Buying A Franchise Gas Station
Gas stations and their corresponding convenience store or food outlets rank as one of the most popular and profitable franchises in the United States. With over $400 billion in revenue every year, and more than 100,000 gas station/convenience stores operating all over the country it is clearly a popular business model. But is it right for you and how can you stand out from the competition?
buying a franchise gas station
There are two ways of starting a gas station in the U.S. Either build your own or start a franchise. Before committing to a gas station franchise, you should understand how it works, how much it can grow your earnings, and the risks involved.
Buying a gas station has never been more rewarding. Fixed, regulated prices (and maybe even the opportunity to open a convenience store or repair shop) provide a much more stable investment than an automobile-based franchise. Take advantage of the chance to sell fuel and food in one swipe and make your business much more profitable. Low labor costs and easy training are just a few advantages of owning a gas station. Follow these steps to buy a gas station franchise.
Investing in a gasoline station franchise business has a high financial entry barrier. The total initial cost runs $250k to $2 million for a small gas station. There will also be ongoing costs like franchise fees, insurance, licenses, inventory, royalties, and many more, which will require at least and additional $300,000.
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Gasoline station franchise brands require their applicants to have lots of cash or liquid assets. These cash requirements range from $20,000 to get started with a 7-Eleven gas station convenience store franchise, to well over $1,000,000 for gasoline station brands like ARCO AM/PM. These investments are required to pay for anything from opening inventory to permits and franchise fees.The range in cash requirements across gas station franchise businesses is based on what type of franchise you want. Upfront fees can be as low as $20,000 to lease an existing location.
However, if you have to purchase real estate to build a gas station from the ground up, initial costs could top $1,000,000. Adding a convenience store or a car wash to your franchise requires an additional cash investment for inventory and/or materials.
Franchise fees are also an important upfront investment in a service station convenience store business. Franchise fees pay for the support that gas station franchises get from the corporate brand, including advertising and marketing, training, and other administrative functions. Franchise business owners get a lot of support, but that support cuts into the bottom line profits of your gas station convenience store. It is important to figure these annual fees into your potential gas station business budget.
The good news is that many service station franchisers have financing options that will help offset the cash requirements to own and operate a franchise. ARCO AM/PM offers loans and incentives for purchasing land, rebranding an existing gas station under the franchise, and offsetting startup costs for veterans. These enticements make it easier for different groups to enter a franchise.
Another way to buy a franchise is to get a franchise loan. Most lenders and banks that service other small business loans will be able to provide a loan. However, a financial institution will look at a number of things in order to qualify you for a loan. Of course, you need to have good personal credit. But a franchise lender will also look at the strength of the franchise brand and the location of the franchise before giving a loan. Well-known branded franchises attract more customers to a gas station, and the location is key to a steady stream of customers.
Before getting a franchise loan, you must also document the condition of your new business. Lenders want to see your franchise agreement and other contracts, including leases and rental agreements. You will also have to provide any permits (i.e. a license to sell beer or lottery tickets) and environmental reports on your gas tanks. They may also want detailed information about any real estate and equipment included in your franchise agreement. These loans for gas stations are often harder to get than regular commercial loans, as lenders are concerned with the effects of environmental regulations and gas prices on gas station profits.
You can also use an SBA loan to finance your franchise gas station dreams. SBA Loan 504 allows for the purchase of real estate, buildings, and long-term equipment for your new or existing gas station franchise. These loans are easier to get than a traditional loan, as they require a lower down payment and are backed by the Small Business Administration. SBA loans also involve funding from non-profit sources, so they have lower interest. With these favorable conditions, an SBA loan is great for a business with lower cash flow for repayments.
Seller financing is great option for making your business purchase if other funding sources fall through. Seller financing is when the current owner of a business agrees to a mortgage on the business. With a percentage down in cash, a seller may allow you to pay for your new store in installments. For a franchise business, that kind of support would be called internal financing, and you would make payments on the cost of the franchise to your parent company, along with regular franchise fees. This is not a standard practice for gas station franchises, so you must check to see if it is available.
Finally, gas station entrepreneurs often self-finance the cost of their businesses. Because of the difficulties involved in getting loans, franchisees often use 401(k) accounts, personal savings, and contributions from friends and family for their purchase. Paying cash for your business might wipe out your bank account, but not having a loan will reduce your operating expenses and increase your profitability.
Gas stations have been in the news lately. Increasing gas prices and high gasoline demand make it seem attractive to own gas stations. Add to this the ancillary products and services gas stations sell to drivers, including food and drinks, lottery tickets, tires, mechanic services, detailing, and more. Owning a gas station can seem like a great business opportunity to many entrepreneurs.
Opening or buying an existing gas station and operating it independently can be daunting. You have to source all your equipment, systems, and supplies. Gas station franchises allow you to jump on the service station business bandwagon and more easily run a profitable operation.
Because of this, the typical costs of a Shell franchise are high. The initial investment is typically between $2.5 million and $6.6 million. The annual franchise fee is $30,000, and you must maintain $700,000 in liquid capital.
Circle K franchisees must make an initial investment of between $200,000 and $1.6 million. The ongoing annual franchise fee is approximately $25,000. Circle K offers third-party financing options to cover equipment costs.
An initial investment of between $45,000 and $1.5 million is required to purchase a Street Corner franchise. Franchisees are required to maintain a liquid net worth of $100,000. Financing is available from third-party sources. It can cover the franchise fee, equipment, start-up costs, accounts receivable, inventory, and payroll.
Getting a Sunoco APlus franchise is challenging. Candidates are evaluated based on their business experience, skills, financial strength, and personal ambition. The total cost for a Sunoco APlus franchise is relatively affordable, running between $25,000 and $600,000.
It takes an investment of between $165,000 and $200,000 to get an Express Convenience franchise. Owners are provided with training on how to run their businesses. Financing is available for Express Convenience franchises.
A total investment fee of $50,000 is required to get an On the Run franchise. You must have liquid assets available of at least $100,000. This is one of the lowest franchise costs we encountered in our research.
ExtraMile franchisees receive training from Chevron, advertising support, ongoing business advice, and mechanizing. The total investment to buy and manage an ExtraMile franchise is between $1.5 million and $2.5 million.
Did you know: A successful gas station owner can make anywhere from $40,000 to $100,000 or more annually? Owners of gas stations that do more than sell gasoline earn more money because the profit margins of the other things they sell are high.
Gas stations and their corresponding convenience store or food outlets rank as one of the most popular and profitable franchise types in the United States. But is it right for you, and how can you stand out from the competition and earn a profit?
It has never been a better time to invest in a gas station franchise. Increasing gas prices and demand coupled with the opportunity to open a convenience store, fast food operation, car wash, or repair shop provides several sources of income that can be a more stable investment than a retail store, fast food restaurant, or other types of franchises. Low labor costs, easy training for new workers, and franchisor support are just a few advantages of owning a gas station franchise.
Selecting the right location for your gas station franchise will help you maximize traffic and income possibilities. However, popular sites will cost you more to secure and keep the franchise over time.
Here at Franchise City the vast majority of calls we get from investors are seeking a Subway, Gas Stations or a 7-11. All of us here are also franchise and business owners yet how many of us own a Subway, a 7-11 or a Gas Station? The answer is zero. I'll leave that to your imagination why. 041b061a72