Opportunities
Grocery Store Route & Sales Netting 62K
Sold
Specifications
Earn 20% commission on sales delivering brand products to 13 stores in Northwest Omaha! This delivery route services Hy-Vee, Baker’s Wal-Mart, Target and Fareway stores with a national brand. Products are stored in a warehouse, with orders received on Tuesdays and Fridays for pickup and distribution by the route driver. Deliveries are made beginning early in the morning and end in the early afternoon. While this is a national brand, the only “fees” to corporate are in a weekly rental of a handheld POS device.
The current owner purchased the business in July 2015, earning $399,072 in the first full year of operation and is already on track to nearly double that in 2017! Pay is earned by a 19-20% commission on sales, with weekly sales averaging $7,000 and commissions averaging $1,400. Yearly expenses amount to a little over $9,000, which netted the business $62,617 in cash flow during 2016.
Looking to sell in order to travel and semi-retire, a new owner could easily pick up the route and increase revenue by developing more relationships with existing store management to increase product purchases. The seller works 36-38 hours per week making deliveries and loading inventory into the truck, which is included in the purchase of the route. Inventory moves quickly, so there is very little carry over from week to week. Price at only 1.5 times cash flow, this is a perfect business for an early riser!
Business Highlights
- Location and Service Area: Northwest Omaha
- Rent: $225/month paid to warehouse
- Number of Clients: 13 stores in NW Omaha
- Route Clients: Hy-Vee, Baker’s, Wal-Mart, Target, Fareway
- Commission Schedule:
- orders are received on Tuesdays and Fridays with the goal of emptying the truck on Wednesdays
- commissions are paid every two weeks and average 19-20% of net sales
- Reason for Selling: Travel and semi-retirement
- Hours: Between 36-38 hours/week
- Store deliveries are done early in the morning and end around 2pm
- Warehouse pickups done on Tuesdays and Fridays (as needed)
- Seller Training Period: Will ride with new owner for 3 weeks
- Growth Opportunities: develop more relationships with existing customers to increase product purchases
- Current Owner’s Responsibilities: inventory and delivery of product
Financial Highlights
- List Price: $72,000
- 2017 Gross Sales: $177,596 (as of May)
- 2016 Gross Sales: $399,072
- 2016 Cash Flow: $62,617
- 18% Profit Margin
- Assets Included in Purchase:
- Vehicle – delivery truck with new tires
- Inventory – various breads, tortillas and salsa (inventory moves quickly and there is very little carry over from week to week)
- Intangible Assets: client relationships
- Relationships are the key to growth – developing rapport with store managers and inventory personnel opens avenues for them to increase their brand purchases
Income & Expenses
Commissions
| Net Sales | 20% Remittance | |
| 2016 | $359,067.00 | $71,813.40 |
| 2015 (purchased in July) | $103,262.90 | $20,652.58 |
| 2014 | $329,466.00 | $65,893.20 |
Commissions are paid from net sales, not gross sales. The franchise deducts any store credits and promotions from the gross sales before paying commission.
Expenses
| Type | Annual Cost | |
| Gas | $4,160 | ($80/week x 52) |
| Warehouse | $2,700 | ($225/month x 12) |
| Handheld POS Rental | $1,040 | ($20/week x 52) |
| Insurance | $1,296 | ($108/month x 12) |
| Total | $9,196 |
Net Income (Commission – Expenses)
| 2016 | $62,617 |
| 2015 | $11,456* |
| 2014 | $56,697 |
* Business purchased by current owner in July 2015, so 2015 net income does not represent a full year
- The first 5 months of 2017 are already showing an 11.23% increase in sales!
- Weekly average sales for this route are between $7,000 - $9,000 with the seller earning roughly $1,400 per week in commission
- With expenses limited to gas, insurance, and rental fees, the possibility for growth is high and dependent on the route driver up selling
Day-to-Day Operations
- Deliver product to existing accounts (grocery stores) starting in the early morning hours
- Evaluate and create an order of product needed for the shelf
- Pull the order from inventory in the delivery truck and place on the shelf
- After servicing all accounts for the day, pick up additional product from the warehouse for deliveries if needed for the next day
- Ideally, one could estimate the amount based on weekly sales and only return to the warehouse as needed rather than daily
- Inventory is restocked in the warehouse each Tuesday and Friday
- Route specifications
- Baker’s requires daily visits, which usually consists of taking a few minutes to straighten display shelf and restocking if needed
- 5 larger stores (Hy-Vee, Wal-Mart) are visited on Wednesdays and Saturdays for restocking
- The remaining 8 stores are taken care of Tuesdays and Fridays
- On Mondays and Thursdays, each store is visited for inventory and display checks
Financial Overview
- As an independent distributor, pay is based on commission, which varies on the number of items sold
- Currently, the seller averages between 19-20% commission per week
- Expenses include fuel, stale or damaged product, storage, handheld POS and insurance
- For this route, the yearly $9,196 in expenses are as follows:
- $80/week in gas ($4,160/year)
- $225/month for warehouse storage ($2,700/year)
- $20/week handheld POS rental ($1,040/year)
- Distributor pays a $500 deposit on a $4,000 handheld POS
- Remaining $3,500 owed is split out in 35 installments
- Money is eventually refunded to distributor
- $108/month for insurance ($1,296/year)
- For this route, the yearly $9,196 in expenses are as follows:
- No out-of-pocket expenses when purchasing inventory
- Route owner is responsible for any inventory not accounted for by sales (i.e., any product that goes stale or is not sold that week)
- Independent distributors are required to sign a service agreement to represent the brand standard
- Company promotes and assists distributor in growing the business
- Discounted items for store promotions:
- Distributor is paid full commission on the discounted selling price
Growth Opportunities
- Improve on and continue to develop relationships with store managers and inventory personnel to increase their interest in purchasing more products
- Support the brand’s promotions and up sell within the designated territory
- Route values can also be increased through new stores opening, new product lines and inflation
Valuation Details
The Firm Business Brokerage used a Cash Flow Valuation methodology to determine the Purchase Price of the business. The formula used is as follows:
Cash Flow x Multiplier = Price
Cash Flow is the sum of net income plus any owner perks and non-onward going expenses.
Multiplier is a prescribed number between 1 and 5 determined by a 100-point, 20-question rating system used to determine the business valuation (average is 3).
The Cash Flow for 2016 is $62,617, with a prescribed multiple of 1.5.
With this information, the computation result follows:
$62,617 x 1.5 = $93,925
The List Price for the business is set at $72,000, as is priced below value as the owner is eager to move into retirement.
Using the Cash Flow of $62,617, the Buyer’s Net Operating Income after debt service would be $54,563. Assuming a 50% Buyer down payment on the Purchase Price $72,000, the Return on Investment in the first year would be 151%.
Print, sign and send to:
210 N 78th St. 2nd FloorOmaha, NE 68114
Or fax to:
f 402.939.0857