By Marlon Knapp
Many gun buyers bemoan their local gun shop (LGS) without much knowledge of how they actually operate. Come with me for an inside look at some of the challenges faced by your LGS owner . . .
Laws and regulations
The scope and breadth of Federal firearms laws are intimidating to say the least. I could type a thousand word article on just the laws, regulations, and rules for firearms retailers and still only scratch the surface. A misstep can potentially expose the LGS owner to large fines (think $250,000 or more) and prison time of 10 or more years.
Applying for your license means you are inviting the ATF to inspect every aspect of your life to ensure you are a person they will entrust with the responsibilities of procuring and selling firearms. The application includes the fee ($30 – $3000), several sets of your finger prints and a passport style photograph taken within the past 6 months. Once your application is received it is reviewed and your background check is conducted (currently takes about 2 months). Once you pass that you get a visit from ATF compliance agents who interview you to ensure you are going to actively engage in the business and are not simply looking to build your personal collection via dealer pricing from wholesalers. Those agents will explain how to conduct business and evaluate your facility and business plan.
Supposing you did not build a new building, how are you planning to secure your investment? Which alarm system and monitoring companies’ will you use? Cameras and recording (on site hard drive or cloud storage) are another consideration. What about physical security for your employees? Will you allow/require employees to be trained and armed, or will you hire armed security or a combination of both? Hardening of the exterior to prevent or at least slow down a potential after-hours break-in. Will you store your firearms on the shelf or move them every night into safes or a vault? Side note, we suffered a break-in once, it took the burglars 59 minutes to pry the door open but only 62 seconds to smash our display cases and make off with 34 handguns and one stripped AR receiver. We now move our inventory into vaults at closing. However, the old adage “if you build a bigger can the thieves will bring a bigger can opener” is true.
This is a big consideration for your LGS. Most American insurance companies do not want to insure gun shops so we mostly are required to purchase what are called “excess lines” insurance. My current policies are underwritten by Lloyd’s of London. You will need building, inventory, liability, and workers compensation insurance at the least. An average policy will have a $2,500 deductible and should you suffer a loss (like a robbery or burglary) your deductible will rise to $10,000 for at least one year after the event. As an aside, should you suffer a loss insurance will only pay (minus the deductible) your actual cost of goods and repairs, not their value. Other things that can raise your insurance requirements include, Gunsmithing, firearms instruction, buying/selling used merchandise, manufacturing and selling reloaded ammunition, and having a shooting range.
Fact: FFL’s (Federal Firearms Licensees) are only allowed to use the FBI NICS system to check the ability of a person to purchase a firearm at the time of purchase. We are not allowed to run a “pre-purchase check” and unbelievably, we are not allowed to use it to screen an employee prior to hiring them. You will have to purchase a background check from a willing local law enforcement agency or find another way of vetting your potential new hires.
This one is BIG for every retailer but it seems like an even bigger mine field for those of us in the firearms industry. We all have a finite amount of space and (normally) a finite amount of capital to work with. Additionally we have to choose which wholesalers to work with, which manufacturer’s product lines to carry and which individual products to stock. Some manufacturers (Colt, Kimber…) require the retailer to maintain a minimum inventory to be allowed to use the term “stocking dealer” or even be allowed to carry those products at all. Kimber requires a “Master Dealer” to purchase a set dollar amount of product up front and a smaller amount each year. Colt requires the retailer to maintain a minimum of 20 of their firearms (no, you can’t just carry the cheap stuff) in stock at all times. This has caused many of the wholesalers to stop even offering their products, as the burden to most retailers (mom and pop shops) is too great. Want to carry reloading supplies? Good luck with that. Reloaders, (myself included) are notoriously picky about the components they use. You don’t have Winchester 231 powder? Fine, I’ll buy it and all my other components somewhere else. What about accessories? There are millions of choices depending on the market segment you want to attract.
What hours are you going to be open? What hours are your employee’s available? What hours will maximize your profit potential?
Feeling overwhelmed yet? I didn’t even touch on bookkeeping, record retention, pay scales/job roles, utilities, taxes, local ordinances, other licenses, additional government alphabet soup agencies, unions, dress codes, ethics, banking regulations, point of sale systems, janitorial, operating procedures, dealing with prohibited persons, belligerent customers, shady characters, local law enforcement, hang arounds, and a host of other considerations.
So the next time you walk into your LGS and want to tell them how they should run their business, may I politely suggest that if you think you have the answers, by all means open your own shop and show them how it’s done.
Marlon is owner of Knapp Weaponry in Wichita, Kansas. He discovered the shooting sports and firearms at the ripe old age of four, thanks in part to his Uncle Rich, a Nebraska State Highway Patrolman, and Nebraska Game Warden. Marlon is former military, and current NRA and Kansas certified firearms instructor.