How Much Does It Cost to Buy a Gas Station? Understanding Investment Factors

The Size of Gas Station You Buy

Does size really matter regarding the cost of buying a gas station? Yes, it sure does. Let's see why the size of a gas station, whether small, medium, or large, plays such an important role in your purchase price and profit potential.

• Small Gas Stations: Small stations require less capital to buy or maintain, making them perfect for quieter areas. But remember, a smaller fuel volume and fewer amenities might mean less profit.
• Medium-Sized Gas Stations: Medium-sized gas stations balance affordability and income potential. With more pumps and a modest convenience store, you will likely attract more customers and, thus, higher profits.
• Large Gas Stations: Large gas stations, like big-box stores, demand a considerable upfront investment and higher operating costs. However, increased fuel volume, expansive stores, and amenities enhance profit potential.
• Location and Market Considerations: Choosing the right size isn't just about cost. It's about matching your station to the market. An oversized station in a quiet town might struggle, just like a tiny station on a busy interstate.
• Operating Expenses: The size of your station will affect how much you spend on things like gas station supplies, equipment, and staffing. The bigger your station, the more you'll likely shell out each month.

Required Licenses, Permits, and Insurance

If you're considering stepping into the gas station industry, get ready to dig through a mountain of paperwork. Let's look at licenses, permits, and insurance requirements and explore the importance of compliance.

Gas Station Marketing Costs

We've all seen those eye-catching gas station signs, haven't we? Marketing can make or break your gas station business. Let's explore how to charm customers and drive traffic to your pumps.

• Branding and Signage: Branding and signage give your station a unique identity—eye-catching signs, costing between $10K-$30K, guide drivers, make a statement, and create an impression.
• Online Presence: It's 2023. You can connect with the tech-savvy crowd with websites, social media, and online listings. Typically, annual costs for these can be a few hundred to thousands of dollars, but the broad reach is worth it.
• Promotions: Everyone loves a good deal. While promotions can vary in cost, they are a surefire crowd-pleaser. Budget accordingly, whether it's a discount or a freebie.
• Loyalty Programs: Reward your regulars with loyalty programs. They usually cost a few hundred dollars annually to manage but are a great way to build strong customer relationships.
• Local Advertising: Get the word out there about your station. These mediums can cost a few hundred to thousands of dollars, depending on their reach, from billboards and local papers to radio spots.

Equipment and Inventory Costs

Those shiny fuel pumps and stocked convenience store shelves come with a price tag. Let’s crunch some numbers and see what money you’ll need to shell out to buy and maintain equipment and inventory for your gas station.

Financing Options Available

Ever heard the saying, "You have to spend money to make money?" Well, securing that initial investment can be quite an adventure. So, let's look at the different paths you can take to finance your gas station dreams.

• Business Loans: Gas station loans are all about finding the right fit. Traditional bank loans are one way to go, but you'll need a strong credit history; interest and repayment terms hinge on creditworthiness and bank policy. Online lenders, on the other hand, have less strict qualifications and a simpler application process. Consider Backd if you are seeking a gas station loan from an online lender with competitive interest rates. 

• Small Business Administration (SBA) Loans: These government-backed loans offer competitive rates and terms. However, the application process is lengthy, and you'll need a well-prepared business plan and solid financial statements.

• Equipment Financing Companies: If you want to fund your purchase of gas station equipment, equipment financing is an option. The lender safeguards themselves by using the equipment as collateral, with rates and terms varying based on creditworthiness and equipment lifespan.

• Business Lines of Credit: This flexible option allows you to borrow only what you need. However, be mindful that high-interest rates can sneak up if you don't quickly pay off balances.

• Leasing: Consider leasing rather than buying your gas station property to save upfront costs. However, evaluate your financial situation and long-term goals before choosing this option, which can result in higher monthly payments.
• Seller Financing: Some sellers might offer to finance. Although it often requires a sizable down payment, it can streamline buying. Terms and rates will be at the discretion of the seller.

Operating Costs of Your Gas Station

The day-to-day life of a gas station owner isn't all about counting cash. Staffing, utilities, insurance – it's all part of the package. This table will help explain some of the ongoing costs you can expect.

Miscellaneous Gas Station Costs

Buying a gas station can be full of surprises. Along with the obvious costs like purchasing the property and equipment, some other miscellaneous expenses can creep up, which you should budget accordingly for.

• Legal and Accounting Fees: Purchasing a gas station requires professional assistance, including attorneys for legal documents and accountants for financial needs. Budgeting around $2,000 - $5,000 for initial consultations is a safe starting point.
• Marketing and Advertising Expenses: Allocating a substantial marketing budget for gas station promotion through traditional ads, digital marketing, or events is essential. Based on your chosen strategy, monthly costs can range from $500 to $2,000.
• Maintenance Costs: Gas stations require constant upkeep, from the pumps to the parking lot. Expect regular maintenance to cost you $500 - $1,000 per month.  
• Due Diligence Expenses: Before buying a gas station, due diligence involves thorough inspections, surveys, and environmental assessments. Depending on the station's complexity and size, these can cost $2,000 to $10,000+.
• Unexpected Costs: In any business venture, hidden or unforeseen expenses are always possible. Be prepared to set aside a contingency fund, typically 5-10% of the gas station cost, to cover any surprises.

How Much Does It Cost to Buy a Gas Station Franchise?

Investing in a gas station franchise can be a great way to benefit from an established brand's reputation, status, system, and support. However, franchise costs can differ significantly depending on the franchisor. Here is a quick overview of some top gas station franchises and what you can expect regarding the initial investment and requirements.

Shell

• Franchise Description: Shell is one of the largest oil companies in the world and a globally recognized brand.
• Primary Locations: Nationwide
• Unique Features/Benefits: Strong brand recognition, broad customer base, and extensive training programs.
• Estimated Initial Investment: $2.5M - $6.6M, $700K minimum liquidity, $30K annual franchise fee

RaceTrac

• Franchise Description: RaceTrac operates convenience stores and gasoline stations across the Southern United States.
• Primary Locations: Southern US
• Unique Features/Benefits: Innovative store design, diversified product offering, including frozen yogurt.
• Estimated Initial Investment:$1.0M-$1.4M, including a franchise fee of up to $25,000

Circle K

• Franchise Description: Circle K is an international chain of convenience stores owned by the Canadian multinational Alimentation Couche-Tard.
• Primary Locations: Nationwide
• Unique Features/Benefits: A strong global presence and franchise support.
• Estimated Initial Investment: Converting a convenience store to a Circle K costs $268.5K to $3M, while a newly constructed Circle K store costs $1.3M to $4.8M.

Street Corner

• Franchise Description: Street Corner focuses on filling the niche for shoppers who need a quick pick-up of convenience items.
• Primary Locations: Nationwide
• Unique Features/Benefits: Various store models fit for different locations.
• Estimated Initial Investment: $80K - $2M, liquid capital of $50K, and minimum net worth of $400K.

AMPM

• Franchise Description: AMPM is a convenience store chain with branches located in several U.S. states.
• Primary Locations: Nationwide, but primarily West Coast
• Unique Features/Benefits: Strong brand identity, proprietary food offerings, special financial incentives and loans for veterans.
• Estimated Initial Investment: $354K - $1M, $35K-$70K franchise fee.

Dash In

• Franchise Description: Dash In is a Maryland-based business with franchised food store locations in service stations and convenience stores.
• Primary Locations: Maryland, Mid-Atlantic U.S.
• Unique Features/Benefits: Fresh food options and a broad selection of convenience items.
• Estimated Initial Investment: $136K - $187.2K, $95K minimum liquidity, 5.5% royalty fee.

Sunoco A Plus

• Franchise Description: Sunoco APlus is a part of Energy Transfer Partners, L.P., one of the largest retail fuel marketers in the U.S.
• Primary Locations: Nationwide, but primarily on the East Coast
• Unique Features/Benefits: Strong foothold in the East Coast, competitive fuel agreements, well-established brand, and diverse service offerings for multiple revenue streams.
• Estimated Initial Investment: $250K - $600K, $30K franchise fee, $125k minimum liquidity.

Express Convenience

• Franchise Description: Express Convenience is a regional franchise offering gasoline and grocery items.
• Primary Locations: Wisconsin, US
• Unique Features/Benefits: Fast and friendly customer experience, franchisee training, and readily available financing.
• Estimated Initial Investment: $165K - $200K

On the Run

• Franchise Description: On the Run is a flagship convenience store brand developed by Alimentation Couche-Tard.
• Primary Locations: US
• Unique Features/Benefits: Turnkey program, full set of support services.
• Estimated Initial Investment: $636K - $1.6M, $25K initial franchise fee.

Extra Mile

• Franchise Description: Extra Mile is a chain of convenience stores owned by big oil giant Chevron primarily on the West Coast.
• Primary Locations: West Coast, US
• Unique Features/Benefits: Strong brand recognition and extensive industry experience.
• Estimated Initial Investment: $215K - $4.21M, $15K

Exploring Other Options: Top Alternatives to Purchasing a Gas Station

If you're an entrepreneur by nature, surely you've asked yourself, "How much does it cost to buy a gas station?" However, it's not for everyone; you may find that out the more homework you do. So if you are still trying to decide if it's the right move, below are some alternative paths to consider.

Becoming a Fuel Distributor

Becoming a fuel distributor is an excellent alternative to buying a gas station. Think of it as playing a game of connect-the-dots between fuel suppliers and gas stations without dealing with the day-to-day hassle of running a gas station.

• Broadening Horizons: By becoming a fuel distributor, you can expand your business by providing fuel to various gas stations and industrial clients. It presents an opportunity to widen your business reach.
• Network Building: This business model will require establishing solid relationships with suppliers and customers, enabling a vast business network.
• Profit Margins: You might benefit from higher profit margins by selling directly to businesses.
• Economies of Scale: Higher volume purchases can result in better pricing from fuel suppliers.
• Industry Insight: You'll gain a deeper understanding of the fuel industry, which can be invaluable if you decide to buy a gas station later.

Investing in Renewable Energy Stations

If buying a gas station isn’t for you, consider hopping on the green wagon. The future of energy is renewable, and choosing to refocus on this rather than a gas station could be your ticket to ride an exciting trend. From EV charging stations to biofuels, here’s what you should know.

• Future Forward: As the world moves towards sustainable alternatives, investing in an electric vehicle (EV) charging station or biofuel station could tap into a growing market.
• Government Incentives: You could receive government incentives for promoting green energy and lower your startup costs in the process.
• Environmental Impact: It's a great way to contribute positively to the environment.
• Forward-Thinking Consumers: Attract a forward-thinking customer base receptive to sustainability and technological advancements.
• Potential Partnerships: There could be opportunities to partner with EV manufacturers or renewable energy companies.

Opening a Convenience Store without Fuel Services

How about a simpler life? Consider running a convenience store that doesn't provide fuel services. This way, you can concentrate solely on the retail aspect of the business. It's an opportunity to adapt to the local community's preferences and demands and make your store stand out.

• Simplified Operations: With this option, you can focus on retail, avoiding fuel-related regulations and potential environmental issues.
• Community-Centered: Tailoring convenience stores to cater to the local community's needs offers a more personalized shopping experience.
• Product Variety: You'll be free to stock a wide range of products, including groceries, quick meals, and household items.
• Lower Risk: With no fuel sales, you're less vulnerable to oil price fluctuations.
• Location Flexibility: You're not limited to locations near highways or busy roads; convenience stores can be successful in a variety of settings.

Joining the Auto Repair Industry

Do you have a knack for fixing things? An auto repair shop could be your stage, where you use your skills to keep vehicles running smoothly. It's a business that runs on skill, demand, and enduring customer relationships.

• Leveraging Skills: If you're a skilled mechanic or passionate about cars, opening an auto repair shop could be a profitable alternative.
• Demand Driven: Cars need regular maintenance and repair, creating a steady demand for your services.
• Customer Relationships: Auto repair shops often build long-term customer relationships, ensuring repeat business.
• Lower Initial Investment: While this venture still requires equipment, space, and staff, the costs can often be lower than establishing a full-service gas station.
• Service Variety: From oil changes to engine repairs, your services are extensive, adding multiple revenue streams.

Leasing a Gas Station

Looking for a stepping stone into the gas station industry? Leasing might be your answer. It's a way of sampling the business without diving in headfirst with the commitment of buying. Consider it an on-the-job training opportunity with the freedom to move on if it's not for you.

• Less Financial Burden: Leasing a gas station may be a more financially feasible option for those looking to enter the industry instead of purchasing one outright.
• Short-term Commitment: Leasing allows you to dip your toes into the gas station industry without making a long-term commitment.
• Lower Maintenance Costs: Many leases include clauses where the owner is responsible for major maintenance, reducing your expenses.
• Flexibility: Moving on from a lease is easier if the business doesn't work out or you want to try a new location.
• Learning Opportunity: Leasing can provide real-world education about running a gas station before you buy your own.

Final Word

So there you have it. We’ve covered all aspects related to the nitty-gritty of stepping into the gas station game. Whether you're eyeing a piece of a gas station franchise, building your own gas station business from scratch, or taking an entirely different path, keep asking questions, never stop learning, and take a second to enjoy the ride. It’s an exciting time to be an entrepreneur, and this sector has much to offer.