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tobacco shop

I am going to very closed to buy a tobacco store in Prince George County. It is in a good loaction , new shopping center with Shopper food ware house, restaurant, barber shop , banking... and very closed to resident living such as condos, single house . The owner is very confident about the margin of 30% on the sale receipt . I did verified all sale receipts for the past year 2010 to find out the gross sale is about $548,000. I asked him for total of the cost of good sold for 2010 ; he told me about $300,000. Cigar is the best selling and very profitable by 100% ( buy $ 3 sell $6) . In addition, the customer can buy some snack. drink together ;therefore, his store is in very good business. He is owning this store in 5th year. The store does not have Lottery, Keno, Racetrack, atm, check cashing, phone card and selling ciagette ( profit only 10%) , cigar and accessories. Please, tell me any experience , pro and cons before I make a final decision to buy. I am very appreciate your help !

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The BAF Group LLC
MD

Cigarettes are sold in the State Minimum as a loss leader for the rest of the products. A 10% profit on Cigarettes sounds low; I have not sold a Tobacco location in several years, but the State Minimum should yield 18%, as I recalled. I could be wrong, but you should check into that.

Lottery could help drive even more sales, but it can also be a detriment. Lottery is only a 3% to 5% profit line, and if the volume is too high, it can create traffic that can sometimes hurt the rest of your sales. I know of one Liquor Store that had a problem in that way. On Fridays - which was the Store's biggest Liquor sales day - there were so many people buying Lottery tickets, that no one could get into the store to buy Liquor! They finally had to move everything in the store and create a kiosk off to one side, just to accomodate the Lottery buyers.

From my experience, Tobacco Shops can be a very good business. Check the rebate money: Sometimes, that is a profit line that is not showing up on the books. That is a good thing, for you; but it is something to know, so that you can determine whether the business is worth the price.

Feb 20, 2011

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