How to Open a Gas Station

Part 1 - How to start a How to Open a Gas Station business - Background

Gas station businesses attract customers by selling gasoline, which most people need for their vehicle. Gasoline is just one of the many products that gas stations may sell to travelers, though. Many stations also offer foods, drinks and convenience store items. According to IBISWorld, the gas station industry brings in $89 billion annually through selling products like these.

Our guide is in 3 parts:

• Part 1 - How to start a Gas Station business - Background
• Part 2 - Our planner tool to see if this idea is the right fit for you
• Part 3 - Action plan to get started

What are the costs involved in opening a gas station?

The startup costs associated with opening a gas station business are substantial. According to JUX Law Firm, business owners should expect to spend around $300,000, which breaks down as follows:

• $2,000 for legal fees

• $2,000 for insurance premiums

• $3,000 for state permits

• $5,000 for promotional signage

• $10,000 for initial inventory

• $20,000 for setting up a convenience store

• $100,00 for setting up the gas station

• $150,000 for purchasing a building

Depending on the location of a gas station and what buildout is involved, the startup costs for a particular station may be more or less. In some cases, the startup expenses can be much more than noted here.

What are the ongoing expenses for a gas station?

The ongoing expenses for gas station businesses are high. Gas stations must pay for the fuel they sell, which alone often runs over $1 million annual for many stations. They must also purchase other products that are sold, and pay employees’ wages, utilities, taxes and permit fees.

Who is the target market?

A gas station business’ ideal customer is either a family that’s traveling or a long-haul truck driver. Traveling families won’t purchase a lot of fuel, but they’ll frequently get snacks or beverages for everyone in the family. Long-haul truck drivers will also frequently purchase some food or a beverage, and they’ll also often spend hundreds of dollars filling up their truck’s tank.

While these are ideal customers, gas station business owners aren’t picky about whom they serve. Anyone who comes into a gas station is a likely customer and will probably spend at least a few dollars on an item.

How does a gas station make money?

A gas station business makes money by selling products to drivers and passengers. Stations are named for their primary product: gasoline. This is just one of many products that gas stations sell though. Most gas stations also offer:

• Pre-made food (e.g. pizza and hot dogs)

• Beverages (e.g. such as coffees, teas and sodas)

• Snacks (e.g. ice cream, candy and chips)

• Grocery staples (e.g. milk, bread and eggs)

• Basic automotive supplies (e.g. windshield washer fluid and tire pressure gauges)

• Beer and wine (if permitted by law)

• Tobacco products and lottery tickets

How much can you charge customers?

The price of gasoline fluctuates on a daily basis, but most gasoline station businesses don’t try to make a lot on the fuel they sell. Instead, they use low fuel prices to attract drivers — and then sell other products that have higher markups. Most gasoline stations have many pre-made foods, snacks, beverages and convenience items available for less than $5. Each sale may be small, but lots of sales over the course of a day can generate a significant revenue.

How much profit can a gas station make?

Gas stations can generate millions of dollars in revenue, but much of this is often consumed by ongoing expenses. In an example that JUX Law Firm provides, a gas station that earns $2.4 million annually might have ongoing expenses of $2.1 million, and that doesn’t take into account all the salaries and some other fees the gas station must pay. According to The Nest, gas station owners make around $70,000 each year. (Profits may increase once a station’s loan is paid off.)

How can you make your business more profitable?

Gas stations can add revenue streams and increase their profit margins by incorporating sideline businesses. Car washes, auto shops and restaurants are popular side businesses to add.

Day-to-Day and Growth

What happens during a typical day at a gas station?

On a day-to-day basis, a gas station business owner or their employees will need to:

• Accept shipments

• Restock inventory

• Prepare pre-made food and drinks (if offered)

• Ring up sales for customers

• Clean the gas station (e.g. empty trashes and clean the restrooms)

When not working on these tasks, business owners must also schedule and manage employees, place orders for products and pay bills.

What are some skills and experiences that will help you build a successful gas station?

Running a gas station business requires knowledge of many different aspects of business. Business owners must identify and source products that customers will want to purchase, hire and manage employees, place service orders when equipment malfunctions, and follow permitting laws in their area.

Business owners may want to take some business classes before opening a gas station, or they might want to work as a manager for another gas station first. Joining professional organizations, such as The Association for Convenience & Fuel Retailing, can also help business owners learn about the industry.

What is the growth potential for a gas station?

A gas station business owner may operate a single gas station, or they may have several in a region. Owners who have one station can operate as an independent business or a franchise, while those who have multiple stations in a region often elect to get franchises. Pronto Food Mart in Austin, Texas is an example of an independent station. Chevron is one gas company that has franchises available around the country.

What are some insider tips for jump starting a gas station?

Many business owners opt to purchase an existing gas station rather than open a brand new one. Purchasing an existing station provides more stable and predictable revenue, and it can make the permitting process easier because the station is already operating. A current list of gas stations for sale, which are priced from tens of thousands of dollars to well over $1 million, is available at BizBuySell.

How and when to build a team

Most gas station businesses need at least a few employees to help run the station. Even a small gas station will require several people to cover all the hours that the station is open. Employees, however, often aren’t paid very much. In many cases, they make minimum wage or just slightly more.

Part 2 - Is a How to Open a Gas Station business the right fit for you?

Part 3 - Action plan to launch your How to Open a Gas Station business in 90 days