Have you ever considered opening up your own business? Is being your own boss appealing to you? Perhaps you’ve been wondering how to open a gas station… but don’t know where to start?
To open a gas station, one must plan for purchasing a location, a building, pumps, supplies, amenities, and then follow state and federal regulations as they prepare to open a new business. There are many options to register under, such as an LLC, sole proprietor, or as a corporation.
With all of that being said, it can be a bit daunting to take on a project this size, but don’t worry! I’ll break it down for you in 5 simple steps.
Table of Contents
What To Consider Before Opening A Gas Station
First, Have A Plan!
Before you actually open a gas station, you should first create a plan.
You need to consider the logistics. This ain’t gonna be easy!
Keep a careful list of jobs and then draft up a business plan.
Consider a few essential questions:
- What are the costs involved when intending to open a gas station?
- Where will you build your gas station?
- Is it profitable to own a gas station in your area?
- Is the area safe and what are the state and federal regulations that you’ll have to abide by?
- What’s your competition like? What will you offer that they don’t?
You’ll first want to figure out the details of buying a gas station and the costs associated with that… or if you’ve decided to build from the ground up, you’ll want to understand all of the costs.
During this process, you’ve probably already scoped out a few locations to buy.
In addition to price, distance, building, and the pumps, you’ll want to consider a location that is in need of a gas station.
Setting up out in the desert might not be as profitable as a busy un-served street corner.
Think about other nearby gas stations and what they have to offer. Find out what the risks involved with that location include:
- Does your location pose a possible target of robbery? You’ll want to get a decent insurance policy for a more volatile area!
- Is your area at risk of flooding or weather warnings?
Keep in mind that the federal government has regulations that you’ll need to follow on EPA to protect against pollution.
Each state may have specific regulations. California for instance, has strict environmental regulations making it so that business owners need to have pump nozzles that keep excess fumes from leaking into the air. Additionally underground tank storage inspections are strict in some states to prevent tank leakage or other mishaps from occurring.
Think about your competition.
- What does your area not have in a gas station?
- Do other gas stations offer fresh food, clean bathrooms, friendly staff, 24 hour service, hot chocolate, or slushies?
What’s Your USP?
Do you visit a particular gas station just because they do the best salad (chilli dog)?
Special features attract more customers.
Special offers attract even more!
I’m sure you have an encyclopaedic knowledge of which local businesses offer the best bang for your buck.
When you offer good service and good prices, people go out of their way to visit your business.
Don’t open a gas station without a vision of where you’ll fit in the market!
How To Open A Gas Station
Step 1: Register Your Business
After you have planned everything out, you can now open a gas station!
But first, determine how you want to register your business.
This is not only important for taxes, but also for your own liability and freedom to act in behalf of your business.
If you would like to go farther and open up more gas stations in the future, you may want to register as a corporation.
A corporation is built to be scalable.
Think like Bezos!
Like LLCs, corporation owners, investors, and directors are not personably liable for the company. Another bonus of a corporation is that none of those people listed would add the corporation to their personal taxes, like in a sole proprietorship.
If you would like the business to be under your name and connected to you, a good option would be a sole proprietorship.
Please note, this is not the best for this type of business structure.
It’s a good option for a person who has their own business, usually with their name on it.
The downsides to a sole propriety would be that all of the liability falls on the owner of the business, including all of the debts and losses that the business takes on. Basically, the person’s name is attached to the business.
Another option would be a partnership, but that can be tricky because, like a sole propriety, each of its members holds personal liability for the company.
An LLC is the better option if you plan on opening up one business with a limitation to the responsibilities born by the owner(s).
With an LLC, you can have one owner or multiple owners, and they are separated from being held personally liable in the case of a lawsuit or debts that come up through the business. Thus the name LLC or “limited liability company”.
You can manage and have the freedom to order your staff differently in an LLC.
If you decide to go for the LLC then you’ll want to:
- Register your company name with the state you will operate in
- Get an employer identification number (EIN)
- File the Certificate of Organization and Certificate of Formation
- Make an Operating Agreement
- Select a registered agent.
A registered agent could be a person within the business that receives legal documents and tax documents for the business.
We consider the benefits of an LLC in more detail here.
Step 2. Find Investors
After you have registered your business, you now need some investors.
Investors are key when beginning a business requiring high capital. Unfortunately gas stations are one such business. You will need money!
First thing’s first.
- Start off right by opening up a bank account for your business. This probably goes without saying, but be certain to keep your personal bank account and your business account separate!
- When you set up your business account, you may want to take out a loan for your business. It’s something to talk to an agent about about before opening your account.
To start out you’ll need a few hundred thousand dollars to cover the necessary costs for your new business. Those would include:
- Your store or plot
- The food and machinery for inside the station
- Setup costs
- Employee wages
- Registration, licenses, permit fees, etc.
When you calculate all that you will need for startup, don’t forget to also include your continual startup expenditures.
The staff will still need to be paid, the lights and gas will still need to be functioning, your bathrooms and stations will need to be kept up, as well as food and supplies that will need to be stocked.
Lastly, fuel prices can fluctuate drastically, so, be prepared to have a buffer just in case that need arises.
Step 3: Find A Gas Supplier Contract, Permits and Licenses
There are a few more things that you would need to do before getting established.
The gas supplier that you sign with will take a percentage of your sales.
Tanker trucks delivering on time is the lifeblood of your business, so make sure that you investigate who you want to use when you begin. You could even ask a friend in another part of town or another state who they’ve used in the past to get the best information on a supplier.
The farther away your supplier is, the more transportation costs will go up. Don’t forget to investigate location as you search for the perfect match for a gas supplier.
In addition to the supplier, there will be many permits and licenses to obtain with a new gas station, such as:
- Water discharge permits
- A license for motor fuel outlets
- Tank inspection
- Fire surveys
- A certificate of occupancy
- The codes and regulations (for your state) to sell food or alcohol, lottery tickets, and other restricted items.
Another thing to look out for is whether or not you need to register for a state ID in your state.
This is one advantage of starting your business as a franchise: you won’t need to worry as much about obtaining these things because the company will help you with that process or obtain them for you through their channels.
Step 4: Insure Your Business
Business owners are often susceptible to vandalism, defacement of property, and staff injury claims.
I highly recommend that you buy business insurance to protect your business.
Operating a gas station can expose you to several risks on a daily basis: burglary, employee injury, equipment breakdown, property damage, and more.
Insurance helps to keep you and your assets protected.
A good idea would be to consult a business attorney throughout the whole process and make sure that you understand the contracts you’re getting into. The licensure and permit process can be quite overwhelming for a first-timer.
Step 5: Market Your Business
Once you have completed the first four steps, all that’s left is to get your name out there. The more marketing you do, the better your gas station will do.
Business owners who are active on Yelp and contribute to the community have better relations with their customers. They can also get a pulse on how people see their business and things that they could improve on.
A few bad reviews on Yelp can really hurt a new business, but owners who pay attention and respond to those reviews can create a great appearance to the community and create confidence among potential buyers.
Make A Website… And Write A Blog!
In any competitive business, reaching the withering heights of the first google search page can make all the difference.
This allows you to answer common questions and provides more opportunity to rank highly. You could even write your own article on how to open a gas station!
Blogs can also generate passive income through advertisement space and affiliate marketing. I can show you how to start a blog here.
It only takes a few seconds to see what others have said about your business on Google Maps. Want a rest stop with a clean feel, good food, and smiling faces behind the register? You’ll probably look on Google first to see what their reviews are.
If the reviews are poor, people will not use your gas station.
Customer Loyalty Programs
Another way that businesses have seen success is by creating a program that keeps customers coming back to your store.
It takes a little effort to set up, but it could provide that niche service that you need and get customers into the store to buy products through the program. This will also create an opportunity for them to pick up one extra thing when they get inside, driving up revenue.
You weren’t expecting this one were you? However, in today’s age, people are glued to their screens more than ever before (we both are right now, after all).
Every business should be aiming to capture the audience’s attention, even a gas station. A single viral video has the power to keep being flooding to your business. It will also set you apart from other, more old fashioned businesses.
How To Buy A Gas Station
Buying a functioning, profitable gas station may be an easier (though more expensive) option.
Buying a pre-existing gas station is simply a case of enquiring with the owner or responding to adverts online.
Franchising is another (and likely better) option for your business.
When you open up, you will already have one of the big chain names on your station. Customers will already know and trust them – and consequently you!
A franchise will give you their know-how and you’ll already have your foot in the door with their well-established systems and organization.
Keep in mind that with a franchise, you will be paying royalties to the main company for the use of their name and services. They can charge some hefty fees! Read your contract carefully (twice!).
Is It Profitable To Own A Gas Station?
Gas stations have brought in anywhere from $450 billion in 2014 to $105 billion in 2017.
The margins can vary year to year, but it is becoming more difficult to turn a profit.
As of 2017, there were about 115,400+ gas stations in the U.S., but it appears that that number has gone down to 115,000 in the last few years. This is likely because of the new increase in electric cars and the difficulty of existing gas stations to meet the needs of their customers and still make a profit.
Customers are demanding more and more from a gas station. They prefer clean, open, inviting rest stops to buy foods whenever they’re hungry. It’s no longer acceptable to be just a gas station with a few snacks and maybe a (dirty) functioning bathroom.
This is causing existing gas stations to update or be passed over.
Should You Open A Gas Station?
Gas stations are finding it difficult to keep up with the push away from gasoline to more sustainable sources.
As cities become more and more electric, you’ll see fewer and fewer gas stations out there. There have also been advances in more fuel-efficient cars, which means the need for gasoline is declining. That’s great for the customer, but it’s something to consider when you want to open your gas station.
Do the people in your area drive new cars, older cars, electric cars?
Plus, speaking again of revenue, gas stations can find it challenging to keep up. Your station may find that you have to make 50K monthly to break even and cover the necessary business expenditures.
Gas stations get to keep about ¢2 profit for every gallon sold. That’s why it’s also important to try to get customers into the store to buy other items.
Hopefully I’ve offered some insight into how to open a gas station.
I’d be amiss if I didn’t end this article with a word of caution.
Few people will have the funds to open a gas station. Furthermore, if you do, there are likely more favourable ventures to embark on.
The world has moved online. And so should you.
I’d strongly advise considering an online business, with lower startup fees and more chance of growth.
These are a good place to start: