Unless you drive a vehicle that plugs in, you’re going to be frequently visiting gas stations all of your adult life. Some simple math will help you figure out where I’m going with this – owning a franchise that almost everyone visits.
Let’s say that you start driving a vehicle consistently at the age of 18. Let’s also say that you’ll be filling up your vehicles’ gas tank once a week. Today’s gas prices hover around $3.50 a gallon. Filling up a 12 gallon gas tank will cost you around $42. Multiply that amount by 52 weeks (52 x 42 = $2,184.00).
If you drive until you’re 75 years old, that means that you’ll have driven for 57 years. If you’ve been filling your vehicles’ 12 gallon gas tank up every week for that entire time, you’ll have spent $124,488.00 on gas ($2,184.00 annually x 57 years of driving).
Are you with me so far? Let’s keep going.
As of 2010, there were around 250 million vehicles on the road in the US. If the owners of those 250 million vehicles are spending $2,000 or so a year on gas, that means that $500 billion is changing hands at gas stations all across the U.S. (Hat-tip to Chris Wisbar who helped me with the math.)
Company-owned and franchisee-owned gas stations are doing the selling – and almost everyone goes to a gas station once a week.
How Much Green Is Involved?
If you think that I’m going to be going all green with this month’s franchise article, you’d be wrong. As a matter of fact, this article is focused on fossil fuels…petroleum, and it’s delivery via retail franchises.
According to the National Resources Defense Council (NRDC) retailers-including distributors and marketers, on average made about $0.04/gallon in profit. Some of these are actually the oil company’s themselves (company-owned stores), but many of these are independently-owned and operated stations who make more money selling candy and hot dogs than gasoline. . .gas station franchises.
There’s a lot of markup in the products that are sold by these gas stations. That’s why more and more gas stations have convenience stores inside of them.
Gas Station Franchises
Would-be franchise owners contact me several times a year seeking information about owning gas station franchises. Admittedly, it’s one sector of franchising I don’t have that much experience with.
One reason for my lack of experience is that in the 12 years I’ve been assisting would-be franchise owners, I’ve only worked with one person who was seriously looking into purchasing a gas station franchise. It was a 7-Eleven franchise (with several gas pumps) and it had just become available.
The 7-Eleven franchise model is unique in the fact that it builds out stores well in advance, and then offers them to franchise candidates that qualify. In other words, the stores are ready before the franchisee even signs the franchise agreement. In most franchise opportunities, the location for the business isn’t chosen until the franchise agreement has been signed and the franchise fee paid.
Another player in the gas station franchise sector is ampm. There are three distinct ways that you can become a franchisee of their franchise opportunity:
- Develop a new-to-industry ampm facility: What that means is that you build out a new franchise location-including both a gas station and a convenience store, from the ground up.
- Re-Brand Existing Gasoline/C-Store: Opportunities are available to re-brand an existing non-ampm gasoline c-store facility. In other words, you would convert a non-franchise gas-station/convenience store location into an ampm franchise location.
- Re-Brand Existing Gasoline Station: If you only want to own a gas station-no convenience store attached, ampm offers a way for you to convert an existing gas station into an ARCO gas station. (Arco and ampm are one company.)
Qualifications Needed To Buy a Gas Station Franchise
If you want to buy an ampm gas station franchise, there are several things that you’d need in order to qualify for franchise ownership. Here are a few of them:
- U.S. citizenship or permanent resident alien status with a minimum age of 21 years old.
- Personal participation in operating a retail facility (minimum of 40 hours per week).
- Successfully complete all training requirements.
- Good credit record / credit history evidenced by prompt payment of all financial.
In addition, you’d need to have deep pockets. That’s because the total estimated investment (listed on the ampm franchise website) is $1,822,705 – $7,767,767 ( including estimated real estate costs). In addition, the amount of liquid capital needed may be $1,200,000 or higher.
So, in order for you get a piece of the retail petroleum pie, you’ll have to invest a lot of money up-front – especially if it involves building out a brand-new store.
There’s another way for you to get involved in this sector of franchising, and your investment could end up being lower.
You can buy an existing gas station franchise. There are always gas stations for sale. If you’d like to investigate buying an existing gas station franchise, the following websites provide detailed listings:
- Merger Network
If you decide to look into gas station franchise ownership, know that in your lifetime, it’s doubtful that your petroleum-based business will become obsolete. Just make sure that you have other products to sell along with your gasoline.
Gas Photo via Shutterstock
Four cents profit on a gallon seems extremely low to me. I’m wondering if the percentage margin’s always been that low, do you know?
It may have once been higher, percentage-wise, but it is a volume business.
Thanks for reading my post.
The Franchise King®
It still seems pretty low for a volume business, but like you said, there’ll always be a consistent need for petrol. I noticed over here in the UK that quite a few petrol stations closed down. We had two close to where I live and they’ve gone. I’ve also noticed a lot of the remaining petrol stations are franchises within franchises in terms of it housing a small version of a popular supermarket chain.
While the profit may seem admirable, owning one of these requires a lot of money upfront not to mention that you’re dealing with gas and you should be able to handle it the right way. The good thing about this is that it is not hard to sell as it is a need. People will eventually visit you and buy.
Very true, Aira.
Personally, I would rather own a franchise that sells a product or service that will always be needed-by many, many, people.
The Franchise King®
In any franchise business, you need to have deep pockets to get started and tide through difficult times such as during no sales or low turnover.
Thanks for commenting, Diana.
There are some franchise opportunities that don’t require very deep pockets-especially home-based ones:
The Franchise King®
I can’t stop thinking about the electric car comment you made at the beginning. Now might be the time to start building the infrastructure and franchise model for them.
You’re right: it could be the time.
Pretty risky, though. it may still be too early.
The Franchise King®
That’s a great business avenue for many to look into. However, this business requires a lot of capital to get started. However, the prospect is very lucrative. It is surely one of the avenues that businessmen should look into.
Thanks for commenting, Derick.
It’s not for everyone, but owning a chain of gas stations could be good.
The Franchise King®
Although a gas station may not be for everyone, a franchise can be a great option for people that want to own a business that already has an established brand and business model.
Wow, I didn’t know that you only need to be 21 to buy a franchise. I think owning something like a gas station or a convenience store would be a good investment. My husband just graduated with his business degree, and I think this would be a good goal for our future. As we save up, I will keep an eye out for convenience stores going up for sale.