A gas station franchise isn't for everyone
An aspiring entrepreneur may view owning a gas station franchise as a license to print money. After all, everybody who drives a vehicle needs to purchase gas, even when prices soar. And with the addition of a mini-mart or convenience store, a gas station franchise seemingly offers multiple revenue streams. Unfortunately, it's not quite that simple.
To start, you need a great deal of up-front capital to even consider getting a gas station franchise. While this is a requirement for all franchise businesses, you typically need a greater amount because it's difficult to get funding. Banks and private lenders may not finance gas station franchises because it's too time-consuming and risky. A lending source like a commercial mortgage company must have industry knowledge and experience with funding that type of business. You might have to seek out hard money financing which can be very expensive.
Also, many franchise brokers steer clear of gas station franchises. While BuyerZone's franchise vendors help you get started with successful fast food franchises like McDonald's or Dunkin' Donuts, or service-based businesses like the hospitality industry, they don't offer gas station franchise opportunities because there are too many roadblocks to overcome.
What it takes to get a gas station franchise
Getting financing and finding a franchise specialist that can help you purchase a gas station franchise is challenging enough. But if you're up to task and have the right tools and expertise to make it succeed, there are other considerations to keep in mind:
- Environmental testing - Local officials need to assess the property to ensure it's safe for storing fuel tanks and containing potentially harmful substances. This process is costly and can reach tens of thousands of dollars, even if you don't end up buying the business.
- Direct experience necessary - The franchisor typically requires you to have direct industry experience, or take on a partner with experience before they'll grant you a franchise.
- Low margin business - Gasoline profit margins are actually razor thin. Most gas station owners typically need to attach a mini-mart, convenience store, or eating establishment which adds to your investment costs, but offers higher markup and larger profits.
- Research the gas station - If you're buying an existing gas station franchise, learn why the owner is selling. Is he moving? Trying another business? Can he no longer afford it? These answers should all factor into your purchasing decision.
- Research the neighborhood - With that, find out from other businesses in the area how the residents view the gas station. Does it get a lot of traffic and dedicated customers? Does the location have a good reputation? You want to make sure you have a ready customer base to get through those first few difficult years.
- Perform your own research - Non-profit organizations like the National Association of Convenience Stores (NACS) and Petroleum Marketers Association of America (PMAA) provide many online resources to learn more about gas station franchise ownership.
- License transfer - It's a big help if the person selling the gas station franchise already has licenses to sell lottery tickets, cigarettes, and alcohol. Just make sure it's easy to transfer ownership; otherwise, you'll have to go through a lengthy application process.
- Brand loyalty - Even if you purchase a gas station franchise from a previous owner, it doesn't mean you'll automatically work with the same gas distributor. Meet with the parent company to see if you want to represent their brand or align yourself with another company.
Gas station franchise alternatives
While BuyerZone can't help you purchase a gas station franchise, you still have countless franchise opportunities in restaurants, retail, service, and more. Each opportunity will still require a large up-front investment, ongoing expenses, and a lot of your time to make it a success. But if you find an industry you like, it could be well worth the effort.
Need help selecting the right franchise? Submit a free BuyerZone request for business franchises quotes, and our network of vendors will review your options and help you select a franchise that matches your long-term interests.