A lot of motor vehicle owners make use of gas, especially with logistics and transportation means. Because demand for fuel does not go away, gasoline stations are always a good business franchise or investment.
Due to the high market barrier to entry as well as the high costs of capital, a franchise for gas stations is more appealing compared to starting one yourself. The best advantage that comes with franchised stations is because there is already name recognition, trademarks, franchise agreements,s and more. All future business ventures and investments always require due research and diligence before jumping right into it, making it important to check for the advantages and disadvantages.
Being a franchisee entails different sets of rules and responsibilities. Similar to any franchise, there are some set factors to consider:
- Terms of the franchise agreement
- Any quotas or requirements for fuel sales
- Ownership and maintenance of fuel tanks and pumps
We have rounded up factors for you to consider before you become a franchisee of a gas station.
How is the environmental history of the gasoline station?
Environmental concerns are critical as any concerns such as environmental contamination discovered after the station is bought will require an expensive remedy that can shut down and potentially hurt future operations. Contamination is an issue that businesses must protect themselves from.
Factors to be evaluated should include:
- Laws about gas stations
- The mandatory requirements for the tanks and other gas station equipment
- Results of an environmental site assessment evaluating the history of the property
Will you have a convenience store?
The main product of course is the fuel but not so known to a vast majority of people, the margins on selling gas are low which means gas stations make money via other means. One of these is via the convenience store. This is the reason why convenience stores and gas stations often come in pairs together. Products from convenience stores such as soda, chips, candy, and cigarettes can bring in big revenue.
Does the seller own gasoline pumps and tanks?
These serve as the most important assets used in gasoline stations and are directly related to your operation. These are important investments for any gas station but it is not always the case that sellers of the gas station own the pumps and tanks. In some cases, it is owned by the national franchisor for the stations that are franchised or the owner of the property. The things you can consider could be: who owns the “pumps and tanks”, whether the sale includes the transfer of the ownership, and the repair history of pumps and tanks. Another similar thing you can look into is the terms of the property where the station is located when it is leased and what are the agreements to come out about this.
Risks of a gasoline station investment
All business ventures have their own share of risk. It is crucial to know this to know what you are getting yourself into as a way to properly mitigate the risks. For gas stations, they have their own distinct risks. Part of this is that the success of the business depends on the traffic. Knowing the long-term plans for the area where you want to open your station is one thing. Are their plans for commercial development? Is there going to be construction nearby? Long construction projects can hamper the traffic going to your station while commercial development of the area can prove to make your location more viable given its proximity to upcoming key areas.
Quite possibly the most important part is having a business plan to come with your gas station purchase. This not only gives you a focus but also the right direction and makes the transition much easier.
As a reliable partner and supplier in the Petroleum industry, TOIC provides turn-key solutions for our clients from logistics, warehousing, delivery, installation, commissioning, and service of its equipment. We have products for gasoline pumps and fuel dispensers, Automatic Tank Gauge, convenience retailing, and more. And with services such as tank calibration and tank testing, your gasoline station needs are in one website. Learn more about how gas stations work by checking out more of our blogs. TOIC Solutions is an expert when it comes to gas station solutions. Contact us now to learn more.