How to Start a Gas Station Business

The United States gasoline station industry is worth about $109 billion. Although its revenue declined over the past years, it's still higher than that of many other markets. From buses and commercial vehicles to personal cars, most types of vehicles run on fuel. If you're planning to start a business in this industry, research the market, make a gas station construction cost estimate and seek financing from banks or investors.

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Depending on your business goals, you can either start a gas station from scratch or buy a franchise. Another option is to purchase an existing gas station and turn it into a franchise to keep the startup costs low and scale up faster.

Gas Station Industry Overview

This market is dominated by leading gas station chains like Speedway, Quicktrip and Circle K, but you can still build a profitable business. A growing number of Americans have returned to work over the last five years, which increased the demand for gasoline. Additionally, many consumers have switched to premium fuel. These factors have a positive impact on the gas industry.

The downside is that oil prices go up and down year-round, and as a business owner, you need to consider this aspect when making financial projections. Therefore, it's important to have a good understanding of the market and seek ways to expand your business. For example, you may open a gas station that offers several other products in addition to fuel. Consider setting up an eating area or selling grocery items, tobacco products and car accessories, and another option is to offer a variety of services at your gas station, such as correspondence delivery, car wash services, bill payment and more.

Consider your target audience as well. Gas stations typically earn most of their money from long-haul truck drivers, travelers and families. These consumers drive long distances and hence need a lot of fuel. They may also stop by gas stations to grab a quick snack or to buy refreshments for the trip. Take these aspects into account when drafting your business plan.

Gas Station Operating Expenses

The cost of starting and operating a gas station depends on its size and what goods and services it provides. A full-service facility that offers car repairs, grocery products and automotive accessories will involve higher expenses than a basic station with three to five pumps. Consider the cost of business registration and licensing, rent and utilities, employee salaries, automotive fuel and furniture. Expect to pay around $2.5 million to set up a medium-scale gas station.

If you're on a tight budget, you may launch a small gas station and expand it later. A small-scale facility that only sells fuel and car accessories shouldn’t cost more than $500,000. Staring a large-scale gas station, by comparison, can easily exceed $7 million. One way to cut costs is to purchase a gas station franchise, but you will pay royalty fees.

AMPM, for example, has been offering franchising opportunities since 1979, and the initial franchising fee is anywhere between $431,000 and $11 million depending on the facility's size and location. Circle K, on the other hand, requires franchisees to have a net worth of $500,000 or higher and $100,000 in liquid assets, and setting up costs at least $190,000.

Apply for Business Licenses

Once you have a gas station construction cost estimate, make a business plan that covers the legal, financial and operational aspects. Decide on a location and think about how many pumps you'll provide, how many employees you'll need and what other goods you will offer. Try to make your gas station a destination for travelers or business professionals who are in a rush.

Come up with a marketing plan for your startup business. For example, you can set up a loyalty program for returning customers, offer free snacks to large groups or build partnerships with fast-food chains, car repair shops and other establishments in your area.

Your business plan should also include the legal steps needed to start and operate a gas station. Register your business name with the state, decide on a legal structure and apply for a tax ID number. In general, gas stations are registered as limited liability companies, partnerships or even sole proprietorships. As your business grows, you may upgrade to an S- or C-corporation.

The gasoline industry is tightly regulated, so make sure you get the licenses and permits required in your state. Depending on your location, you may need a general business license, a motor fuel retail outlet license, a building license and permits from the local health and fire department. Most states also require an air pollution control permit. A gas station that provides food or car repair services will require additional licenses and permits.

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About the Author

Andra Picincu is a digital marketing consultant with over 10 years of experience. She works closely with small businesses and large organizations alike to help them grow and increase brand awareness. She holds a BA in Marketing and International Business and a BA in Psychology. Over the past decade, she has turned her passion for marketing and writing into a successful business with an international audience. Current and former clients include The HOTH, Bisnode Sverige, Nutracelle, CLICK - The Coffee Lover's Protein Drink, InstaCuppa, Marketgoo, GoHarvey, Internet Brands, and more. In her daily life, Ms. Picincu provides digital marketing consulting and copywriting services. Her goal is to help businesses understand and reach their target audience in new, creative ways.