Why is Louisiana Convenience Store Industry So Regulated?

convenient store

As a construction lawyer there are many industries that I get involved with that are spin-offs of the construction industry. Typically, these are commercial collections, such as when contractors and suppliers are owed money on projects, they hire counsel to collect. Landlord/tenant is another spin-off, due to the fact that many landlords perform construction work on what the own or they build it new and lease it out. In both instances its natural to help clients with the collection or leasing aspects of the construction projects.  There are complicated contractual documents that are associated with these spin-offs, therefore clients need to look out for their best interests.

A not-so-common, spin-off I come across with regularity is the convenience store industry. I have had the fortune of representing owners, developers, suppliers and purveyors in this industry here in the New Orleans area. Most people use the services of these places whether it be a Shell, Velero or an independent without ever knowing what goes on behind the scenes. This is a very heavily regulated industry, with complex deals and transactions happening daily. Savvy business owners are the ones who are prepared.

Construction and Development

There are two ways to begin this type of enterprise and its no surprise that an owner/developer can either build a new store from scratch or they can renovate an existing location. The problem with building new is that the property needs to be zoned properly for the desired business type. You can’t just go around throwing gasoline into the ground, without getting approval from the Louisiana Department of Environmental Quality (DEQ). The property needs to be zoned properly or owners need to seek a variance through the New Orleans City Council.

Even if a development is a renovation of an existing location, there needs to be soil samples and testing done to make sure that the ground is not contaminated. This can be a nightmare for developers, and nearly the kiss of death if the ground is contaminated. Contracts between developers, owners and the installers of the underground tanks is essential. There is an element of passing along the risk that should be addressed in any document between these parties.

Running A Convenience Store Business

The actual business of running a convenience store can be done in the standard ways by either a corporation (Inc) or a limited liability company (LLC). The structure of the business is the same as any other business, and to be successful you have to see what products maximize return on investment.

The more tricky part comes in when you want to sell gas, food, liquor, tobacco and/or have video poker (allowed in Orleans and other surrounding Parishes). All of these aspects are heavily regulated by both local and state government. There is a mountain of paper work that any owner needs to be familiar with when seeking to increase revenue from any of theses sources.

Both the City and State have arms for the the board of health that regulates food. Liquor and tobacco are regulated by the City and the State’s Alcohol and Tobacco Control (ATC). Video Poker (if you have alcohol permit and sell enough food) is regulated by the Louisiana State Police. All of these agencies have different rules and standards that convenience store owners need to be familiar with. Application processes are time consuming and tedious.

Gas Related Regulation

As mentioned above the petroleum industry is one of the most heavily regulated industries in the country. There is regulation with regards from the installation of the pumps and storage tanks. Regulation on the pricing and distribution. Even a mere understanding of the Louisiana Superfund and remediation process if there is ever a site contamination is helpful.

The Louisiana Department of Environmental Quality has extensive resources and regulation on the way petroleum or gas is used in Louisiana. This is done so that we preserve the environment for later generations. Nevertheless, there is a huge price tag associated with this process and understanding it can pay dividends for convenient store owners.

A Business Like No Other

There are few businesses that encompass such complex local and state regulation like the convenience store industry. There are few businesses that take on such risk and become involved in complicated contractual schemes that shift risk to other parties and insurers.

So the next time you look at an Exxon, Race Trac or independent convenient store / gas station, know that there are many moving parts, starting back before the first shovel broke ground. Even as each truckload of gasoline is dropped off and each Big Gulp is poured, the government is weighing heavily on an owner’s metaphorical back. There are very complex contractual regimes which exist and countless hours of manpower that have been put in to that establishment and the services it provides.

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