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Buying a gas station

Pete799p

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I am curious if anybody here has any experience owning a gas station. Searching for businesses for sale is sort of a hobby of mine (I dont use facebook). It seems like there is always a few that look decent with reasonable financials and selling for a decent multiple.

Things I know that are important:

Who owns the land- many corps are in the gas station developement business. They build them out run them for a few years then lease them out. If you arent careful they will jack the rent on you in the not to distant future soaking up your profits.

Whats under your land- the quality and health of your tanks is very important as Enviro fines/ lawsuits are very expensive.

Location/area- whats your competition like as well as vacant land available with the potential for somebody else to open a station.

Future construction- check with you local city hall/ building department to see if the roads infront of your station will be undergoing construction in the near future. It can shut you down for up to a year or more.

Im sure I left something out but when it comes to me I will post it. Anyways any advice would be great as I have been tempted more then a few times to pick one up.
 
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easymoney99

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Is it fastlane tho?

I am curious if anybody here has any experience owning a gas station. Searching for businesses for sale is sort of a hobby of mine (I dont use facebook). It seems like there is always a few that look decent with reasonable financials and selling for a decent multiple.

Things I know that are important:

Who owns the land- many corps are in the gas station developement business. They build them out run them for a few years then lease them out. If you arent careful they will jack the rent on you in the not to distant future soaking up your profits.

Whats under your land- the quality and health of your tanks is very important as Enviro fines/ lawsuits are very expensive.

Location/area- whats your competition like as well as vacant land available with the potential for somebody else to open a station.

Future construction- check with you local city hall/ building department to see if the roads infront of your station will be undergoing construction in the near future. It can shut you down for up to a year or more.

Im sure I left something out but when it comes to me I will post it. Anyways any advice would be great as I have been tempted more then a few times to pick one up.
 

Pete799p

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I would say it sure could be although i am not too concerned about it being truly fastlane, the way I look at it a 6figure cashflow and paying off a sellable asset sounds good esspecially with a 50%-100% rate of return on my money ( percentages lower with real estate). Plus I have a few ideas on how to generate some additional revenue that could potentially be pretty lucrative. If I buy one station doing 6 figures pay it off in 3 years then buy another one, rinse and repeat I would be making some nice bank. Or I could buy the station with the land, pay it off then rent the station to somebody else. I could also buy a station big enough for a fastfood joint then start a potentially franchisable restaurant idea I have had rolling around in my head. Or I could pay the land off, demo the station, and put up a highrise or other commercial space assuming the area was nice enough to warrant such a thing.

I deffenitially dont have my heart set on it but it seems like it could be a decently profitable proposition with some nice exit opportunities.
 

houseofcards

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Thanks for opening this topic. Do you look for franchises, any particular gas stations like circle k, or just in general looking at the bottom line. This is something I am really interested in doing down the road just don't have the money now but I think if done right some decent money can be made. To do a circle K franchise you need 100 k liquid and half million net worth.
 
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Kak

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I bet the margins are pretty thin, it is an industry where almost the only differentiation is price.
 

CommonCents

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A friend just opened his first gas station. Selling gas is pretty much a razor thin margin, its all about getting the customer in the store and selling them higher profit items. Need killer gourmet coffee, bakery, sandwiches, produce, beverages etc....look at kwik trip and sheetz.
 

Pete799p

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The margins on gas are almost non existent especially after the credit cards take their cut so you are correct that it is all about getting people in the doors. Therefore it is all about location.

I am not looking to start a new one but buy an established one selling for a good margin with some upside potential. Due to the lack of available funding , banks still are tight about SBiz loans so they seem to be selling at reasonable multiples.
 
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PatrickP

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A friend just opened his first gas station. Selling gas is pretty much a razor thin margin, its all about getting the customer in the store and selling them higher profit items. Need killer gourmet coffee, bakery, sandwiches, produce, beverages etc....look at kwik trip and sheetz.

This is why I don't understand why the convenience stores all jumped on the pay at the pump band wagon.

Maybe there is room for a new chain that you can only pay in cash BUT they pass the 3% fee from the credit card on to the customer so they are always the lowest in town. Then they make more profits because a much larger percentage of their customers actually go inside and buy things.
 

Kak

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I bet that it was more of a market share thing. People prefered pay at the pump and passed up the cash gas station.
 

MNentre

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I think I read somewhere that if you use an Amex or other expensive card to process that the stations actually LOSE money after the fees. That shows how small the margins truly are.
 
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Kak

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Marine gas is very high margin by the way... Plus boats would be bigger transactions.

Regular gas at the Shell station down the street is 3.45/ gallon.

Regular gas at the boat ramp in galveston was about a buck more.
 

EastWind

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Gas stations really don't sell gas, the gas is the lure. they sell cigarettes, over priced sodas, snacks, chewing gums, etc.
 

bophisto

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Gas stations really don't sell gas, the gas is the lure. they sell cigarettes, over priced sodas, snacks, chewing gums, etc.

I have been thinking of doing something similar recently. The net returns seem pretty high on some gas stations. I have also heard not much profit is made on the gas. The profit is in the inside store sales.

What area/city are you looking in?
 
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Pete799p

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Marine gas is very high margin by the way... Plus boats would be bigger transactions.

Regular gas at the Shell station down the street is 3.45/ gallon.

Regular gas at the boat ramp in galveston was about a buck more.

Is this first hand knowledge or just based on the prices you pay? I only ask as I dont know very much about that side of the business but based on the enviro reg costs of a regular station the costs of compliance with a marine station situated on a water way might eat up the extra margin. Intesting thought if the overhead makes sense.
 

Kak

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Is this first hand knowledge or just based on the prices you pay? I only ask as I dont know very much about that side of the business but based on the enviro reg costs of a regular station the costs of compliance with a marine station situated on a water way might eat up the extra margin. Intesting thought if the overhead makes sense.

Yes that could be A reason. However, supply and demand always have a say. When you have less competitiors or more spread out you can demand a higher price for your gas. Boats need gas to go and bigger boats cant get gas on land, but get really big and boats hedge gas in cheaper areas. It makes perfect sense from a business standpoint.
 

CommonCents

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road_runner

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Just throwing my 2 cents in here: Have you thought what would happen if there is a technology bum and the alternative fuel cuts the usage of gas by 25-30 %?
If you think you can get in and out for 3 years with decent profit then it is ok, but otherwise i think it is risky long term
 

road_runner

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i have to disagree here. In 5 years the hybrid or electric or whatever fueled cars would increase significantly as the technology would deliver cheaper batteries fuel cell etc. So then they will not be expensive and if they go to 25 % of the total cars this would be a disaster for the gas stations , as the same number of gas stations would have to compete for 25 % less customers
 
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Fisherman

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i have to disagree here. In 5 years the hybrid or electric or whatever fueled cars would increase significantly as the technology would deliver cheaper batteries fuel cell etc. So then they will not be expensive and if they go to 25 % of the total cars this would be a disaster for the gas stations , as the same number of gas stations would have to compete for 25 % less customers

I have been hearing that for years. Electric car has been around for 40 years. I heard the same thing in 2008 when gas was at 50 bucks a barrel...

Nothing is going to take over the gas engine unless there is some amazing breakthrough. Look at mazda they have abandoned all that crap and focused on making the best gas engine possible. Bottom line populations are going up... and the more efficient your car is the less you will conserve... hence you will drive more and plan less. The safer you make a bend in the road the faster people will go around that bend... its human nature...
 

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I have a friend that owns a gas station. He lives in a nice house, 500k+ and has a family that it supports. He is not rich and running one is a full time job, there are alot of moving parts.
 

futhey

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I think CommonCents hit the nail on the head- Gas may not have any margins but everything else does, and the margins are greaaaaatt...

And I would argue this IS fastlane. Think about it, if Real Estate is Fastlane 1.0, then I think there's potential in operating a gas station empire, if it's executed well. Buy one that's in the green, if you're able, and make yourself an expert on the business model. Then you'll be in the position to buy "troubled" or underpriced stations at great prices, and turn them around.
 
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bophisto

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Yeah I am sure there are many gas station owners that one more than one..Just like you hear about people owning more than one , like people own more francises and they have people managing them. You manage the managers...of course easier said than done.
 

Pete799p

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i have to disagree here. In 5 years the hybrid or electric or whatever fueled cars would increase significantly as the technology would deliver cheaper batteries fuel cell etc. So then they will not be expensive and if they go to 25 % of the total cars this would be a disaster for the gas stations , as the same number of gas stations would have to compete for 25 % less customers

I think you are missing what the real profit maker is in the business and its not the gas. Selling gas is just something to help drive traffic to your store think of it like PPC ads for a website. You make very little money off it but it gets people in the door. Plus even if peoples cars get 25% better gas milage they will still need a place to grab some smokes or a 6 pack on the way home.
 

XavierYZ

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In Ontario Canada, where I live 90% of gas station convenient stores are all run by big oil co. No mom and pop shops or anything In between left. Unless your very rural, in that case they are operating out of a house and usually run down
 
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psaco131

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I've been managing a Marathon Gas Station the past 3 years. Like everybody has stated, gas is all pennies & the real profit comes from the c-store. They won't make you rich and its like working a full time job. If you do look into one try finding one near a highway. People need gas as soon as they hop off and before they hop on. Fill-up every inch of the store with inventory. You can add extra things like a cooler with sub's, fountain pop and doughnuts. Really listen to the customer's, when more than one asks for the same thing, add it to your inventory. Customer Service is key to bringing them back to your store. People will always bitch: "Overpriced" "High-way robbery" "Whats wrong with your pump?" "Why doesn't my credit card work outside?". Just be professional and do your best to help.
 

Z5 FILMS

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i have to disagree here. In 5 years the hybrid or electric or whatever fueled cars would increase significantly as the technology would deliver cheaper batteries fuel cell etc. So then they will not be expensive and if they go to 25 % of the total cars this would be a disaster for the gas stations , as the same number of gas stations would have to compete for 25 % less customers



The demand for gas is going nowhere. Especially NOT in 5 years. Maybe in 50 or 75 years. Battery technology is still not that great. They are heavy, toxic and expensive. There's just no reliable cheap replacement for fossil fuels yet.
 
G

GuestUser152

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My uncle owns the number one gas station in South Carolina. Not an opinion he actually sales the most lottery tickets in SC. A very important source of a revenue that I did not see mentioned previously in this thread. It truly is all about location, he built the store in the middle of nowhere, they branched a major road out his way. Built several department stores, a mall, a highschool etc. and 20 years later it is what it is. He is in a hotspot. I also would like to beg to differ that gas stations cannot be fastlane. In the beginning it was his life I will admit, but he found a woman that has managed it for him since the beginning and she runs it for him now. This is a testament to the importance of a great, trustworthy employee. She is worth her weight in gold and he knows it. He has sent her family on vacations etc. throughout the years to keep her happy. His time is his and he as invested the money into other ventures, some franchises, a car wash etc. In closing, with a great location, great employees, and great customer service a gas station really can be a fastlane business.

PS: It's kind of a local legend for its hot dogs as well, so the importance of selling more than gas is once again constituted
 
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JAJT

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There is a local gas station near my house owned by a large grocery store (Loblaws). They always have the cheapest gas AND give you a coupon based on the liters you filled up. I fill up my tank and get a coupon for about a buck to use in-store.

Is a buck much? No. But considering the gas is always cheapest and the store is conveniently located I ALWAYS go there for both gas and groceries. Always. I'll usually forget about the coupons for a few weeks and end up with $5 off or whatever on my next grocery order.

Pretty sweet synergy if you ask me.
 

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