- Franchisees who pay royalties to name-brand gas refineries (ranging from 3% to 14%) in order to use their branding
- Independent operators that own and operate generic “no-name” gas stations and purchase gas on the open market.
Because selling gas isn’t very profitable, most large oil firms have backed out of the retail market.
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 ).
Let’s take a step back and look at a typical gasoline supply chain to see why.
The profit pipeline
Gasoline starts off as crude oil, which is mostly sourced in the United States, in places like Texas and North Dakota.
- Freight vehicles transport it to gas stations, where it is stored in underground barrels with a capacity of 20,000 gallons.
It’s delivered to gas stations in 20-kilo-gallon underground barrels via freight trucks.
- When wholesale gas prices rise, many station owners would rather maintain their pricing and lose money than lose customers to competition.
- Many petrol stations are wary about cutting their prices as wholesale costs fall, fearing a price war.
The real money is made inside the store
According to the National Association of Convenience Stores, 44 percent of gas station consumers enter the store. And one out of every three of them indulges in some sort of indulgence.
The merchandise sold inside these businesses Doritos, sunglasses, lottery tickets, and energy drinks contribute for only 30% of the average gas station’s revenue but generate 70% of the profit.
Card readers are now standard on most contemporary pumps, eliminating the need to walk inside to pay. The average time spent at a gas station by a consumer is now only 2-3 minutes.
Convenience stores also have some of the highest crime rates of any industry in the United States, with average yearly robbery losses of $761 per location.
The gas station of tomorrow
Gas stations in the United States sold 135 billion gallons of gasoline last year, enough to fill 204 thousand Olympic-size swimming pools.
In 1995, there were 195k of them in the United States; currently, there are only 115k.
- Long-term, electric vehicles (EVs) and self-driving automobiles represent a danger to petroleum sales.
- Urban real estate (NYC, DC, San Francisco, Boston) can be put to more profitable uses, such as condos or office projects.
Many stations have taken the pricey decision to install electric vehicle charging stations, which may cost up to $100,000 each.
Given that EVs presently make up of automobiles on the road, it’s a difficult cost to justify. However, the sector is rapidly growing: 4 out of 10 consumers say they’d consider buying an electric vehicle as their next vehicle, and stand-alone EV charging stations are springing up all over the country to serve them.
In the long run, EV-agnostic stations particularly smaller enterprises that can’t afford the upfront cost risk being left behind.
But, if everything else fails, gas stations have a hidden financial weapon in the form of those hypnotic rotating hot dog machines.
- What’s the deal with the 9/10ths of a penny? When gas was only $0.15 per gallon almost a century ago, the government imposed a fraction of a penny gas tax. It’s no longer relevant, but station owners keep it since it makes prices appear slightly lower.
- Explosions aren’t limited to the restroom. Each year, 4.2k flames erupt at gas stations around the country, resulting in $30 million in property damage. Cars are to blame for the majority of them. Hot dog machines are to blame for a handful of them.
- When it comes to restrooms, a beautiful toilet can boost a gas station’s sales. According to one survey, 22.6 percent of customers who use the restroom “regularly” make an impulse purchase on their way out.
- KFC got its origins in a gas station. Colonel (Harland) Sanders created his first fried chicken plate while operating a gas station in North Corbin, Kentucky, in the 1930s.
How much profit do petrol stations make in the United Kingdom?
There’s a reason why nearly all gas stations are also stores: profit margins on gasoline are roughly 2%, so they make the majority of their money on pricey sandwiches and drinks.
Independents, I believe, make much less since they lack the purchasing power and storage capacity of the big boys. I’m not sure how viable it is for some of the smaller businesses to buy ex Rotterdam when the wholesale price is low and sell to us when the price rises again; I’m not sure how sustainable that policy is.
For both petrol and diesel, fuel duty is now collected at a flat rate of 57.95p per litre, with VAT of 20% applied to both the product price and the levy. With petrol costing 1.20 a litre, the government receives approximately 82p from each litre.
Is it possible to become wealthy by owning a petrol station?
If you work in the West, you can expect to earn roughly $60,000 per year on average. The average annual salary for a gas station owner in the Midwest is $61,000, while the average annual salary for a gas station owner in the South is $66,000.
Is it worthwhile to own a gas station?
Because the demand for gasoline in the United States is continually expanding, purchasing a gas station is an excellent small business investment. Our economy is entirely fueled by gasoline. Goods must be transported by trucks, and individuals must drive to work.
There are about 120,000 petrol stations in our country. At more than 80% of these stations, there is a convenience store. Given the importance of gas stations, it’s clear that they’re a fantastic investment for a small business owner.
When purchasing a gas station, there are numerous legal concerns to be made. Consider the following five reasons before signing a gas station acquisition deal.
How much does a petrol station make per month in South Africa?
The convenience store raises the station’s cost, but according to Engen, it earns R309,000 in average monthly turnover in this example. An Engen at the high end of the scale will set you back around R7 million.
What is the cost of establishing a gas station?
In Kenya, the cost of opening a petrol station ranges from Ksh. 6,000,000 to Ksh. 15,000,000. Land, construction, equipment, stocking, licensing, and insurance are all included in the initial capital.
Make sure you have enough money to run your business once it’s up and running. You’ll need a steady supply of fuel, as well as the cost of transportation and paying your employees.
In Kenya, a small petrol station business can be created in a small space and with little capital. If you buy at least one gasoline pump and upgrade later, you’ll be fine. Consider serving motorists on a small scale.
So you’ll need to set up your little gas station in areas where there are a lot of motorcyclists.
The company, on the other hand, will expand from a small start to a stable one, resulting in bigger earnings in the future.
Which firm is the most profitable?
Accounting and bookkeeping According to a 2017 Sageworks analysis, bookkeeping, accounting, tax preparation, and payroll services have traditionally been among the most profitable companies for entrepreneurs, with a net profit margin of 18.4 percent.
Is running a gas station difficult?
Running a gas station is no easy chore, 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.
What does the future hold for the gas station industry?
Gas stations have been a part of our culture for at least a century. There are also photo albums of beautiful gas stations, some futuristic and some charming. We’re moving toward a world where electric vehicles are the norm. What does the future hold for these fossil-fuel era icons?
In the United States, there are presently over a hundred thousand gas stations. The vast majority are owned by single-station operators, making them the classic small business. They don’t make a lot of money off of selling gas. The profit margin over wholesale prices is around twenty cents per gallon, but it is only a fraction of that. The real money is kept in the petrol station’s convenience store. In other words, selling gas is mostly a means of luring customers into the store.
Even after electric vehicles (EVs) take over the new car market, it will take time to phase out gas-powered vehicles, which means the gas-selling sector will not go away immediately. It may take even longer to replace fuel in huge trucks, especially on long-haul routes. That is to say, the gas business will not go away immediately, but demand will undoubtedly decline substantially.
Current gas stations aren’t designed for charging cars until charging speeds improve dramatically. There isn’t enough room, and cars would have to park for an excessive amount of time to get charged. Many individuals will charge their phones while doing other things at home, at work, or in parking lots. Furthermore, because electric vehicles do not require the same level of repair and maintenance as conventional vehicles, the role of gas stations is expected to be diminished significantly.
All of this suggests that present gas stations will most likely become convenience stores in the future.
Older stations are frequently located on small properties that will need to be expanded in order to become viable. Stations, on the other hand, are frequently located on corner sites at important intersections, making them ideal retail locations.
However, repurposing gas stations for other use may create a new issue. Leaking subsurface tanks, as well as oil and other fluids, frequently contaminate the soil. State and federal hazardous waste laws may apply to those sites. The Environmental Protection Agency (EPA) offers a very useful webpage regarding the issues that these sites cause, as well as potential sources of funding for clean-up. There are several approaches to avoiding the brownfield problem without destroying soil. A pre-fab fulfillment center, for example, can be plopped into a site where people can pick up orders they’ve placed on Amazon or elsewhere. Many individuals may live closer to a gas station than a park, thus there are options to repurpose the spots for green space.
Even so, reuse will be a huge concern. Thousands of former gas stations, for example, are believed to have remained undeveloped due to clean-up expenditures in Canada. We might be able to learn from their efforts, as well as those in Norway, which is only a few years away from outlawing new fossil-fuel cars.
The gas station example can teach us a thing or two. One is the need to address the legacy of the fossil fuel era’s devastation, which includes not only contaminated soil near gas stations but also emissions from ancient wells, refineries, and storage facilities. We’ll probably continue dealing with such issues for years after gasoline engines have been phased out.
Another lesson is how deeply the energy revolution will affect our society, even down to the neighborhood level. A lot of the things we take for granted as part of the environment may change, leaving some incumbent station owners stuck while opening up new economic options for others. As a result of all of these changes, gas stations as we know them, like the livery stables of old, appear bound to disappear into the sunset.