Entrepreneurship is often seen as a risky path because owning your business requires a lot of time, effort, and taking on the risks of a new name.
However, if you researched this world enough, you probably encountered franchises. They allow you to use the name and brand of a company if they are franchising the business.
Arco is one of the popular franchising brands operating in the United States and has been franchising for a while.
It could be a good way to own your business and be an entrepreneur if you want to go the franchise route.
In this article, we will discuss everything about Arco franchises, from their fees to the requirements you need to have to run their franchise.
About Arco
Arco is essentially a gas station where people go to fill up their tanks, but they are not just selling gas.
They also have a convenience store brand called AM/PM that you can see in almost all Arco gas stations.
You can franchise these two brands together or separately. However, you wish. This makes Arco not only a gas station but also a convenience store.
The company’s name stands for Atlantic Richfield Company which is the combination of Atlantic Petroleum and Richfield Oil Corporation.
The name came together, and the brand was founded after these two companies merged.
Arco is currently headquartered in Ohio, and Marathon Petroleum has the rights to its name after BP sold this right in 2012.
Arco History
Arco gas stations were founded in 1966, and their convenience store was founded in 1978.
Until 2000, Arco was a separate, independent oil company operating in the United States, Indonesia, and Mexico.
They started to franchise the brand in 1979, and they have been franchising it ever since without interruption. However, Arco didn’t stay as an independent brand all the time.
In 2000, BP acquired Arco for $26.8 billion but kept its retail and marketing side intact while only integrating the rest of the company.
Their franchising and brand name kept going even after BP acquired the company. Now, they have over 1,580 stores nationwide and keep increasing through franchising.
Franchise Model Table
| Cost or Fee | Amount or Percentage |
|---|---|
| Initial Investment | $440,000-$10.4 million |
| Franchise | YES |
| Franchising Since | 1979 |
| Franchise-Fee | $40,000-$70,000 |
| Royalty-Fee | 2-14% |
| Liquidity | $800,000-$1.2 million |
| Estimated Outlets | 1,580 |
How Much Does It Cost To Open An Arco Franchise?
There are two sides to opening an Arco franchise. You can either only have the Arco Gas or Arco Gas with Arco AM/PM.
Arco Gas only sells gas and has no convenience store, but AM/PM includes a convenience store in the gas section of your franchise.
The latter is more expensive to set up and requires more capital.
To open any Arco franchise, you need a franchise fee of somewhere between $40,000 to $70,000 that you pay directly in a lump sum.
Then, you might need to make an investment of up to $10 million, depending on the size of your location and what type of Arco you want to open.
In addition to the costs, you are required to have a net worth of $3 million to open an Arco franchise.
Failure Rate Of Arco Franchise
Franchised Outlets:
| Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|
| 2013 | 606 | 615 | +9 |
For the Franchised outlets:
- In 2013, the growth rate was (9)/606×100≈1.48%
Company-Owned Outlets:
| Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|
| 2013 | 3 | 3 | 0 |
For the Company-Owned outlets:
- In 2013, the failure rate was (0)/3×100≈0.00%
Total Outlets:
| Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|
| 2013 | 609 | 618 | +9 |
For Total outlets:
- In 2013, the growth rate was (9)/609×100≈1.477%
According to the above-mentioned data, there is no failure rate for franchised outlets as the outlets at the end of the year increased during the span of 3 years.
We can see that the franchised outlets for Arco grew in 2013, showing a growth rate of 1.48%. On the other hand, for company-owned outlets, the failure rate of Arco was 0.00%
Overall, when we combine the data of franchise and company-owned outlets, we can see that the Arco franchise has expanded in the years 2013, showing a total growth rate of 1.477%.
Payback Period Of Arco Franchise
2021 AMPM Median Franchise Sales: $1,510,457
| Initial investment (midpoint) | %Profit margin of median franchise sales | Estimated Profits | Time to recoup investments |
|---|---|---|---|
| $4,694,153 | 10% | $151,046 | 32.5 years |
| 15% | $226,569 | 21.5 years | |
| 20% | $302,091 | 16.5 years |
Based on the above table, at an average of 15% profit margin, it’ll take around 20 to 25 years to recoup the investment.
Arco Franchise Requirements
To open an Arco franchise, you are not required to have any experience in the industry or experience working with the brand.
As long as you complete the financial requirements, you are free to apply for a franchise, and you will be likely to get approved.
The financial requirements are a net worth of a minimum of $3 million and a liquid capital of $750,000.
Net worth is the amount of money you have either in some sort of asset or in cash.
Liquid capital, on the other hand, is the amount of money you should have access to in a short period of time. Liquid capital could be cash, 401k, or a home equity loan.
Arco Franchise Training and Support
The brand Arco offers training and ongoing support when you first start and also when you establish the branch and work as part of the Arco brand.
Both for Arco and for AM/PM brands, Arco offers onsite training as well as classroom training.
Both of these training aims to provide you solutions to run the business the same as every other Arco branch.
In addition to the training, Arco also helps you with brand resources for day-to-day operations and marketing materials.
To make sure that you maintain brand consistency, you get an easy-to-use resource manual and marketing tools.
The manual and the tools are always available for you to look at and use all the time.
Arco Franchise Terms of Agreement & Renewal
Arco franchise agreement terms vary from the type of franchise you want to open to the agreement you make with the company.
You can sign a contract anywhere between five to twenty years initially.
If you don’t lease the premises from BP, the initial agreement will be twenty years. If you lease it from BP, it will be ten years, both for Arco gas and AM/PM.
For the renewal, there are generally sometimes associated renewal fees. These fees are typically lower than the initial franchise fee you pay.
However, this information is not public with Arco, and you can only know about it after you sign your initial contract and talk it through with Arco itself.
Arco Franchise Revenue & Profit
Any franchise’s revenue and profit depend on many factors, such as labor cost, lease rate, location, etc.
However, as far as Arco, it is hard to say how much revenue and profit Arco franchise owner earns because the company has not revealed any details regarding its franchise’s financial performance.
The only information regarding Arco revenue that we have is that Arco AM/PM Station made $1.6 billion in revenue in the year 2019.
Arco Franchise Obligations and Restrictions
Both Arco Gas and Arco AM/PM have similar obligations and restrictions.
There has to be an owner with more than 51% stake in the franchisee entity or an employed manager on the premises at all times.
This person will oversee the day-to-day operations, working for at least 40 hours a week.
The employed manager and the owner with more than 51% stake can not be the same individual.
In addition, you have to offer all the services and products that the BP brands require you to.
Any addition or removal you are going to make will have to go through special approval from the franchisor, and it’s not acceptable to do it without any approval.
You also have no say in what products and services the franchisor, BP, gets to sell in your franchise branch.
Arco Franchise Financial Assistance
Arco brand offers a direct financial incentive to their prospective franchisees if they qualify for the assistance.
Whether you are going the re-branding route or a brand new construction on a new site, you can apply for financial assistance from Arco to establish your franchise.
They give out financial incentives as high as $1 million to qualified candidates.
This financial assistance comes as a loan and can be used both for Arco gas stations and their convenience store brand, AM/PM.
The assistance focuses on assisting your construction or converting a site to an Arco franchise site.
They also have different and bigger financial incentives for veterans looking to enter into Arco franchising.
Arco Comparison
| Company | Franchise Fee | Royalty Fee | Initial Investment |
|---|---|---|---|
| Sunoco APlus | $30,000 | 5% | $1.5 million-$2.5 million |
| Circle K | $25,000 | 3.5% | $2.3 million-$4.8 million |
| Arco | $40,000-$70,000 | 2-14% | $440,000-$10.4 million |
Conclusion
To conclude, Arco has been in operation for decades and also have been franchising for decades.
Arco was a combination of two brands at first, but then BP acquired the company, making it a brand of BP.
However, this didn’t change how Arco operates, and they now have hundreds of outlets across the United States.
Along with their gas stores, they also have a convenience store that you can franchise along with the gas option.
This gives you a better edge and chance in return when you franchise because you get two in one setup.
If you’re thinking of investing in an Arco franchise, it could be a very profitable business for you, considering you have a good understanding of the industry.
FAQs
Who is the current CEO of Arco franchises?
Guy Bruce is the CEO of Arco franchises. He was appointed just recently at the end of 2022.
When I have an Arco franchise, do I also get a BP franchise?
Arco is partially a brand of BP. You don’t get to use the BP name directly, but you will have BP’s brand support in your training and marketing efforts.
Is the Arco franchise profitable?
Arco has been franchising for decades, and there are hundreds of franchise outlets across the United States.
This shows that Arco could be a profitable franchise business, but ultimately, it depends on you. Whether you have what it takes and if you can succeed.
How Many Arco franchises Locations Are There?
As of 2023, there are 1585 ARCO gas stations in the United Stations.
Where Is The Headquarters Of Arco franchises?
ARCO is headquartered in La Palma, California.
Who owns Arco?
Arco is a brand of gasoline stations that are owned by Marathon Petroleum.
Sources
Amit Gupta is an experienced expert in digital marketing and co-founder of DrFranchises. With more than 11 years of knowledge in franchise digital marketing, SEO, email marketing, and social media marketing, Amit has helped many brands achieve incredible success online. As a passionate entrepreneur and owner of 7 franchises, he continues to study franchise models, looking at costs, revenue, and profitability to guide brands toward profitable growth. When he’s not working on digital marketing, Amit enjoys spending time playing with his beloved dog.