This places a gas station's net profit margin at less than two percent. Gas stations represent a relatively high investment. Especially when compared to other businesses that an investor can open with the same level of investment. Buying an existing gas station usually costs anywhere from a few hundred thousand dollars to well over a million dollars.
This depends on the success of the gas station and the cost of the land. For a much smaller investment amount, there are plenty of business opportunities available. Opportunities that can generate profits quickly, are scalable, and are businesses with high margins. Station owners make most of their profits in their stores, selling food and beverages, as well as alcoholic beverages, where sales are legal.
Even if due diligence is carried out at the gas station, there is no guarantee that the new gas station owner will not incur environmental liabilities or costs. The combination of all of the above trends is likely to begin to have a significant negative impact on the return on investment of gas stations. Alternatively, if you want to avoid headaches and high start-up costs, buying an existing gas station is a good option. It's important to note that if a gas station actually makes money and has a good return on investment, it would be very rare for the owner to want to sell the company.
So, besides offering first-class services and making a media blitz, what else can you do to stand out in the crowded gas station market? It is likely that they will only become stricter, which in turn increases the cost of solving any environmental problem related to a gas station. However, most of the gas stations that we have reviewed and analyzed so far are high-level investments with below-average funding. After deciding which individual franchise or gas station you want to buy, the next step is to evaluate the station to see if it meets some simple cost-effectiveness standards. In addition, since gas is a commodity, the price at which gas is sold will be quite close to the purchase price and therefore acts as a downward force on gas margins.
This has the potential for investors to achieve a comparatively faster return on capital compared to gas stations. Since the main advantage of a franchised station is the recognition of the name, trademarks, commercial design, and canopies associated with the domestic brand, the owners of the franchised stations are franchisees and parties to a franchise agreement. Environmental concerns are critical, since any environmental contamination (especially if discovered after purchasing the gas station) will require expensive repairs that could significantly paralyze or limit future operations and the profitability of the gas station. In addition, the inability to purchase viable land to house a gas station can greatly limit the industry's expansion options.
The driving force behind this has to do with the gas station business model, in which it can be quite difficult for an operator to generate enough revenue and profit to hire a general manager. We believe that, at its core, the gas station business is a relatively simple business concept, especially in relation to other companies. While most people only think of the price at gas stations when they think of “gas prices”, gas station owners also have to buy gas.