5 Reasons to NOT Buy a Gas Station

Lets start with an interesting statistic. According to the NACS 2017 Retail Fuels Report, 59% of gas stations in the U.S. are one owner-operated. They own one store and often that store is attended by the owner. That type of business is what we call buying a job. The owners aren't working in the business because it makes so much money they are working there because they have to. Also interesting to note is that most major oil companies have sold off all or most of their fuel station holdings. Do you think you as a small business buyer have more market knowledge than the best business minds hired by the oil companies? Big oil is getting out of gas stations that should be a warning sign as should the huge number of single store owner operators. Many of these are struggling business owners making a living on very small margins. Which bring us to the next point

1. Small Margins. Here is a great infographic from the Orange County Register on where $50 spent at the pump goes. $30.75 to the oil company, $7.00 to the refineries, $6.00 on taxes, $4.00 to the delivery company, $1.25 on processing and transaction fees and finally right at the end of the chain you get $1.00. And that number can and does change sometimes even lower most owners suggesting an average of 1-3 cents net per gallon. If you speak with gas station owners as we do or even just visit forums and chatrooms with actual gas station owners most will tell you the gas is just a way to get people to the location and they actually make their money on cigarettes, soft drinks, coffee, and snack foods. But a huge problem today is more and more gas buyers are paying at the pump and not even entering the store making it even less profitable. But you will still have non driving walk in traffic leading us to reason #3 - rough customers

2. Most cheap gas stations are located in less than desirable neighborhoods and open 24 hours a day. And lets face it most gas stations are often frequented by some interesting people particularly in the late and early morning hours. We all watch Youtube and see some of the crazy stuff that happens in convenience stores and gas stations. That will also be happening to you - is that something you want to deal with? Ask your seller if they have ever had any issues where they had to call the police, and Google the address and see if any crime reports come up. There are over 7000 robberies each year at gas stations and 15,000 at conveniece stores which is disproportionate in relation to other businesses.

3. Franchising. Now there are many situations where the franchising model works. In my opinion gas is not one of them. In fact if you are at the mercy of buying only one companies gas at a fixed price, being unable to shop for better pricing, stuck with every promotion they decide on as well as having to pay franchise royalties and fees with your already slim margins, being profitable can be difficult.

4. Environmental issues.This is a problem specific to gas stations. Are the tanks leaking? If so the cost of cleanup can be costly. Many unwary buyers found themselves on the hook for huge bills because they chose to survey only assets that were above ground.

5. At the mercy of potential construction. Some unethical sellers pull a fast one and after determining that weeks or months of construction will make their location inaccessible put it on the market. Always check with the local department of transportation prior to making an offer on a gas station. Or any business for that matter.

Now in closing yes I understand that gas stations and convenience stores CAN be a good business or franchise. In these videos I provide the negative side because as we all know the seller is only giving you the good side. An business decision that has considered both the bad and the good is an educated one. Don't forget to like and subscribe and leave your business and franchising questions down below.

[EqualsThreeable]

I've worked in the gas station industry to over 15 years. Your advice is very good for those looking to get into the business. I wouldn't go franchised gas station, independently run is the best. We have two BP locations and thankfully we have good locations. Here's another tip you missed, have locations with no competition, or possibility of competition. Location, location, location, if there is a vacant lot across the street from your gas station, you should either buy that land or know what it's being zoned as for development. Our two stations are fortunate enough to not have any competition surrounding us, something getting increasingly rare as we plan to acquire a third station

There are two types of customers, your passerby and your regulars. Teaching employees to learn regulars names and stories is hard about as hard as finding good employees who want to work for you more than 6 months. Having a blueprint for what to do in the business takes years of experience, this business is not easy. Judging the amount of security necessary is another factor, for our stores we don't need bulletproof glass or security guards on premises, the surveillance cameras needed. We have never been robbed (knock on wood), but we have had those interesting customers and at times called the local authorities to remove them.

5 years, 5 years is the amount of time you will have to spend each and every day going to that location, after that, you can afford to spend a little less time there. Our newer station is only 5 years old now, but every year since opening has seen bigger numbers with more customers, it's all about building a relationship with those around your location, becoming part of your city in every conceivable way. Reaching out to schools, churches, local groups are an important part of what connects you to more individuals.

Lastly, you should know the costs of going into business as much as maintaining that business. Costs are not cheap, whether it's general maintenance or hardware upgrades, they don't come cheap. a single new dispenser can be over $15, 000. Know the condition of the place you are buying. In many cases it's best to build an entirely new station somewhere else than buy an old run down location and spend more money trying to make the place up to code.

[PizzaRatJC]

I can't afford toilet paper, I've been wiping with stray cats for the last 8 months, but sure, I'll watch a video about why I shouldn't buy a gas station.

[leaturk]

I ran 2 gas stations in the UK and this guys right on the money, I would never get involved again.

[jkholtgreve]

Only guy I’ve known who’s done “well” owned five stations in upper middle class areas and he STILL worked 16 hrs/day. No thank you.

[Larry]

Gas Stations in the UK have mostly become mini supermarkets, with the occasional bakery and/or starbucks in-store too.

Convenience seems to be more profitable for them than selling actual petrol nowadays.

[DrumWild]

I was once a french fries owner, but then I ate them all.

[genxmurse]

Don't buy any franchise, period! As long as you are a franchisee, you are not the true owner of that business. You pay to hang someone's name, not only are your profits heavily gouged, you are bound to play by their rules, (which all too often, are unfair). And if you don't play by their rules, they'll have the rights to shut you down.

[rokujones]

"Interesting People" = homeless, drug addicts, thieves, foolish teenagers, etc. Also, as a general rule of thumb, stay away from most gas stations between 11 PM and 5 AM due to "interesting people" being more likely to be there.

[casualsuede]

My friend bought a gas station. He gets about 500k/yr in positive cash flow and paid off the loan in 2 years. It is extremely difficult and long hours. It is a tight profit margin and his sundry item driving it. It is philips 66 chain. The reason why he is so successful is because he loves his customer base and has hundreds of regulars, many daily. Treating customers well is really where success comes in.

[rafik]

I’m in the gas station business all negative he said is real

[rental]

Got it. I'm gonna start selling drugs instead.

[Schaffkid]

My grandparents owned an amoco gas station for 30+ years. It was an old school style one with a mechanic shop connected. The mechanic shop was the only thing that was profitable. BP bought amoco and were trying to force them into a costly remodel and to shut down the shop. They sold it for pennies.

[rajbeekie]

Many of the immigrants who end up buying gas stations and motels are very hungry to make it in America. They are willing to put in 20 hours a day just to make $20, 000 a year. The hope is the business appreciates in value. The long hours and low pay are not the biggest concerns. The biggest concern is the interesting people who are willing to kill for a few dollars.

[marcsarfati]

I will second most.

He right on everything

Missed one.

Pump technology up grades.
Some are forced to franchise
Some are forced by government
Some are forced by market.

Regulations.
Regulations

[whitecurtis]

Truck driver here. And I deliver fuel to gas stations. Everything on this video was spot on. All gas stations are either racetracks, Murphy or some brand of circle k (shell, Exxon, etc). The mom and pop stations are having a difficult time competing. Infact my job has gotten worse as far as pay goes.

[flufficusm]

Don't ever buy a gas station from the gas station

[Huero]

I use to deliver soft drinks to gas stations, alot of owners are good people but not happy, always complaining and miserable, most of the time they can't find good employees so they are forced to work long hours, most good employees wind up embezzling the gas station I've seen all the time, This guy is right

[formerevolutionist]

"Buying a job"
I have owned two businesses, and that is exactly how I would sum it up. Not only is it buying a job, often it's buying a job for less than minimum wage!

[hassanbazzi]

Extremely valuable information. I had a couple of gas stations with convenient stores. I spent hours sitting inside and monitoring the flow of customers with the owner’s approval. I took the register readings every hour and had the owner signed a couple of weeks on hand training and a five miles no competing. I hated the business due to the long hours but it produces good money. Fantastic video as always. Thank you 🙏

[fredygump]

New regulations roll out in 2020...many small stations will be forced to close...or try to sell out to unwitting buyers. The major change in the new regulations is requiring underground containment to be installed and to be periodically tested to ensure water tightness. Most small stores do not have containment; many small stores are pre-1988, have steel lines (single wall) and single wall steel tanks. They are a ticking time bomb. So far they've mostly been grandfathered in, since their construction pre-dates the first regulations. But the new regulations require everybody to have this containment, regardless of when the store was bult.

Also, it is unlikely that large franchises will buy out these small stores, unless they have an exceptional location. And if a store is bought out, it'll likely be torn down and a new store built in it's place. But the risk of uncovering old contamination and being liable to clean it up means large franchises will avoid doing this. (I do environmental compliance testing for a living; you'd have second thoughts about even buying gas from these small stores...if you could seen what I've seen!)