Many new investors ask- Is it worth investing in gas stations? What is the gas station profit margin? And many more such questions related to gas station investments. Do you know that the gas station industry has a turnover of about $250 billion per year? And there are approximately 120,000 gas stations in the whole US.
More than 85 percent of which have convenient stores attached to them. This is thus a big business we are talking about. But as a new investor, you need genuine facts and information before making any investment. Especially big ones like gas stations.
Here in this article, we have given a few things to consider before investing in gas stations. It’ll help you to decide whether gas stations are worthy investments or not?
Independent Stations Or Franchised
The first and most important thing to consider is what type of gas stations you should invest in? There are two types of gas stations- independent and franchised. Both of them have different investment costs and different ROIs. Talking about the independent stations- there are lots of things you need to do to start it.
You not only have to invest your money but also a good amount of time. On the other hand, if you invest in a franchised gas station, you don’t have to work as hard as the independent ones. Let’s discuss each of these terms- independent gas stations and franchised stations in brief:
Buying a franchised station offers you facilities like the trade designs, canopies linked with the brands, name recognition, and high goodwill. When you are buying a franchised stations, there are a few things that you need to focus on
- The terms and conditions of the franchise agreement.
- Rebates for the fuel sales
- Maintenance and ownership issues with the tanks and fuel pumps
- Requirements and quotas for the sale of fuel
- Gas station profit margins in Canada OR the country you have decided to invest in.
Independent Gas stations
Assume independent gas stations like creating a business from scratch. You have to take care of everything yourself, from arranging your fuel supplier to station construction. However, it might look like a costly investment but don’t forget the high returns.
Unlike franchised stations, you don’t have to pay commissions to anyone. You are the only owner of this business, and profit will come directly to your pockets. However, before you invest in independent stations, here are some requirements that you should prepare in advance:
- The real estate where you are going to build your station
- Learn about the taxes
- Picking the right area for your pump
- The lease of your pump and many more
- Learn how much a gas station makes in a year and how can you increase this amount?
Know The Risk Of Gas Station Investment
When we talk about investments, the term RISK comes along with it. In every business and investment, the risk of failure is always there. But with proper knowledge and preparations, you can avoid or kill any risk on your investments. Talking about the gas station investment, the risks are quite different compared to other investments.
Just like any other investor, you might also want to know some ways to avoid that risk and increase your gas station profit margin. Aren’t you? Here are some tricks that every gas station investor must know on- how to decrease the risks involving in gas station investments:
- Understand the long-term plans of your area; you wish to open your station. In other words, check what changes are going to be made in the future in your area.
- Know the environmental history of the location. Do the research and check if the land is safe to install fuel tanks.
So these were some essential things that every gas station investor must know. We hope this blog helps you to decide whether to invest in a gas station or not.