Buying & Selling a Convenience Store or Gas Station: Due Diligence and Business Valuation
By James Blake onThe business valuation of gas stations and convenience stores for sale vary immensely from location to location. When selling or buying a gas station or convenience store, you must clearly understand the nature of the business acquisition, and structure the letter of intent (LOI), purchase agreement, and other business sales contracts for asset protection, financial security, and business agility.
Sales of gas stations and convenience stores and similar management agreements or lease agreements are often structured in a number of ways, including:
• Management Agreement where a third party operates the premises
• Selling Real Estate Only where operating business entity may continue or leave
• Selling a Gas Station or Convenience Store Business, selling or not selling the real estate
• Sale of Building, Lease-Hold Agreement: Real estate owner keeps ownership of property
• Franchise Agreements and Business Licensing
Legal Due Diligence: Purchase Agreements & LOI
Buying a gas station or convenience store can be a good investment, but success often requires a small business owner or investor to conduct thorough due diligence. Often, business investors will require a letter of intent (LOI) to conduct due diligence and get exclusive business acquisition negotiating rights for a period of time. A buyer must investigate all aspects of commercial and business law, including:
• Reviewing Commercial Leases or Real Estate Sales Contracts
• Contractual and Legal Liabilities of the Business Entity
• Trademark, Licensing, and Franchise Law Issues
• Legal Representations and Warranties
• Environmental Liabilities of Real Estate
• Comptroller Leins or Tax Leins on Real Estate
Business Due Diligence: Gas Station & Convenience Stores
In addition to legal due diligence for buying a gas station or convenience store, due diligence of financial statements and business condition is also important. An investor or small business owner should investigate:
• Financial Statements for the past 3 years
• Inventory on hand, inventory turnover rate, relationships with vendors, business credit
• Condition of sales equipment and fuel pump calibration
• Quality of employees and management
• Condition of Premises and need for construction or commercial lease build out
The terms of your purchase agreement and the details revealed by your due diligence will have a significant impact on business valuation. Our business law firm in Austin regularly advises clients who are buying or selling commercial property or businesses, including gas stations and convenience stores, as well as commercial leases and business management agreements.
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