For $1 million in general liability coverage, the average gas station in America spends between $450 and $1,000 per year.
For a snapshot of average general liability insurance expenditure across a number of businesses, see the graph below:
If you purchase general liability insurance as part of a business owner’s policy (BOP) rather than as a standalone policy, you may be able to save money. A business owner’s policy (BOP) is a more complete insurance package that covers numerous types of coverage, such as business interruption and property insurance.
Is owning a gas station worth it?
Because the demand for fuel in America is steady and not going away, gas stations are a wonderful business to franchise. Our country is fueled by gas. People must commute to work, and trucks must transport commodities throughout the country. The gas station industry is worth $250 billion per year. In the United States, there are about 120,000 petrol stations. More than 80% of them are also connected to a convenience shop. This is a huge industry. It’s a terrific moment to get your hands on a piece.
There are a number of legal aspects to consider and discuss with your business lawyer if you are thinking about buying a gas station or are ready to sign a gas station acquisition or franchise agreement. Although buying a gas station is a unique business and investment opportunity in New York and New Jersey, there are a number of contract, legal, and commercial due diligence concerns to consider before signing a purchase deal.
As a potential buyer, you should think about and examine the following points:
How much does it cost to invest in a gas station?
What does it take to open a gas station? As previously stated, opening a gas station entails a significant financial investment. To cover the following initial expenditures, you should budget at least $300,000: Purchasing the property.
Is owning a gas station profitable?
Revenues at privately operated gas stations are scarcely increasing, with typical profit margins of less than 2%. According to financial filings from the previous year, privately operated gas stations have hardly increased sales and have average profit margins of 1.7 percent.
How much profit do gas stations make?
Gas stations make an average net margin of just 1.4 percent on their fuel, according to IBISWorld. This is significantly lower than the 7.7% average across all industries, and it places it below other typically low-margin firms such as grocery stores (2.5%) and car dealerships (2.5%). (3.2 percent ).
Do gas stations make money selling gas?
But, before you scream foul, keep in mind that, despite the year’s ups and downs, gas stations do not make much money selling fuel. According to the National Association of Convenience Stores, net profit for fuel sales averages 3 cents per gallon after credit card fees and other operational costs.
When gas prices rise and drivers believe they are being overcharged, gas stations are barely making ends meet, if not losing money. When wholesale prices skyrocket, as they did in 2008, 2011, and 2012, station owners can’t raise pump prices as quickly as their costs rise or risk losing customers to competition.
When the wholesale price falls, as it is currently, there is less pressure to reduce the price.
Drivers are so ecstatic to see cheaper costs that they don’t search the entire city for the best deal. Then, when it comes time to put gas in the tank, they fill it up rather than just putting a few bucks in.
And drivers have some money left over to spend on the drinks and snacks inside, which are the most profitable for station owners.
“As pricing decreases, I don’t see people shopping (for the best deal) as much as they do when pricing increases,” Beyer adds. “At the pump, they’re still feeling relieved.”
How much does a gas station franchise cost?
Applicants for gasoline station franchises must have a large amount of cash or liquid assets. The financial requirements for a 7-Eleven gas station convenience store franchise range from $20,000 to well over $1,000,000 for gasoline station brands like ARCO AM/PM. These funds are needed to cover anything from inventory opening to permits and franchise costs.
The funding requirements for gas station franchises vary depending on the sort of franchise you seek. Leasing an existing location can cost as little as $20,000 up front.
However, if you have to buy land and build a petrol station from the ground up, the initial costs might be in the millions of dollars. If you want to add a convenience shop or a car wash to your franchise, you’ll need to invest more money in inventory and/or materials.
In a service station convenience store business, franchise fees are also an essential upfront investment. Franchise payments cover the corporate brand’s assistance for gas station franchises, such as advertising and marketing, training, and other administrative activities. Franchise business owners receive a lot of help, but that help eats into your gas station convenience store’s revenues. These annual costs should be factored into your possible gas station company budget.
Will gas stations go out of business?
We tend to overlook about petrol stations in the electric vehicle narrative since it focuses on the technological and economic implications of EVs on emissions, grid burden, and noise pollution. Gas stations are already a forgotten break in our journeys to and from more intriguing areas, due to their regularity, utilitarian function, and unglamorous design.
We go to gas stations because it’s necessary, not because we enjoy it. Pumping gas is time-consuming and unpleasant, and keeping highly flammable fuel in the center of a community is a liability nightmare. When you consider the 63,000 violent crimes that occur at gas stations in the United States each year, as well as the (now relevant) fact that pump handles are the most germ-infested public surface, there’s little to endear us to these establishments. The growth of mobile fuel delivery companies demonstrates that we are willing to pay a premium to avoid having to fill up ourselves.
The number of gas stations has been declining for decades
In 1905, the first gas station opened in the United States, and by 1994, there were 202,800 across the country. By 2013, the number of stations had dropped by 25%, or about 50,000, and by 2020, the number had dropped to 115,200. According to a BCG analysis released in 2019, 80 percent of traditional gas stations could be out of business by 2035. Of course, new gas stations are still being created, but big-box gas retailers, which sell over 940,000 gallons each month, are squeezing out many smaller businesses.
Not only that, but even before electric vehicles became a factor, the impact of US fuel economy regulations enacted in 1978 has resulted in a 14 percent reduction in gas demand today compared to what it would have been if the standards had not been implemented. The rise of electric vehicles is simply the final nail in the coffin, as the BBC’s top environment correspondent Justin Rowlatt says, “Electric cars are going to drive the fuel station business into a death spiral over the next two decades.” Many other countries have established similar goals, with implementation deadlines ranging from 2025 to 2040. The United Kingdom has already committed to prohibiting the sale of new internal combustion engine (ICE) vehicles by 2030. At the same time, according to BCG, one-third of new automobiles will be electric or partially electric by 2030.
Selling electricity is not like selling gas
All of the aforementioned issues will lower demand for fossil fuels, further weakening gas station profitability. While some gas stations (especially highway rest stops) will be able to make becoming completely electric a viable business model, most will not.
Take, for example, the first full-electric gas station in the United States. The station in question has been in operation since 1958 and is located in Takoma Park, Maryland. The station’s owner opted to go all-electric in 2019. Without a $786,000 grant from the Maryland Energy Administration and the Electric Vehicle Institute, the move to electric would not have been possible. All except the largest and most strategically located gas stations will be unable to switch to electric based on market forces alone without state financing.
How these energy sources are delivered to clients demonstrates the significant disparity between gas and electricity sales. Because of the flammable nature of gasoline and diesel, as well as the increasingly severe safety protocols that must be followed while dispensing them, these fuels must be sold from designated, closely monitored facilities. Electricity, on the other hand, is pretty much everywhere, so we don’t need to replicate a centralized distribution system for EV charging.
Is it hard to run a gas station?
Running a petrol station is no easy endeavor, whether it’s your first foray into entrepreneurship or you’re a seasoned (but never-ending) pro. According to Entrepreneur, managing a gas station may be one of the most profitable businesses in the country if you have the necessary skills.