Branded gas station + c-store: seeing inside-vs-outside margin for the first time

Client Profile

Single-location branded gas station and attached convenience store in Texas. Owner-operator working the register most shifts and running the books from home in the evenings. Revenue streams: fuel (outside), inside grocery, tobacco, beer, lottery, ATM surcharge, and EBT/SNAP. Franchise agreement with a major fuel brand.

Starting Problem

The owner was running the business and trying to do the books in parallel. Every revenue stream — fuel sales, inside sales, tobacco, beer, lottery, ATM, EBT — was ending up in the same “Sales” bucket. There was no way to answer basic operational questions: is tobacco actually making money? is the inside operation subsidizing the fuel operation, or the other way around? are we over-ordering slow-moving SKUs?

What Was Broken

• ·Fuel inventory was not tracked on a FIFO basis — tank stick readings existed but were never reconciled against purchases and dispenser sales
• ·Lottery sales were booked as revenue with the state sweeps booked as expense — misrepresenting gross revenue and margin. Lottery should be a pass-through: only the 5–7% commission is actual revenue.
• ·EBT deposits from the state processor were not being matched to POS batch totals
• ·Franchise royalty was accrued only when the annual invoice arrived — meaning 11 months of revenue looked more profitable than it actually was, with a big correction at year-end
• ·ATM cash loads were being booked as expense when loaded and revenue when withdrawn — not a real P&L line, just noise

What We Changed

• ·Set up a per-revenue-stream chart of accounts: fuel, inside grocery, tobacco, beer, lottery commission, ATM surcharge, EBT, other
• ·Moved lottery to pass-through accounting: ticket sales as customer-deposit liability, state sweeps as liability reduction, commission as revenue. Only the commission flows to the P&L.
• ·Monthly tank stick reconciliation against purchases (delivery BOLs) and dispenser sales — shrinkage tracked separately from evaporation (expected 0.5–1.5% for gasoline)
• ·ATM vault cash moved to a balance-sheet account. Only the per-transaction surcharge revenue and network fees hit the P&L.
• ·Franchise royalty accrued monthly as sales are recorded — no more lumpy year-end correction
• ·EBT and SNAP batch totals from the POS matched weekly to state processor deposits; held funds and processing fees captured separately

Workflow Used

• ·Daily POS upload tagged by revenue stream
• ·Weekly lottery statement reconciliation against POS sales and state sweeps
• ·Monthly tank inventory reconciliation — gallons in from deliveries, gallons out from dispenser, expected evaporation, residual variance flagged for owner
• ·Monthly franchise royalty accrual tied to the sales cycle

Operational Outcome

The owner now sees inside-vs-outside margin monthly. One direct operational change: reduced ordering of slow-moving tobacco SKUs that looked profitable in aggregate but were losing money once franchise royalty, aging inventory, and reconciliation costs were allocated.

Reports delivered going forward: per-revenue-stream P&L, fuel shrinkage report with variance vs expected evaporation, top-5 inside SKU velocity, and a franchise royalty accrual tracker.

Timeline

Two weeks of setup (chart of accounts restructure, lottery migration, tank reconciliation workflow) plus ongoing monthly close.

Lessons Learned

• ·Lottery treatment matters. When it was booked as revenue, gross margins looked healthier than reality — by a meaningful gap. Owner decisions (inventory, staffing, pricing) were being made off the wrong number.
• ·Per-revenue-stream P&L is not a nice-to-have for c-stores — it is the difference between “we made money this month” and “we know which revenue stream made money this month.”
• ·Monthly franchise royalty accrual prevents a year-end margin shock. 11 months of overstated profit has real operational consequences.