Owning a gas station continues to be a stable business. I have worked with many clients on selling and buying gas stations and it is somewhat unique to other industries because the gas and oil industry changes and evolves constantly. But, regardless of changes in the types of fuels used in vehicles now and in the future, customers will still need stations to dispense these fuels. The industry continues to see steady growth. Factors like convenience options, volume of gas sold, quality of equipment and location will all affect profitability and the initial purchase price. However, changes in the economy and fierce competition are known risk factors that must not be overlooked.
There are two types of stations: convenience stores that sell gas and gas stations with stores. Let’s further define the difference to avoid confusion. Convenience stores that sell gas operate like small-scale grocery stores selling food items in addition to selling gas. Examples include, 7-Eleven and Circle K. Fuel stations with a store primarily sell gas, but also sell snacks and travel items and may have a car wash and or a vehicle service station for oil changes and other mechanical services. Examples of these include Shell, Mobil or Exxon stations. If the gas station has a convenience store associated with it the value will be higher as the items in the store typically have a high profit margin and can account for as much as 80% of profits. Although very similar, it is important to know the differences when looking at the purchase price. The higher the profit margins, the higher the asking price.
Further examination of pricing and profits is related to the volume of gasoline sold and the station’s location.
When buying a gas station, look for high volume ones. The higher the gasoline volume per month the more attractive the business becomes.
How much traffic does the gas station receive? Stations located near major traffic centers like highways, interstates, airports and shopping malls will do better than a gas station situated off the beaten path.
Purchasing a gas station with quality equipment ensures adherence to the Environmental Protection Agency (EPA) and state regulations concerning the protection of the environment and safety. Check to see when the most recent inspection on the underground tanks was performed. Ask the current owner if any leaks or hazardous waste has been found or detected on the premises in the last ten years. Fixing these issues is very costly so it’s important to consider them when negotiating the sale.
The economy and the competition are risk factors that need to be considered as well when buying a gas station. Despite being a stable business model, there are still risks involved with buying a gas station that you should take into consideration. Risk in the gas station business mostly relates to the economy. When the price of gas goes up it affects the economy negatively. People make an effort to drive less or are constantly seeking out the establishments with the lowest prices. Also, in a down economy, consumers tend to spend less money on convenience store items.
When considering the competition, big oil companies like Racetrac, QT and others are opening stores all the time. These giant retailers are affecting the profits of independent stations. However, smaller retailers can still compete by providing competitive prices on both gas and in-store items.
Overall, the gas station business still exhibits stability and growth due to the never-ending need for fuel by consumers.