Investing in a gas station can be a lucrative venture if approached with careful planning. With the right strategies, purchasing a gas station can provide a steady income and long-term growth opportunities. Whether you’re looking for gas stations for sale in urban areas or on back-country highways, understanding key factors can make all the difference. Here are eight essential tips to guide you.
1. Location, Location, Location
The location of a gas station plays a critical role in its profitability.
- Rural Locations: Take, for instance, a gas station on a remote highway in Georgia. Positioned strategically on a long stretch of road with minimal competition, such a business could see high profitability due to the lack of nearby alternatives. For many customers, convenience doesn’t always mean being in the middle of a busy city; it means having what they need when they need it, even in more isolated locations.
- Urban Areas: Gas stations in busy cities benefit from built in high traffic volumes and dense populations. These locations can be immensely profitable but certain risk factors like increased competition and higher operational costs play a factor.
Always analyze the area’s traffic flow, accessibility, competition, and potential for growth before committing.
2. Understand the Financials
Thoroughly review the station’s financial records, including:
- Monthly and Annual Revenue: Check sales from fuel, convenience stores, and additional services like car washes, air pumps and game machines. The store’s sales reports will likely give the best picture of how the store is truly performing.
- Expenses: Include inventory costs, rent or mortgage, utilities, employee wages, maintenance and all other recurring costs.
- Profit Margins: Remember, fuel sales often have lower margins, while convenience store items and additional services yield higher profits.
Ensure the financials align with your investment goal and consider any and all risk factors before closing.
3. Evaluate the Competition
Investigate nearby gas stations. A lack of competitors, like the remote highway example, can make a station more profitable. However, if there are multiple stations nearby, you’ll need a strategy to differentiate yourself, such as:
- Offering competitive fuel prices.
- Stocking unique convenience store items. For example, if there is a popular fishing destination nearby, consider selling bait and lures.
- Providing additional services like car washes, game machines, or even EV charging stations.
4. Assess the Infrastructure
Inspect the station’s physical infrastructure, including:
- Tanks and Pumps: Ensure they comply with safety regulations and are in good working condition.
- Building and Facilities: Check for repairs needed in the convenience store, restrooms, and parking areas.
- Technology: Modern gas stations use point-of-sale (POS) systems, inventory management software, and contactless payment systems.
Also consider hiring an inspector, especially if you are not keen on identifying potential issues. A well-maintained station reduces future repair costs which means more money in your pocket.
5. Understand the Legal Requirements
Gas stations are subject to various laws and regulations.
- Environmental Compliance: Ensure the underground storage tanks meet local and federal standards.
- Licenses and Permits: Confirm the station has all necessary operating permits.
- Zoning Laws: Verify the location complies with zoning regulations for commercial fuel businesses. This will more than likely be the case for existing stations, but will greatly affect the opportunity for a ground up development.
Seek legal advice to avoid potential liabilities and speak with a real estate representative or consultant to ensure the store is in compliance with local rules and regulations.
6. Analyze Fuel (“Jobber”) Contracts
Most gas stations have fuel supply agreements with major oil companies or independent suppliers. A store without a jobber contract is likely to have better fuel margins, but may lack the guarantee of having access to fuel at any given time.
- Contract Terms: Understand the pricing model and duration of the contract. Some contracts require a fixed amount of fuel sales over the life of the contract. Be sure to review all terms carefully, especially if you are a first time gas station owner.
- Flexibility: Some contracts may limit your ability to source fuel from other suppliers, affecting your profit margins. This is why some locations prefer to remain independent.
Negotiate terms that allow for flexibility and competitive pricing. There are pros and cons to securing a long term contract, so be sure to go with what best fits your goals for the store.
7. Diversify Revenue Streams
Relying solely on fuel sales alone is not advisable. Consider these additional income sources to become a one stop shop for your clientele:
- Convenience Store: Add high-profit items like snacks, drinks, and daily essentials. Diversifying and having more inventory, to a certain point, means more customers and profit.
- On Site Services: An automated car wash, air pump, or even renting out a space for a food truck can all boost income significantly.
- EV Charging Stations: As electric vehicles grow in popularity, installing EV chargers can attract new customers. EV drivers need convenience items as well, and a charging station could be a great way to get them to stop at your store.
Diversifying ensures stability, even during fluctuations in fuel prices and the overall economy.
Final Thoughts
Purchasing a gas station is a significant investment requiring thorough research and planning. From selecting the right location to diversifying revenue streams, every decision impacts the station’s success.
If you’re looking for gas stations for sale, River Brokers offers a wide range of listings to meet your needs. Explore opportunities with us and find the perfect gas station to invest in today.
