How to Start a Gas Station Business in USA
When we are planning to start a business we must study what are the characteristics and peculiarities of the business. A gas station can be profitable. But, considering how to start a gas station business in the USA, leads to the realization that this type of business is subject to different regulations, and requires numerous licenses.
This article will guide you through important points on how to start a gas station business in the USA.
Fuel billing varies greatly, because it is influenced by the large variations in the price of oil, and also by the variation in consumption due to transport. During the past crisis, the number of trips by American drivers dropped significantly, but in recent years the trend has been a growth in demand.
In the USA, there are approximately 168,000 gas stations . It is a highly concentrated sector..
It is very difficult to set up a gas station completely independently, so what is recommended for entrepreneurs in the sector is to rely on one of the large companies operating in the USA. You can also choose to partner with some of the cooperatives or small companies that compete with the big ones.
In general, the way to start is the franchise.
Requirements to open a gas station
As you can imagine, it is a fairly regulated activity. It carries certain safety hazards , in addition to an environmental impact , so you have to comply with various regulations.
The DGC report
The first step is to obtain a favorable report from the General Directorate of Roads. To achieve this, the plot where the gas station is to be set up must be well defined. It can be land owned or rented. A project, especially a business plan, must also be well advanced to obtain approval from the DGC. The decision of the administration is binding.
The construction project
Second, a technical project must be prepared, with the construction of the gas station, the respective fuel tanks, the building, the pumps, etc. For all this it is essential to have an expert. Obviously, the professional’s project, endorsed by his school, will have to comply with all current regulations.
Obtaining all administrative authorizations
- Afterwards, you still have to request more permits, in particular the building license and the opening license, at the corresponding town hall.
- With the construction project in hand, you have to go back to the DGC to assess the complete project with all the official documentation. If all goes well, the DGC will give provisional authorization to start the works.
- When the works are finished, the approval of the DGC must be requested again before the opening of the gas station. This time is a final approval .
- Everything is almost done, because then you have to obtain an authorization from the Autonomous Community , register in the Territorial Register of Industry and demonstrate that there is a supply contract for at least 3 years.
- Then only small things would be missing, such as the certification of the dispensers and waste management.
Seeing it like this, there are many procedures , but you have to take into account that normally a gas station is set up by the hand of a franchise, and that the company that guides you will guide you in the management of some procedures to which they are very accustomed.
How much does it cost to set up a gas station?
The investment theme is one of the most important aspects of the business plan for a gas station. The amount required is highly variable, because setting up a small establishment with 4 automatic dispensers is not the same as setting up a complex with many supply points, a large store and a restaurant.
In general, the consensus is that for a low cost gas station, the minimum initial investment is about $ 250,000, to which you have to add about $ 50,000 to start the business. Keep in mind that the tanks of many gas stations have capacities of 20,000 liters and more, and filling them costs a lot of money.
For a more classic gas station, an investment of about $ 400,000 can be estimated , and we are not talking about the purchase of the land, which would go separately.
How much does a gas station sell?
The raw statistical data tells us that on average, a American gas station has a turnover of 2.5 million dollars per year . But, obviously, a service point with 10 pumps in a shopping center is not the same as a small town business.
For our gas station business plan, we are going to consider a turnover of 1.5 million dollars per year.
How much margin does a gas station have?
The percentage of margin that the distributor earns can vary greatly depending on the evolution of the fuel price and the policy of the oil companies. However, it can be considered as an estimate that the gas station stays approximately between 10 and 12% of the RRP that the customer pays.
For our example of a business plan, we would be talking about between $ 150,000 and $ 180,000 of annual gross margin, and only in the fuel section. Gas stations also usually have a “supermarket” activity with which they complete their income.
Main expenses of the gas station in USA
We can consider that at least 2 people must be hired (in addition to the entrepreneur), at an annual cost of $ 23,000 each. This cost includes the Social Security contribution and is based on the sectoral agreement.
The electricity cost is important, although normally the brand subsidizes a part of the bill. This is because the cost is high because the facilities are illuminated so that the brand is highly visible to drivers. Even so, in net for the gas station the cost can be $ 6,000 per year.
Gas stations also use a lot of water, as consumers take advantage of the stop to use the toilets. It has an annual expense of about $ 1,500.
Then you have to add telephone, and various communication systems for another $ 1,500 per year.
It can be estimated that about $ 5,000 is paid to the brand in various concepts of royalties.
In the miscellaneous chapter, with the agency, insurance, waste collection services, etc., you can count another $ 5,000 per year.
If we consider an investment of $ 400,000 amortized between 10 and 33 years depending on the elements involved, we can estimate an annual cost of $ 20,000
Benefit of a gas station
The estimated result of the gas station that of this business plan would be the following:
- Sales: 1.5 million dollars.
- Gross margin: $ 160,000
- Personnel expenses: $ 69,000
- Supplies: $ 9,000
- Fees: $ 5,000
- Miscellaneous expenses: $ 5,000
- Amortizations: $ 20,000
- Annual result: $ 68,000
At this amount, you would have to deduct the rent of the land, if you do not have the property.
Note: The data may vary from country to country. Also, do a proper research before you start any business whether it is in the USA or UK. Before you leave check out these interesting articles:
Thanks for reading.