How to Start a Gas Station
This is article is written as a guide on how to start gas station. Fuel is a chemical substance when burned can produce heat and energy. This energy so produced by fuel can be used for cooking, industrial, and manufacturing purposes.
In powering automobiles, heat energy can be converted into mechanical energy and used to run cars, trucks, and other mechanical equipment. Types of fuels:
- Solid fuel – These are solid materials such as charcoal or coal that are converted through the process of combustion to produce energy.
- Liquid fuel – These are fuels such as crude oil that are converted to produce mechanical and kinetic energy.
- Fuel gas – These are fuels that are in a gaseous state and when processed can be in the form of CNG gas that is used for cooking.
- Biofuel – This can be derived from Biomass but can also be solid, liquid, or in the form of gas. So principally it is derived from living matter that can be replaced. A good example of biofuel is ethanol made from sugarcane wastes.
- Fossil fuel – These are the fuels we know today. They are derived from fossilized remains of animals and plants which have been exposed to high pressure and temperatures.
Examples of fuel dispensed by a gas pump in a gas station include the following:
- Gasoline (petrol)
- Diesel
- CNG Compressed natural gas is a fuel that is similar to gasoline.
- CGH2 Compressed hydrogen CH2, CGH2, or CGH2 is the gaseous state of the hydrogen kept under pressure – Wikipedia.
- HCNG – Hydrogen blended with compressed natural gas..
- LPG – (GPL) Liquefied petroleum gas can be used for heating appliances and cooking, highly inflammable.
- LH2
- Ethanol fuel (like E10, E85, E100)
- Biodiesel
Different types of gas stations
A gas station is a facility primarily designed to sell gasoline, lubricants, and other merchandise such as batteries, tires, and other groceries for motorists’ convenience.
A gas station, otherwise known as a filling station, or a service station or a petrol station is a business concern that dispenses petrol/gasoline, diesel, or other motor vehicle lubricants for motorists who usually drive into the station to fill their tanks. Most gas stations offer any of the three types of service to their customers which include: self-service station, unmanned station, minimum service station, or full-service station.
Self-service:
In the self-service station, the station permits the customer to serve themselves by following all the required service instructions which include the filling procedures and some precautionary measures to be taken while filling the tank. These instructions are pasted on each pump. As expected, customers visit the store to make payments to the cashier employed by the station.
Unmanned service station:
This type of service station makes use of card-lock, which is a pay-at-the-pump system and it is usually without any staff in attendance.
Minimum service station:
This type of filling station operates with an attendant that dispenses the fuel or diesel through the pumps. In some states in the US, the customers are not allowed to operate the pumps because of the state laws in place.
A full-service station:
This type of station has attendants that man the pumps, and perhaps wipes the windscreen and gauges the tire pressure and oil level. Payments are directly made to them.
Industry overview
The gas industry generally has been stable over the years with a minimum amount of instability. But like other industries, the gas station businesses have in the last five years witnessed some mixed growth and improvement in performance as a result of the consolidation of the domestic economy in the US.
The gas station industry is doing well not only in the US but indeed all over the world. Statistics in the US show that there are over 10,719 licensed Gas Station businesses with gross earnings of $106bn and employing over 120,226 people.
The gas station industry is highly competitive and in an attempt to remain modest in their operations, some operators in the industry have introduced extra services to make their stations attractive to customers. As a result, they have introduced car wash services, vulcanizing services, snack and coffee bars, and convenience stores within their facility. All these additional services are designed to attract more customers and generate additional revenue.
The industry is well disposed to continue to show modest growth even amid the existence of electric cars and intense competition, people will always purchase petroleum products for both domestic and industrial use. Even though the industry looks overstretched as if there is no more room for new entrants, intending entrepreneurs who are eager to open their service stations in the US will find a place in the industry. Try it and there is a place for you so far you a real entrepreneur.
Typically, a full-service gas station has on average of five pumps and about 25 hoses for pumping fuel. It pumps over 350,000 liters of fuel every month, although the volume varies based on monthly usage. A typical gas station offers more than just gasoline but attaches convenience store with a variety of items for sale such as:
- Soft drinks and candy, including grocery items.
- Tobacco products
- Other petroleum products such as lubricating oils
- Automotive accessories
- Snacks
- Tea and coffee
- Books and magazines
Some filling stations go further to market businesses such as lodging or landscaping tools. This Add-on brings in more revenue and can make the fuel station a profitable business. They do sometimes offer minor vehicle repairs.
To make the station a profitable one, location is the key. Location is ideal when there is traffic for both within the state and inter-state so that when a motorist is low on fuel after a long journey, he or she can pull in to a gas station for a top-up without an option to decide between a full service and self-service stations.
Statistics show that the profit margin for gas stations is on the upward spiral, and therefore aspiring investors shouldn’t harbor any fear investing in the sector. To own a gas station, you have three options – to set up and own your tanks and pumps or to lease the equipment or go for a franchise. The last option will see you answer the name of the franchisor and keep to its business standard and it is also possible that you make an initial heavy investment to secure your franchise.
To get your gas station going and attracting many customers, you must offer unique services of serving your customers well. You can do this by maintaining regular inventory and having smart attendants to dispense the gasoline. No matter how you decide to run your gas station, you must adhere to the health and safety laws and protect your business and staff from liabilities arising from fire and burglary, and other industrial accidents. So you must secure your business and staff with the appropriate insurance cover.
Fuel is used all over the world to power vehicles such as cars but beyond that, it is used power other vehicles such as:
- Lawn equipment
- Trucks such as tankers and trailers.
- Earth vehicles such as bulldozers and caterpillars.
- Recreational vehicles
To achieve some level of success when setting a filling station, you must be ready to invest heavily at the outset either to start the business from the scratch or to buy-in into a franchise for any brand of gasoline.
If you decide to opt for a franchise or outright purchase of a gas station, you need to consider the following
It is generally acknowledged that Gas stations are a great business to set up whether, from scratch, outright purchase or franchise, the demand for fuel in the US is regular and not going anywhere in the foreseeable future. The people use gas extensively, either for their cars or for trucks that convey goods across the country. Gas station industry in the US is worth over $250 billion a year in revenue generation and the number of gas stations is over 120,000. with 80% of the numbers operate a convenience store.
If you have made up your mind or still considering either franchising or acquiring a gas station, there are some legal factors you must take into consideration and probably bring it to the notice of a lawyer before you sign a deal.
The following are some of the issues you must consider as a prospective investor:
- What is the ownership structure of the Gas Station; a “Franchised” or “Independently” Owned?
Some legal issues concerning the fundamental structure of the franchise agreement are crucial because it determines whether approval for the agreement will eventually come. The terms and conditions of the franchise, including the maintenance of the fuel pumps and tanks are the case in point. Is a convenience store going to be part of the agreement?
- What is the ownership structure of the pumps and tanks?
If the gas station is franchised, then the pumps and tanks are owned by the franchisor but if leased, it may be owned by the property owner. So in evaluating the agreement, you must consider whether the fuel pumps and tanks are part of what you are paying for.
- Fundamentally evaluate the risks associated with gas station investments.
The risks may be associated with future use of the site the gas station is located with the result that future development of the area might seriously jeopardize the prospect of making future sales sufficient to make a profit.
- The environmental concern of the gas station should be examined and evaluated. The issue that is concerned here is the potential presence of contamination. If there is any environmental contamination that is only found out after a deal has been struck, a large chunk of money will be spent in an attempt to remedy the gas station.
In some states, operating a gasoline station requires initial upfront investment in the area of the permit for:
Underground tanks operation
Water discharging fire inspections
Other issues on safety and health
Though the pump price of gasoline has been going up, this increase is yet to be reflected in the profit index of the operators.
HOW TO START A GAS STATION BUSINESS
- List of important/Legal Documents required to Run a Gas Station Business
- Budget for your gas station
- Marketing strategies for your gasoline business
- Strategies to create and Boost Your Brand Awareness both national and international:
- Conclusion:
List of important/Legal Documents required to Run a Gas Station Business
To plan to take off as a gas station business, you need some basic legal documents in place. In the US these documents are mandatory if you want to do your business legally.
- Certificate of incorporation
- Taxpayers’ identification number
- Various licenses such as motor fuels retail outlet license, general business license, and driver’s license for drivers.
- Health inspection certificate
- Fire certificate
- Commercial Vehicle Operator’s Registration for fuel tankers
- Proper identification and vehicle license
- Non-disclosure agreement
- Employment agreement.
- The service support facility and a recent inspection report.
- Business permits
- Various insurance certificates which include:
- General insurance – for general liability
- Health insurance – for the health and safety of the employees
- Fire Insurance – in the case of arson and other fire outbreak.
- Workers compensation – for workers’ compensation in the case of an accident
- Overhead expense disability insurance
- Business owner’s policy group insurance
- Payment protection insurance
- Intellectual Property Protection / Trademark – in the case of infringement.
Budget for your gas station
To operate your gas station successfully, you need to plan and equip your station with basic equipment. In this age and time, you must procure the basic technology to keep up with the trends in terms of dispensing the gas, transporting the fuel to your station, securing the station, entertaining motorists who drive in to fill their tanks and collecting payment when the product is sold. Specifically, you may need the following equipment:
- Fuel tankers
- Fuel storage tankers
- Fuel pumps
- CCTV cameras
- Fire alarms
- POS machines
- Computers and computer printer
- Music sound systems
- Telephone, fax machine, and internet facilities
- Office furniture and fittings
- Equipment for the store, if there is going to be a store
All these should be costed and appropriate price tags put on them to arrive at the budget. It requires some research and possibly window shopping to reach the appropriate price for them, and then the budget.
Marketing strategies for your gasoline business
To run your gas station successfully and at a reasonable profit, you must be proactive in an attempt to market your products. Any strategies you adopt must be able to attract customers; otherwise, you won’t make any headway since other well-known brands have their foothold already in the market.
The following are some of the marketing strategies you can adopt to push your gas station to the market and get it noticed and patronized.
Read Also: Developing A Marketing Strategy For Small Business
Promotion
- Begin by sending direct mail including your flyers to owners of motor cars within and outside your neighborhood; these may include business people, public figures, celebrities, sportsmen and women, corporate organizations, haulage companies, transport companies, taxi drivers, student car owners, colleges and universities, and others you sense to use the roads where you have decided to build your gas station.
- Open a business account on Facebook and upload engaging content that will attract readers, some of which will eventually locate your gas station. Use other social media like Linkedin and Twitter
- Set up a minimal website to give your business an online presence.
- A roadshow will be necessary, so try it in communities that are likely to be your potential customers.
- If exists, join the local gas station owners association for regular updates and tips.
- Publicize your gas station in community newspapers and radios.
- Announce discount days for your regular customers.
- List your gas station in local directories such as yellow pages.
- Encourage the use of referrals by serving your customers in the best ways possible.
Pricing:
In the US, the oil industry is generally regulated while the pump price per liter of gasoline for the gas stations is determined by the state. So to achieve some level of success in the gas station business, you must ensure you get a regular supply of gasoline, diesel, and kerosene directly from the major oil marketers, and possibly trade with your oil tankers. You should never patronize third party suppliers if you hope to survive in the gas station business. It is the universal remedy to achieving your goals.
So there is little you can do to play with the price to attract extra customers All you need to do is to ensure that your merchandise manager gets the supply of gasoline, diesel, and kerosene in the required quantity directly from main marketers and not third party suppliers and also ensure that you own your petroleum tankers. With that, you will be able to reach an appropriate price for your products.
To use the right price when offering your services also entails cutting your running cost down to the least level, and making sure you promoting and marketing your brand is a regular feature in your daily activities.
You can also try as much as possible to work with independent contractors and marketers so that you maintain a good business relationship with all stakeholders.
Read Also: How to Make Customers Pay your Price
Strategies to create and boost your brand awareness both national and international:
If your original plan is to pursue national and international growth expansion, you must be ready to commit resources in an attempt to expand geographically; this strategy entails opening chains of gas stations in strategic locations as well as franchising at the national and international level. However, in the pursuit of the growth strategy which will be carried out with series of advertising and other promotional efforts, it must be planned strategically and executed in phases to prevent getting stuck in the course of implementation.
The oil industry keeps on changing and for you to keep abreast of the time, you must be ready to invest in promoting your brand to maintain brand awareness and convert new vehicle owners to your brand. To achieve this, therefore, here are some platforms you can utilize to plant your promotional messages and create a corporate identity for your gas station.
- Use an email platform to send promotional messages including your flyers. Moreover, distribute your flyers and handbills to targeted areas by handing them out.
- Boost your corporate awareness by engaging in road-show at regular intervals in targeted communities and relevant parts of the state.
- Carry out a series of ad blitz in both the print and electronic media platforms.
- Organize relevant and engaging oil/gas community-based events that will attract car owners in their numbers.
- Erect billboards at strategic points in and around your city.
- Use social media to your advantage by keeping an active account with them. Many of them like Facebook, Instagram, Twitter, Google + et al you should leverage on to promote your product/services
- Seek for the list of those who own automobiles both in your area of operation and in the neighboring cities, and introduce your gas station.
- Create your website and use it to promote your gas station by uploading captivating articles and placing adverts on it..
- Create suppliers/distribution networks (WhatsApp) for example, for your gas station.
- Brand your gas station vehicles and gas attendants’ uniform with your company’s logo et al and make sure your staff wear their branded T-shirts and facing caps while on duty.
In addition to the above, for your gas station sales to flow uninterrupted, you must have a firm agreement with the depot and the main petroleum oil marketer as well as maintaining good business relationship with them. The danger of running out of stock cannot be overemphasized; your sales will stop and if the interruption is prolonged, your best staff will begin to leave one after another, and it is a matter of time before your gas station packs-up.
Conclusion
Gasoline is a common commodity that is used all over the world by vehicle owners. Many companies have grown into multi-national organizations for operating in the oil industry. This is because all vehicles need oil to work and because of the regular demand for gas, it makes a business sense to invest in the oil industry.
There has been a steady but minimal increase in sales and profit in this sector and if the business is run diligently, there is the prospect for a higher profit.
However, opening and running a gas station requires smart planning and huge investment. You will need to invest in a good location, secure sufficient funding, promote your gas station extensively and show enough diligence in your operations, only then you will have every reason to expect good dividend in this sector.