In this guide, we will look at the average cost of opening a gas station and factors that determine such prices.
Owning or building a gas station is a capital intensive project that will require being financially prepared.
Read on as we discuss the cost implications and more of starting this business venture.
Buying a Gas Station Franchise Vs Starting From Scratch
One of the most important decisions to make as it relates to cost has to do with the type of gas station to open. Two main options are available; buying into a franchise or starting from scratch. The cost implications for these can be quite significant.
With an existing franchise, you won’t have to build from scratch.
Rather, you’ll own a part of the company and use its business model to operate. This includes using the franchisor’s brand in addition to getting all the support needed to succeed. These privileges will come at a cost to you.
However, such costs will be nothing compared to starting one from scratch.
In other words, the cost of opening a gas station from scratch is higher than buying or investing in a franchise. However, it’s important to note that some gas station franchise costs can be quite pricey.
Nevertheless, these are generally cheaper when compared to starting one from scratch. Having to start anew will take up many resources which can be substantial.
Cost of Owning a Gas Franchise
Some of the top gas station franchises in the United States and their required investment amounts include; Circle K with an initial investment of $185,500 and 7-Eleven starting from $37,550.
AMPM is another gas station franchise with an initial cost starting from $430,698, Street Corner starts at $99,400 while the starting costs for Dash In comes at $138,600.
Also among the top gas station franchise brands is RaceTrac which has quite a substantial starting cost at $1,000,000.
Cost of Opening a Gas Station from Scratch
Building a new gas station business from the very beginning not only requires significant capital but also lots of work. When it comes to determining the startup costs, several questions will easily be asked.
These have to do with the total cost involved, a breakdown of such costs as well as the running or operational costs. Expenses will also be incurred for registrations among other things.
Having answers to these questions goes a long way in helping you determine the eventual costs for such a project. Let’s get to the details.
Scale of Operation
When starting a gas station the scale of such a business will determine your startup costs. Capital required for this investment will range from $1,300,000 to $7,500,000. Apart from the scale of the business, other variables are involved.
Such variables have to do with where the business will be located among other things. These will be discussed shortly. Before then, let’s discuss the cost details of opening a gas station.
Owning A Gas Station: Cost Breakdown
Having stated the costs involved in owning or opening a gas station, it’s equally important to state the cost details involved. When broken down into bits, such costs can be quite varied.
We will be listing some of these cost details to give you a clear idea of what’s needed.
As seen earlier on, the cost involved in opening a gas station largely depends on the scale of the project. On the low end of things, we’ve said the least amount required starts from $1,300,000.
A breakdown of such costs will include legal fees at $2,000, obtaining state permits which attract a fee of $3,000. Insurance premium starts from $2,000. Your new gas station will require promotional signage which goes for $5,000.
About $10,000 is needed to maintain an initial inventory. What more? Most gas stations also include a convenience store. This (convenience store) will cost about $20,000 to set up. Setting up the gas station will take up a cost of about $100,000.
Purchasing a building for your convenience store will start from $150,000 depending on location. In some cases, the buildout required for the project can substantially jerk up the costs involved. As such, you’ll need to know what’s needed or best for you.
Running costs are very important for successfully operating a gas station. Such costs will range from product (gas) costs which alone attracts about $1,000,000 or more for most stations. Other supplies will need to be always available.
Other expenses incurred on running costs include permit fees, employee wages, utilities as well as taxes among others.
This simply refers to the cost needed for a standard or large gas station. This might be built with the intension of expanding into new locations within a short time. The starting costs for opening such a large gas station will start from $7,500,000.
Further breakdown of this cost will include the legal expenses which allow you to obtain permits. The cost of this will amount to about $15,300.Such permits will include air & water pollution control permit, sign permit, fire department permit, and more. Other things covered under this fee include POS Software and machines.
Startup costs also include marketing or promotion. The cost here varies and will range from $30,000 to $50,000. Insurance costs will start from $30,000. While the cost for leasing a standard facility along strategic locations (such as major highways) will run from $250,000 and above.
The cost involved in operating a standard gas station also includes the running costs such as utilities, worker’s wages, promotion and marketing, and inventory (including gas and those for convenience store). There are also taxes and permit fees among several.
Making a Decision
It is important to have a clear idea of what you want from the onset. This helps you have a clearer understanding of the cost implications involved. The type of gas station you seek to open, where you wish to locate it as well as the other additional services offered will have an impact on your startup costs.
If you’ve read to this point, you should have a better understanding of startup costs for a gas station. We have also included information on the factors influencing costs, as well as provide a cost-range based on the type of station you wish to open.