Cafe and Gas Station

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Cafe and Gas Station

TROON CAFE AND GAS STATION

56 Lakeview Circle
Indian River, Michigan 49749

Gerald Rekve

The Troon Cafe and Gas Station will be a full-service and self-serve facility that will sell gasoline, boat fuel, motor oils, lubricants, and confectionery and will house a 45 person cafe. The cafe will be based on a 1950s diner to appeal to the aging baby boomers. The use of colors, seating, and counter will mimic the traditional 1950s diner.

EXECUTIVE SUMMARY

Business Overview

The business owner of The Troon Cafe and Gas Station is Wanda Fretter. The city council has approved the planning phase of the Cafe and Gas Station. The approval is conditional based on obtaining above-ground gas tanks that are in compliance with the Fire Services Act and securing the necessary financing. Thomasson Oil, based in Mackinac City, will supply both oil and gas to the facility. We will also sell a full range of cigarettes and pipe tobacco. The menu items will be all fast-food type, therefore allowing for quick turnover of the customers in our 45 seat cafe.

OPERATIONS

The gas station will be an incorporated business owned and managed by Wanda Fretter. The gas station is located on the main route going through Indian River, Michigan and the hours of operation are 5:00AM to 1:00AM, seven days per week. The proposed site measures 250 feet by 210 feet, and offers easy access from the local highway. There will be 6 self-serve pumps, 6 full-service pumps, a convenience store that measures 200 square feet, and public washroom facilities. The cafe will be 680 square feet.

The funding will be used for various purposes as outlined below:

Site preparation: $150,000
Equipment (purchase and installation): $200,000
Fuel: $30,000
Build convenience store: $150,000
Inventory: $13,000
Insurance: $1,000

The business will begin when all of the start-up capital is in place. An environmental assessment will be completed by the local government office responsible for gas station businesses.

Once all the business processes are started, we will begin site excavation to install the gas tanks and lines. Then once this is done, the building for the cafe and gas station will be constructed. We will use the most current technologies to build the location's structures.

Management Summary

Wanda Fretter will be the manager of the business and will work full-time at Troon Cafe and Gas Station. Mrs. Fretter has extensive experience in the business, having worked as a manager for Perky's Restaurant Chain for four years and as a manager with Tricky Speedy Stores for six years. Wanda's management experience will be a valuable asset to the business.

The business will hire the following:

12 part-time employees, each with 4 to 35 hours per week
7 full-time employees, each with 37.5 hours per week
3 full-time cooks, each with 40 hours per week

Eventually, a bookkeeper will also be hired for the business. The position will be filled in 2010, pending completion and approval of the environmental assessment and secured financing. The position will be part-time, consisting of 4-8 hours per week.

PRODUCTS & SERVICES

The Troon Cafe and Gas Station will be a full-service and self-serve facility; the initial focus will be fuel sales, including regular, premium, and diesel fuel.

The station will also sell motor oils and accessories, such as coolants and lubricants. According to the Petroleum Communication Foundation, the profits realized on fuel sales are marginal and with such small markups, the main way to stay in business is to sell huge volumes. (An average urban station sells from three to six million gallons of gasoline per year or 400-800 gallons an hour.) Despite huge volumes, margins are so thin that virtually all filling stations depend on non-fuel products, such as snack foods, to increase revenues and margins. For this reason, the secondary product line will include convenience items such as magazines, tobacco, maps, ice, soft drinks, and candy.

The fuels will be contained in above ground tanks. Underground fuel storage tanks usually fail from rust perforation due to several effects of water inside the tank. External rust, unless very heavy, isn't highly correlated with internal rust. Leaks can occur due to tank damage or at piping connections and a new tank involves significant expense.

Automobile Fuel

According to the American Petroleum Products Institute (APPI), automobile fuel consumption is constant. With the minimal profit margin on automobile fuels, the business will also target recreational boaters and fishers by selling boat fuel. Another focus of the business will be convenience store sales and cafe sales.

Boat/marine fuel

Sport fishing and recreational boat use in Michigan is a multi-million dollar industry. Boating attracts tens of thousands of visitors every year. Recreational fishing and related activities are not only of economic importance, it is part of the city of Indian River's history. With the wide variety of fish and fishing environments and facilities available, it is no question that Northern Michigan's reputation as an fisher's paradise is unchallenged.

Water Sports Participation in 2006

Percent of population participating at least once in 2006

Water sports	Men	Women
Swimming	46%	41%
Fishing (others)	28%	23%
Canoeing	16%	10%
Fishing (fly)	5%	2%
Water skiing	16%	13%
Sailing	22%	18%
Scuba diving	24%	15%
Board sailing	26%	24%

Other Services

The gas station/convenience store combination will offer confectionery, hot and cold beverages, news-papers and magazines, and prepared food items in addition to industry staples like gas and other car accessories.

MARKET ANALYSIS

The Troon Cafe and Gas Station will be the only gas station in the area that is easily visible and accessible from the local highway. The Troon Cafe and Gas Station will target several different types of customers. The travel and tourist market will be one target market. The town of Indian River doubles in size in the summer months, and the traffic through the town is substantial. The visibility and location of the station will ensure a constant flow of traffic through the station.

The additional two target markets are local citizens and the residents of the area surrounding Indian River; through these two markets we anticipate a constant stream of business for gas and food purchases.

The business will be a success for the following reasons:

Lack of comparable competition
Nice new store and cafe built with traditional decor
Convenient store sales
Visible, easily accessible location
Cafe that looks like it was built in the 1950s, yet is new construction

COSTS

Below is a detailed explanation of the different costs associated with starting this business.

Item		Cost
Environmental assessment, prepare site	$	150,000
Install equipment (pumps etc.)	$	200,000
Convenience store construction	$	150,000
Inventory for convenience store	$	13,000
Business insurance, permits, licenses	$	1,000
Purchase fuel	$	30,000
Total required	$	544,000

History of the Industry

Crude oil is the raw material from which gasoline is distilled. Crude oil makes up more than 99 percent of the volume of most gasoline and it contributes a significant portion of the final price. Crude oil prices behave much as any other commodity with wide price swings in times of shortage or oversupply. The crude oil price cycle may extend over several years.

Refining costs are the component of price added by the refining company to cover its costs and profit margin. Refiner margins average 10 to 15 percent of the total pump price. This money pays for refinery capital costs, refinery fuel, wages and salaries, profits and corporate taxes.

Retail costs are the price that is retained by the retailer. The majority of motorists see little or no difference between brands of gasoline. If competing gasoline stations are about equal in service, convenience and cleanliness, many motorists will switch stations for two-tenths of a cent per gallon. This means competition is based almost exclusively on price and the best way to attract customer is to sell for less. As a result, gasoline retailers must keep their markup razor-thin. Markups, which are less than 10 percent, cover: land, salaries, buildings, fuel delivery, site maintenance, profit (about one cent per gallon). With such small markups, the main way to stay in business is to sell huge volumes, and the primary way to increase volumes is to reduce retail margins.

Competition

There are almost 55,500 retail gas outlets in the United States. Retail gas through these outlets accounts for 37 percent of overall petroleum demand in the country. In Michigan there are 769 gas outlets, and in the Indian River area there are 5 gas stations.

As with much of the retail sector, the retail gas industry has undergone some major changes over the past 20 years.

Some factors that affect gas stations are:

Increased/longer operating hours
Strategic location adjacent to supermarkets/malls
Increased numbers of gas stations in urban centers
Shifts in customer demand for more products and services (ATMs, etc.)

Independent and corporate gas stations have met with these demands and the result is increased competition. The competition is most intense in cities and larger towns. An independent company like The Troon Cafe and Gas Station can still be profitable in a smaller, rural and less competitive setting.

Although competition has increased over the past few years, fuel sales continue to increase annually. The most intense competition is in larger urban centers (large supermarkets with gas bars take the lead).

This leaves opportunity for independents in smaller rural settings. To be successful, location on a main highway with significant through traffic is a key factor. Easy access, convenient and plentiful parking, and high visibility are also very important.

There are many things that must be done to assure that the business can be successful and efficient, as noted below:

Convenience store equipment turned on as necessary
Count float, open daily records, check tallies recorded from previous evening
Initialize and turn on pumps
Do an inspection of pumps, site and equipment
Order fuel; inventory control done automatically by fuel company
Store inventory control; order as necessary
Dip measurement to check fuel level at night
Measurement checked to daily usage (as per cash machine); balance as necessary

Supplies

Below is a list of proposed suppliers, the products they offer, and the terms.

Supplier	Products	Terms
Western Transportation System	Fuel, petroleum, boat fuel, diesel	Net 15
Pepsi Canada	Soft drinks	Net 15
Canadian Confectionery	Chocolate bars, candies	Net 15
Coca Cola	Soft drinks, bottled water	Net 30
Fresh Meats Inc.	All kitchen rest foods	Net 15
Confectionary Inc.	All confectionary Items	Net 15
BONZOS	Chips and other snacks
Bats Inc	Chips, snack foods, chip dips	Net 30
Fresh Sandwich's Inc.	Made daily sandwiches	Net 0—paid on delivery
Auto Trader	Car magazines	Net 0—paid on delivery

Customers

The Troon Cafe and Gas Station is located in the heart of the major tourism destination-Indian River is a popular summer-time vacation destination. The area's population itself almost doubles in size during the summer, turning this small city into something more like a large city.

Location

The location allows for maximum visibility and easy access. Motorists will see the station from the highway in time to access the station safely. It will have excellent forecourt lighting for nighttime customers and will be built on flat land that will facilitate access. There will be ample room to enter and exit the station without difficult or abrupt turns. Prominent signage on the site will list the services offered and their prices. Strategically placed road signage will direct highway traffic to the gas station.

MARKETING & SALES

Advertising

To attract business, we will employ the following methods:

Business cards
Flyers
Internet website
Weekly contest—''Free Gas Draw''
Yellow pages
Radio advertising
Signage on local highway and surrounding areas

For the first six months of business, the customers will be polled as to how they found the business and the most inefficient advertising and marketing techniques will be eliminated.

Pricing Strategy and Target Sales

The Troon Cafe and Gas Station will make every effort to be competitive in its pricing. External factors such as the price of international crude oil affect gas prices and are beyond control of our business, but we will maintain a fixed profit margin. Higher transport costs will be reflected in our prices; therefore, our pricing will be somewhat higher than most urban centers. This will not affect sales due to the limited competition and the strong customer base from local residents.

The industry standard for markups, less than 10 percent, will be followed. This standard 10 percent covers land, salaries, buildings, fuel delivery, site maintenance, and profit. With this in mind, the convenience store will offer promotions to local residents to increase sales volumes. These promotions will include contests and giveaways.

Sales are expected to be high during peak summer season. It is anticipated that a regular and loyal customer base will be established within the local community to ensure a consistent positive cash flow during the slow season.