Relationships Over Money: The Abyss Gets a Partner

Hi There Gas Nation!

Episode No. 8 is here:

This week we'll talk about the GBG 911 Challenge some more and we're going to start off talking about The Abyss. That's location #2 as we named them last week. This is the one with the great big sink hole in the parking lot.

Financially speaking, I took a little setback with this one. I was going to flip it like the rest of these stores, but decided to rent it out to a friend instead of selling it.

I've always put relationships and friendships ahead of money and the world has returned the favor, so I know I'll do just fine, it'll just come a bit slower.

We're still refurbishing that store, finishing up the inside and putting in some new pumps soon.

So about my friend. He's an Ethiopian refugee who came to America via a 4-year stint in the Sudan. He finally gets here and does room service at a hotel and works for me when he’s not working there. He's learning the business and working for me and the hotel for a few years. And then he and his 2 good friends buy a gas station together. These guys run this gas station for 20 years and my friend finally sold it last year and cashes out and is ready to retire.

So he called me recently looking for another opportunity because entrepreneurs and owners always have an itch to scratch and here I am ready to sell this store and I say "I'm going to lease it to you" because again I believe in what you give is what you get.

So I'm leasing it to him now for $5000, NNN (pronounced ‘triple net’), which means that he pays all the expenses associated with the gas station, including insurance and taxes.

What I get out of this, besides the rent, is some incentives from Chevron, $350k worth of incentives to be exact. What I need to do is to brand the gas station to their specs and put in some new branded dispensers. This will cost me about $200k so I'll have $150k left in my pocket from this deal and then I get to keep a 3 cent rebate on the fuel for the next 10 years so if my guy does 50,000 gallons a month, I've got another $1500 coming in each month, which is really sweet.

So why am I so excited about this location? I've been at this game for 30 years so my gut and my eyes tell me it'll do well, but I also ordered a feasibility study on this location.

While their numbers are ambitious, I think they're pretty solid, minus a couple of corrections. So they're saying we'll sell 870,000 gallons of fuel. I think that's a little rich so I discounted it by 15% and came up with around 740,000 gallons. And then they said that in the last couple of years the average margin on a gallon of fuel (gasoline and diesel combined) is 21 cents so that, against the 740,000 gallons, is $155,000 of gross margin on fuel sales. So then they got to estimating inside sales and the way they do that is they look at where you are in your market area vis a vis other stores and there's no one to the south of me for 13 miles and there's no one to the west and east for 10 miles. There is a store around the corner and another one down the road that I own, but those are the only two. So they came up with a little north of $1.8 million in inside sales. Again, I think they went a bit overboard so I took that down to $1.3mm a year so that's around $115,000 a month. He'll be able to generate about 30% gross margin on inside sales.

So now we have $414,000 gross margin on inside sales and $155,000 gross margin on fuel for the year so that looks pretty good. What these companies don't account for is lottery sales and because this is a blue-collar working market, I estimate my friend’s going to make another $45,0000 a year on the lottery. If you add all of that together, that's $614,000 in gross margin. On top of all of this, he'll make another $8k-$10k a month on video poker. That's more than enough to cover rent to me, all of his expenses and be left over with quite a bit of money.

If the store does well he'll buy this real estate from me. It's a win-win and it's how I've always done business because there's really enough money to go around.

So I'm really excited about this one. We have a lease, an offer from Chevron, a gas delivery agreement and we expect to be open in June.

What that means for you guys is that I'll walk you through how we open this store and how it all comes together but we're well on our way.

Also a quick update about our channel - please do follow along and subscribe, and also turn on notification because besides these GBG 911 videos each Saturday, I'll be dropping more industry insider knowledge videos on Wednesdays.

We're just ramping up folks. Thanks for being with me and supporting me and I'll talk to you all next week.

GBG

Watch Episode 8 here: