Today’s profitable gas stations aren't just a place to fuel up. Fluctuating gas prices and a hypercompetitive market means gas stations are also convenience stores where drivers pump gas, get their oil changed, grab a soda, a slice of pizza, a package of double AA batteries and a bag of chips for the road. Successful station owners can make anywhere from $40,000 to as much as $100,000 annually, but not without hard work and a lot of ancillary business.
Path to Profitability: Fuel, Food and More
The National Association of Convenience Stores reports that of the 150,000 gas stations in the U.S., 123,000 are also convenience stores. The gas station/convenience store combination sells more than 80 percent of all fuel sold in the country. As of July 2017, less than 1 percent, or just 314 stores, were still owned by one of the five major oil companies.
Shrinking profit margins and increasing competition means service stations can’t survive just by pumping gas. The old school, gas-and-go stations are a thing of the past. Because inside sales are so important to profitability, newer stations are being built on at least 2 to 2.5 acres of land and have more gas pumps, convenience stores and other auto services in order to turn a profit.
Lower Prices Equal Greater Profit
With its extreme volatility, fuel retailing is not for the faint of heart nor for those with limited access to capital. Since 1994, overall demand for fuel in the United States has increased, and the total number of fueling locations – all convenience stores selling fuel, as well as gas-only stations, grocery stores selling fuel, and marinas – has decreased from more than 200,000 to a little more than 150,000 sites. After credit card fees and other operating costs, net profit for gasoline sales averages 3 cents a gallon, according the NACS.
Contrary to what most consumers think, higher gas profits do not mean higher profits for individual station owners. When fuel prices shoot up, and drivers suspect price gouging, stations barely break even and may even lose money. When prices go down, drivers stop shopping for the best prices and fill up their tanks instead. They also have more money to spend at convenience stores.
Earning Potential Varies
How much money a gas station can actually earn is dependent on a number of factors. A well-run gas station in a prime area will typically do well and generate a profit. However, success depends on many factors that are out of an owner's control such as the price of fuel, nearby road construction or fluctuations in the labor market. When looking for a property to purchase, remember that not all gas stations are created equal. Try to find a property that is in a good location on a busy main street, a high-traffic intersection or close to a highway. Also consider finding a property where you can charge above-market prices for fuel, such as near airport car rental returns or in the busy business district of a downtown area.
- National Association of Convenience Stores: Who Sells America’s Fuel
- National Association of Convenience Stores: The Price of Fuel
- CBS News MoneyWatch: Why Gas Station Owners Love Low Oil Prices
- Convenience Store Decisions: What Is the Typical Profit Split Between Inside Sales and Gas
- The Nest: The Average Annual Income of Gas Station Owners
- Zacks: Are Gas Stations Good Investments
Frances is a business writer with over 15 years experience writing about media, technology, retail and related issues for a variety of national and international publications including The New York Times, The Week, USA Today, The Independent, and Lonely Planet News. Follow her on Twitter at @francesk