 2,356 in 2006 and repairs and maintenance experienced a 16.5% upsurge to $2,457, up from $2,109 in the previous year. Supplies (up 8.6% to $1,226) and drive-offs (up 10.3% to $341) also saw significant gains in 2007.
On a monthly basis, wages, less benefits, averaged $14,980 per store in 2007, up 14%, but other employee costs increased as well. Payroll taxes were up 6.3% to $1,286 and health insurance experienced the highest net gain of 28.5% to $974. The one break the industry experienced in 2007 was in workers compensation costs, which dropped 22.9% a year ago to $361, down from $468 in 2006.
As a percentage of gross profit dollars, utility costs per store remained unchanged at 4.8%. Interestingly, though, was that by quartile based on chain size the top (4%) and second quartiles (4.9%) paid significantly less than the third (6%) and bottom (6.1%) quartiles. This is most likely a result of the bigger chains’ willingness and ability to spend more to invest in more economical equipment, such as computer-controlled refrigeration systems and upgraded lighting in-store and at the pumps.
Greg Parker, president and CEO of The Parker Cos., a 23-store chain in Savannah, Ga., said retailers have options to control operating expenses including enhancing credit card security and PCI compliance. For example, when it comes to utilities he urged operators to rationalize light usage and use low energy fixtures. "Be creative handling benefits for managers and store personnel," said Parker, who is also the vice chairman of research and technology for NACS. "Better labor management, even scheduling to the half hour can save hundreds of dollars per store every month."
Terry Beachler, owner and president of Beachler’s Servicenter & Car Wash in Peoria, Ill., implemented an automated lighting control system in his third-generation business.
He partnered with Schneider Electric to introduce an integrated lighting control system. The system provided immediate cost savings.
Beachler chose to implement six total lighting zones at the business, all of which control exterior lighting. The areas with simple lighting needs, such as the convenience store interior and service bays, are controlled with manual switches, but for the other areas he set up zones with specific lighting programs. There are two zones for the large signs that identify the business; two more for the islands with the gasoline pumps; and two more for the building exterior, he said.
Since unattended fueling is available on two of the six pumps from midnight to 6 a.m., two-thirds of the canopy lights are shut down automatically. With the lighting control system, employees never need to manually turn on or off an exterior light.