GSB-24: How to Negotiate Vendor's Contracts to Your Advantage and Win- The Pain and the Gain

Gas Station Business 101 Podcast - How to Start, Run and Grow a Successful Gas Station Business

GSB-24: How to Negotiate Vendor's Contracts to Your Advantage and Win- The Pain and the Gain

Pain: If you are in c-store business already then you know how much pain it can be to negotiate vendor's contracts to your advantage. Just remember one thing, the contracts are often written by their legal dept and it is always to benefit them and not YOU. They are always looking out for them and not YOU. Unless you have a big legal dept with a few high paying attorney's on board, it is hard to negotiate with them, it is usually their way or the highway. But as a small business owner most of us do not have access to big law firms or a legal dept, not to mention if we even try to hire an attorney to negotiate on our behalf, we can go bankrupt just by going back and forth and paying their legal bills. So I know most of us often the sensible approach and read these contracts, talk to the vendors and ask other retailers about how they handled their contracts and then try to find comfortable ground and that is in my opinion is the most sensible approach to dealing with these legal contacts.

Gain: There are benefits to having contracts too, say just for signing you can get rebate back to you or get to sell their products cheaper and they reimburse you the difference, sure why not. But have to read them carefully to make sure it makes sense for your business.

Type of Contracts:

There are mainly 4 types of contracts in a gas station business

1. Brand contracts these are the hardest one to deal with, typically given by your fuel suppliers, soda companies, and Cigarette and tobacco companies
2. Supply contracts or I call them mini contracts typically given by your janitorial and other service related companies
3. Service contracts, typically given by your phone, internet companies to ATM, vacuum and similar type of companies.

4.Certain product or brand placement contract, often given by candy companies like Hershey's and such

Which Vendors offer you contracts? Before we jump to high on this issue, let's first see which of our vendors usually offer us contracts. A typical gas station/c-store usually have anywhere from 10-20 vendors that supply you from fuel to all your restroom supplies, your beer, soda and all your grocery and store supplies. Now not all of them offer or ask you to sign something, and that is a good thing, because if we have to sign 15 or 20 of them just to stay in business, we won't get much done, as we would be too busy to read and negotiate these legal documents for a long time.

Most often you will see contracts are offered by your tobacco and cigarette companies, then you will see contracts are offered by your soft drinks such as coke and Pepsi company, then you have your general grocery company who may also offer you some type of contracts based on what you buy from them. Then there are mini supply contracts by some service vendors, like Cintas or similar service companies that offer and sell you all the paper and janitorial supplies. But there is a big difference between these mini supply contracts and the big tobacco or soda contracts. The mini supply contracts are simple, they mostly make you aware that since they will install various dispensers in your store for free you should honor that free of charge service and buy their products only. To me these are reasonable contracts and yes since they have invested interest you really should buy from them

Then there are contracts from your local phone, internet or cable companies, ATM contracts, vacuum machine, pay phone and such contracts.

1. Now let's dive right in and talk about the first and the biggest one of all, the brand contracts

Fuel contract

Cigarette/Tobacco Contracts

Soft drinks contracts

2. Next is Supply contracts, which are as I said before, much simpler to handle and understand.

Grocery company

Janitorial company

3. Next comes the service contract, often offered by your internet or phone companies to trash pickup service to ATM machine, to Vacuum machine you have at your store. You have to be careful about some of these contracts as well.
4. Product and or brand placement contract. These are often the simplest and easiest contracts to handle, and often they come with some money too without much of hassles. see I saved the best for last?

Well yes they are easy compare to what we just talked about, typically a candy company can come and offer you couple of hundred bucks to display a mini racks with some of their candy either on the checkout counter or someplace visible and just for that hey offer to pay you certain amount of money every year.

Last word:

Just remember the contract has to be beneficial to your business , because you have to look at your best interest, and not theirs, you are in business to make money and not to make sure they make their money regardless if you do or not.