Gas stations have traditionally been a popular small business investment opportunity.
Entrepreneurs with a passion for profits and a desire to succeed acquire gas stations because they offered a basic necessity as well as the possibility of additional income through ancillary services like a repair facility or a small store.
Over the years, gas stations have become sophisticated business ventures. These days, gas stations don't just sell gas – they sell a variety of products that cater to the needs of travelers, tourists and business clientele. Increased environmental oversight, volatile energy markets and a glut of competition have made the job of gas station ownership more difficult than ever before.
But the good news is that buying a gas station can still be an effective first step on your path to small business success. You just need to know what to look for. With that in mind, here's what we think you need to know if buying a gas station is on your radar.
- Scope of sale. From the outset, you will need to carefully identify what is included in the sale. Is the real estate owned or leased? Is it a franchise or an independent station? Are store inventory and fuel reserves part of the sales price? These questions and many more will make a big difference in determining the value of the acquisition.
- Independent vs. franchise. More and more gas stations are electing to operate as franchises rather than as independent businesses. Franchised gas stations operate under the brand of a major oil company and are obligated to use that company's gas supply. The benefit is that you'll receive advertising, promotions and risk mitigation features that aren't available to independent gas station owners.
- Environmental issues. It's important to conduct a thorough due diligence process when buying a gas station. Environmental impact concerns are a threat that can't be taken lightly. In a franchised gas station, the oil company is usually responsible for environmental issues. If you are purchasing an independent gas station, you'll need to perform your own environmental assessment before you commit to a purchase.
- Traffic. Location is a critical factor in a gas station acquisition. A station that is located off the beaten path can't attract the amount of traffic you'll need to meet your revenue targets. But even if the gas station is located on a major traffic route, you'll want to research planned highway changes to make sure current traffic levels will be sustained for the foreseeable future.
- Convenience store. Many gas stations have adopted convenience store business models and offer a range of products for their customers. It's not uncommon for today's gas stations to include micro-sized restaurants, prepared foods and more. You'll pay more for gas stations that include these amenities, but you'll also benefit from additional profit centers.