A gas station is a great investment for savvy entrepreneurs and now is a great time to get involved. Earning a whopping $ 6,526.76 million in 2021, the gas station industry is scheduled to grow at a compound annual growth rate of 5.67% from 2021 to 2027.
From acquiring funding and an ideal plot location to managing inventory and staffing challenges, embarked entrepreneurs must educate themselves on critical steps. This guide will provide steps on how to start a gas station. We’ll cover competitive analysis, startup costs, equipment sourcing options, office selection, registering an EIN, business insurance, and marketing.
1. Conduct Gas Station Market Research
Market research is essential to opening a gas station. It offers important insight into your target market, local market saturation, and even trends in services and products within the industry. Research can be primary or secondary.
Some details you’ll learn through market research for most gas stations include:
- Growing suburbs and high-traffic urban corridors near intersections and highways allow stations access to more potential customers.
- Evaluate fuel consumption trends in your state using resources like the EIA. While national gas usage fluctuates with oil prices and eco-trends, regional consumption varies.
- In auto-centric areas like the South, gas demand is high.
- In urban zones, stations often cluster around prime intersections.
- Stations balance thin profit margins on gas sales with higher markups on convenience store items.
- Experts recommend keeping gas prices low to drive traffic, making up margins on ancillary sales.
Ongoing market monitoring lets owners spot trends like shifting fuel types and react quickly. While research provides key insights before building out stations, staying abreast of regional developments helps maximize profits long-term.
2. Analyze the Competition
Carefully scrutinizing your competition is key to strategic station planning and gaining market share. Start by mapping all stations within a several-mile radius of prospective plots, from the nearest gas station to the farthest. Log key data like fuel brands, gas and convenience pricing, amenities, staffing, and customer demographics for each.
Some ways to get to know local competitors as you open a gas station include:
Observe traffic flows. Count cars at area fill-up stations during rush periods to estimate customer capture power. Are niche stations like truck stops drawing specialized customers? How long are wait times at regular versus premium pumps? This quantifies real-world performance data.
Research stations’ online presence, including websites, social pages, and review platforms. Evaluate SEO strength by running competitor URLs through tools like Google PageSpeed Insights and Moz. Referral traffic and search visibility contribute mightily to sales.
As 40% of fuel shoppers use apps to find the best gas prices, download competitor apps. Score navigation, specials, payment options, and loyalty programs against customer reviews to see where rivals excel or lag.
For corporately owned stations like Shell and Exxon, little financial or operational data is public. However, you can access revenue information on independent stations by searching state corporation databases or using market research firm reports. This helps accurately estimate area sales volumes.
Like real estate purchases, avoid underestimating the impact from less quantifiable factors like seasonality, area safety, neighboring development plans, and local ordinances. For example, stations near highways may sell 30%+ more during summer travel months while urban shops weather that fluctuation better thanks to commuter sales.
Ongoing competition checks even post-launch keep owners attuned to shifts in area gas prices, new station openings, customer migration, and external trends that influence profitability. Budgeting for professional location analysis and continuing education protects against missing key signals.
3. Costs to Start a Gas Station Business
Starting your own gas station franchise takes some upfront and ongoing investment. Maybe gas station owners develop a budget as part of their early business plan to account for partnerships with a fuel supplier, obtaining gas pumps and air stations, and more.
Here’s a breakdown of costs for a successful gas station startup:
Start-up Costs
The first major expense is property purchase or leasing a suitable lot. Per commercial real estate analysis, average prices range vastly between regions, from $650K in Ohio towns to multimillion plots in New York and California metros. Ideal lots run 1-2 acres.
Next, factor in demolition costs if the site isn’t undeveloped and environmental testing like lead and underground tank removal averaging $ 20K to $100K. Then budget for permits, impact fees, and bringing utilities on site. These expenses can stack up quickly.
Station construction costs run from $1.5 million to $2.5 million including underground tank installation, pavement, lighting, landscaping, convenience store, and canopy. Owners may also opt to build out service bays or car washes costing $200K+ more.
FF&E like pumps, point-of-sale and security systems, signage, coolers, shelving, and merchandise add $150K+. Gas pumps configured with standard fuels cost around $30K each with proprietary ethanol blends and diesel additions adding more per pump. Most stations require a minimum of 6-10 pumps.
Inventory is another substantial budget item, with $100K+ in gas and $50K+ in convenience items needed for opening day to keep shelves full and customers flowing. Don’t skimp here during the crucial launch period.
Staffing stands as a considerable monthly expense averaging $80K+ for even small stations. Figure one manager at $45K+ and 10 attendants/cashiers at $10-$15 per hour plus payroll tax and benefits costs.
Finally, budget hefty licensing fees from $10K to $100K depending on location, brand partnerships (if applicable), number of pumps, convenience footprint, and more locked-in during application processes that can take 6-18+ months.
Ongoing Costs
Plan for $3K+ in monthly utility costs including electricity, gas, water/sewer, trash pickup, and telecom/data services. Payroll also runs $80K+ monthly as detailed above.
Gas and convenience goods inventories require weekly replenishment totaling around $60K monthly for modest stations, reduced somewhat via fuel distributor and snack supplier discounts. Credit card processing fees take a 1-3% bite of sales too.
Facility maintenance, landscaping, and regular construction upgrades cost $1K+ monthly or more depending on station size and service bays offered. Owners should budget $10K+ in annual maintenance capital for projects like pump refurbishing and big-ticket repairs.
Insurance premiums tally $6K+ per year covering essentials like business liability, workers comp, and product liability. Costs run higher for larger operations and areas with elevated accident rates.
While launching a station entails major financial risk and regulation, established shops bank solid returns. Careful planning and forecasting keep entrepreneurs on a steady footing.
4. Form a Legal Business Entity
Selecting the right legal structure is key when starting a gas station, balancing owner liability protection and tax implications with operating ease and growth capabilities. We’ll compare entity options—sole proprietorship, partnership, LLC, and corporation—to fit your situation.
Sole Proprietorship
Simple and inexpensive, sole proprietorships only require registering a DBA with the county clerk. Owners report profits or losses on personal returns, avoiding corporate taxes. However, proprietors carry unlimited liability for business debts and judgments. For hazardous enterprises like gas stations with flammable materials, elevated crime risks, and environmental liabilities, exposed personal assets make proprietorships dangerous long-term.
General Partnership
General partnerships allow multiple owners to combine assets and share profits and liabilities. However, liability risk remains high as each partner can be held accountable for the actions of others, like damages from a partner’s poor safety decisions. Unless detailed partnership agreements are drafted, disagreements can dissolve partnerships rapidly.
Limited Liability Company (LLC)
Given the substantial financial risks inherent with gas stations, LLCs offer the best fit, blending pass-through taxation with liability protections. LLC owners aren’t personally responsible for company liabilities and debts. Plus, LLCs carry lower compliance burdens than corporations. Startup costs run just $100-$800 depending on the state.
Corporation
C-corps and S-corps offer the greatest liability shields but bear the highest formation costs and greatest paperwork burdens. Owners aren’t personally liable but face double taxation of profits and shareholder dividends. Formal processes to record meeting minutes, voting procedures, stock issuance, and manager documentation also hamper flexibility.
5. Register Your Business For Taxes
Before accepting any payments, gas station owners must register for essential tax IDs to legally operate, charge sales tax, hire employees, and declare income. The main identifiers are an Employer Identification Number (EIN) and a state sales tax permit.
An EIN acts like an SSN for businesses, uniquely identifying your company to the IRS for tax and banking purposes. As gas stations take frequent cash payments and must report precise fuel, convenience goods, and repair service sales totals across quarterly filings, an EIN is mandatory.
Thankfully obtaining an EIN takes just minutes online. Simply navigate to the IRS EIN Assistant and answer a few questions about your LLC entity, owners, and business activities. On successful submission, your EIN is immediately provided to use on tax documents.
Alongside your federal EIN, gas stations must also complete state-level sales tax registration before opening doors. Requirements vary slightly between states but largely entail submitting details on your ownership structure, location, and inventory to receive a seller’s permit.
For example, the Texas Comptroller’s Office issues sales tax IDs, walking businesses through site addresses, projected revenues, outlet types (like pumps and convenience stores), payment info, and legal attestations to authorize collecting and remitting state and local sales taxes.
Most states levy fuel taxes calculated per gallon sold. These excise taxes are included in pump prices and remitted monthly. State agencies guide proper calculation, reporting, and payment.
Lastly, don’t forget city and county licenses, fees, and zoning permits. In total, expect to spend a few thousand fulfilling all registration requirements before opening. While burdensome, proper licensing ensures full legal compliance from day one.
6. Setup Your Accounting
Robust accounting is non-negotiable when launching a gas station, given substantial transactions from fuel pumps and convenience store purchases. Without tracking sales volumes, vendor costs, taxes, payroll, and overhead expenses precisely, profitability and tax compliance suffer quickly.
Accounting Software
Thankfully software like QuickBooks radically simplifies small business accounting. When integrated with business bank accounts and credit cards, transactions for every penny of income, inventory orders, employee expenses, facility maintenance, and more automatically sync. Reports break out sales, COGS, profit margins, accounts payable/receivable, and tax liabilities.
Hire an Accountant
Consider retaining an enrolled agent or accountant specializing in retail fuel station taxes too. With frequently changing environmental regs, fuel blending laws, and transportation department rules, expert guidance prevents misfiling quarterly taxes while saving tax time. Expect to invest around $3,000 annually for personalized bookkeeping assistance plus tax preparation.
Open a Business Bank Account
Keep business finances 100% separate from personal banking and cards. Deposit all revenues into and pay vendors from business accounts exclusively. Never commingle funds or use business revenues for personal debts. This burdensome untangling often trips up sole proprietors.
Apply for a Business Credit Card
Apply for credit cards in your LLC’s name using your EIN. Business cards consider company revenues, assets, and credit history, not your finances when assigning credit limits. Making large inventory orders via dedicated gas station cards builds helpful credit.
7. Obtain Licenses and Permits
Successfully launching a gas station hinges on securing the proper permits and licenses beforehand. Find federal license information through the U.S. Small Business Administration. The SBA also offers a local search tool for state and city requirements.
The core permit for fuel stations comes from state departments of agriculture, consumer affairs, or weights/measures bureaus regulating metering pump calibration and fuel blend composition. For example, the California Division of Measurement Standards affirms all devices used for commercial measurement like dispensers and scales deliver fair accuracy. Applications require listing all controlled equipment on site.
Environmental Protection Agency permits relate to air quality, underground storage tank registration, and spill management across stations. Even small-volume gas spills require immediate agency reporting and remediation coordination under the Clean Water Act. Staff must train on proper spill protocol.
Stations selling propane also need licenses for safely handling the compressed gas from the Department of Consumer Affairs. Technical staff undergo specialized training. The same department permits lottery sales and alcohol when sold on premises for responsible retailing laws compliance.
Additionally, convenience stores onsite require health and sanitation permits around safe food storage, prep, and sales if selling anything beyond pre-packaged goods. Local fire marshals review emergency equipment like extinguishers and conduct site visits ensuring adequate egress routes and suppression systems are in place before opening.
Many counties and towns layer on supplemental licensing around stormwater management, zone permitting, building code compliance, signage allowances, noise ordinances, and accessibility accommodation mandates too. Be prepared for abundant initial and ongoing fees.
Finally, though state-specific, don’t forget labor law postings, workers’ compensation insurance, minimum wage, and overtime policy documentation must stand ready for staff inspector audits. IRS tax authentication and alcohol/tobacco wholesaler agreements round out readiness preparations.
8. Get Business Insurance
Given extensive flammable inventory, 24/7 access by customers, cash transactions, and environmental liability risks, securing adequate insurance is imperative before opening gas station doors. While adding another major expense layer, coverage protects owners against financial ruin when accidents, natural disasters, or crimes inevitably strike.
For example, a late-night burglary could see thieves abscond with thousands in cash and merchandise. Or a major storm might collapse canopies onto pumps and vehicles, injuring patrons now demanding compensation for medical bills and car repairs. Even minor vendor delivery mishaps can cascade without proper liability limits.
Standard coverage packages include:
- Property insurance covers damage to structures, equipment, and inventory from theft, vandalism, wind, fire, and burst pipes.
- General liability insuring against personal and property damage claims from customers if injuries occur on premises even if equipment functions normally. If canopy lights fell, for instance, owners would be liable.
- Workers comp mandated for employees, paying a portion of wages and medical bills for work-related injuries helping limit lawsuits.
- Environmental liability protects against accidents like gas spills plus gradual leakage from aging underground tanks. Cleanup runs $100K+ easily.
- Employment practices liability shields against wrongful termination, harassment, and discrimination claims.
Polices run $7,000+ annually for a single location with costs scaling based on claim history, area risks, and revenue size. Expect high deductibles around $10,000.
9. Create an Office Space
While gas stations focus operations on the retail fueling forecourt and attached convenience stores, securing discrete back office space helps owners conduct uninterrupted managerial work offsite. Potential options range from home offices to coworking spaces to small standalone commercial offices.
On-Site Gas Station Office
If the site allows for it, the best option for most gas station owners is an on-site office. These are often referred to as retail offices. An on-site office adds no additional long-term contract, lease, or financial obligations. On the downside, there’s no separation between the retail side and administrative side of operating the station, but on the upside, you’re always close enough to keep an eye on things.
Coworking Office
Coworking spaces like WeWork offer convenient offices away from the gas station. This is a great option for small teams seeking a space without long-term commitments or major upfront investments. Open desk rentals start at around $300 monthly. Private offices with doors for confidential calls hit $600+ per month. Coworking locations feature business-grade wifi, free printing, conference rooms, kitchens, and front desk staff to welcome guests. The communal setting also enables networking opportunities with other entrepreneurs.
Commercial Office
For an established gas station owner, or a gas station owner with multiple locations, a commercial office may be suitable. Commercial offices charge by square foot. These offices are wonderful for establishing authority in the field. They scream professionalism and put you in a place amongst other distinguished business professionals to network.
10. Source Your Equipment
Launching a station requires extensive specialized equipment from underground tanks and spill containment gear to pumps, POS systems, and food prep appliances. While buying certain items new is advised for safety, other wares can be sourced secondhand for savings. Weigh options for purchasing, leasing, and renting key components.
New Equipment
As the literal lifeline of operations, investing in new piping, leak monitors, fire suppression and tanks gives owners needed reliability and warranty protections on these sensitive underneath components unseen after installation. Top equipment makers like Gilbarco and Franklin Fueling Systems sell directly or through certified resellers.
Used Equipment
Significant cost savings come from sourcing functional pumps, point-of-sale systems, security cameras, or even small convenience store shelving secondhand from station outfitters. Facebook Marketplace, Craigslist, and eBay frequently list quality equipment, especially from sites changing branding or closing. Carefully test electronics onsite before purchasing.
Rentals
Temporary fuel needs for festivals, sports events, or television shoots commonly rent mobile refueling trucks, tanks, and spill supplies that station builders could also leverage during construction phases before permanent equipment gets installed and inspected. 30-day rates for 5000-gallon tanks and 10 pump complexes run $9,000.
Leasing
Combined purchasing and financing agreements through equipment distributors allow breaking out payments over 5+ years. This prevents huge one-time capital costs. However, maintenance and insurance stipulations bind owners to vendor servicing agreements and expensive penalty fees apply for early termination. Reserve leasing only for essential equipment like tanks that last decades.
11. Establish Your Brand Assets
Beyond just selling fuel, savvy gas station owners build distinctive brands that connect emotionally with drivers through consistent visual identity and messaging. An owned brand beats blending into commodity competition.
Getting a Business Phone Number
Choose a professional phone system like RingCentral for fuel station calls instead of relying solely on cell phones. Cloud-based services provide toll-free numbers, voicemail transcriptions, and routing to any employee device for $30+ monthly. This prevents missing customer calls and builds credibility.
Creating a Logo and Brand Assets
A striking, memorable logo acts as the nucleus of station brand identity on signage, pumps, ads, and uniforms to stick in consumer minds. Build off your name to design an icon encapsulating the essence of your vision.
Online logo makers like Looka offer fast DIY tools including curated fonts, icons, and color palettes to represent your outlet starting at $20 per design. This allows mocking up professional brand guidelines documents as well as defining supporting graphical elements like patterns and illustrations for under $100 total.
Printing Business Cards and Signage
Business cards establish credentials with site reps, vendors, and contractors. Cards list essential contact and location details. At pumps and registers, large exterior signage in your distinct graphical style trains customers to recognize your developing fuel brand from a distance at first glance. Print 500 cards and a 4’x6’ lightbox sign from Vistaprint for under $200.
Purchasing a Domain Name
Every brand needs a matching .com domain as its home on the web linked to your email accounts and website. Brainstorm names containing your station name or street address for uniqueness. Domain sellers like Namecheap make registering and managing domains simple from just $15 annually per .com domain.
Building a Website
Though supplementary to real-world shops, informational websites boost SEO and reinforce brand legitimacy online. Use DIY website builders like Wix for free user-friendly templates, drag-and-drop editing tools, and integrated booking functionality. Or hire a freelancer from Fiverr starting around $150 to custom craft a site matching your vision.
12. Join Associations and Groups
Beyond daily operations, connecting with other station owners, industry groups and fuel associations helps entrepreneurs stay atop trends, forge partnerships, and get guidance from veterans navigating common pitfalls.
Local Associations
State petroleum marketers associations like the Florida Petroleum Marketers Association offer regional policy advocacy, networking events, compliance updates, and group insurance rates for members. Joining provides a support network plus showcases and technical training.
Regional convenience store owner associations such as the Florida Independent Gasoline Marketers Association also give retail fueling outlets community through meetings, socials, and an annual convention of thousands to showcase innovations.
Local Meetups
Attend regular public tradeshows to connect with suppliers and distributors unveiling emerging inventory lines, POS integrations, loyalty programs, and merchandising advancements each year.
Finder sites like Meetup also list informal regional peer meetups to swap ownership stories and area vendor recommendations in casual settings.
Facebook Groups
With over 1 billion users, Facebook hosts plentiful niche communities offering camaraderie and crowdsourced answers from struggling or aspiring gas station owners nationwide. Top groups include:
- US Gas Station, C-Store, Tobacco shop, and smoke shop owners
- Texas Oil and Gas Professionals
- OIL & GAS GROUP
Dig into group archives for extensive conversations around shop buildouts, vendor dilemmas, staffing hurdles, and more before posting questions. Experienced voices eagerly answer newcomers.
13. How to Market a Gas Station Business
Without active promotion, stations vanish into the competitive background. Combining digital engagement and real-world messaging maximizes consumer awareness and traffic growth.
Personal Networking
First, tap friends, colleagues, and existing patrons for referrals, the most valuable lead source. Satisfy customers so completely that they eagerly endorse your outlet online and recommend visiting their networks. Perhaps offer a $5 credit for sending new customers who fill up 10+ gallons.
Digital Marketing Ideas
- Run Google/Facebook paid ads targeted locally by fuel type, geo-fencing along commute routes, and via demographic layers like households with multiple vehicles.
- Claim and manage location pages on review platforms like Google Business Profile and Yelp to monitor and respond to feedback.
- Launch a shop Instagram profile with photos of staff, merchandising, and food offerings. Use localized hashtags around your town and street to extend visibility.
- Produce a weekly one-minute Facebook Live broadcast covering fuel prices, new inventory, staff shoutouts, or community news to humanize your brand through short videos.
- Partner with radio stations, local newspapers, and community bloggers to run co-branded fuel giveaway contests in exchange for media promotions.
- Introduce a mobile loyalty app for discounts on fill-ups, car washes, and convenience items. Integrate with pumps for automatic fuel-ups crediting points to accounts.
Traditional Marketing Ideas
- Mail coupon flyers to neighborhood homes and apartment complexes promising grand opening fuel discounts to seed an initial visitor base.
- Place eye-catching vinyl decals touting weekly specials on all pump faces to capture drivers’ attention while filling up.
- Install a digital roadside sign along busy adjacent streets with animated graphics flashing current gas prices and drawing in passing motorists.
- Run 30-second radio spot ads on local stations before drive-time newscasts boasting competitive per-gallon rates and convenience items.
- Sponsor community events like summer concerts and Little League teams with banners touting your station. Staff a tent to meet residents in person.
- Partner with complementary merchants like auto parts stores and quick-service restaurants to distribute co-branded flyers offering bundled discounts across locations.
Consistency across digital and traditional channels cements recognition until drivers automatically associate your outlet with affordable area fueling.
14. Focus on the Customer
Delivering incredible service keeps customers loyal while powering word of mouth, the most valuable referral source. In convenience-fueled sectors, thoughtful engagement builds emotional bonds that keep drivers coming back.
Some ways to improve customer focus at your gas station location include:
- Consider personalizing pump visits by having attendants greet regulars by name and handle fill-ups for seniors or parents with kids in tow.
- Train staff to suggest purchasing customers’ favorite beverages or snacks along with gasoline.
- Make amends quickly if errors happen like mix-ups at the register.
- Provide upset patrons discounts on their next visit along with your apologies to transform mistakes into strengthened loyalty.
- Address negative online reviews promptly by thanking the customer for their feedback, apologizing for their experience, addressing how you’ll improve their pain points around pricing confusion or dated interiors, and inviting them to give your station another try for a better impression.
- Other website visitors respect honest communication.
- Focus on knowing top customers’ preferences, listening to their frustrations, and showing authentic appreciation for their business through friendly conversations and loyalty programs.
When drivers feel genuinely valued beyond just transactions, they return frequently even if competing stations offer slightly lower prices. Further, they enthusiastically share their affection for your outstanding service with friends, coworkers, and neighbors, providing continual word-of-mouth referrals.