Is Owning A Gas Station Profitable 2024?

Since gas stations always seem to be in demand, your entrepreneurial head might wonder: Is owning a Gas Station profitable?

While it might look all hunky and dory from the outside, it is essential to dive deep into this business to understand what really goes on in a gas station business

There are so many things you have to consider: investment, profit margin, things that affect the profit margins, etc. So let us help you understand the gas station business better in this comprehensive guide.

Is Owning A Gas Station Profitable

Gas Station Statistics

  • In 2023, the gas stations in the U.S. made sales of 654.14 billion U.S. dollars, down from the previous year’s sales of 739 billion dollars.
  • In 2023, the market size of the gas station industry was $148.3bn in 2023.
  • The market size of the gas station industry declined by -2.4%.
  • There are approximately 168,000 gas stations in the U.S.
  • Gas station owners can rake in $0.03-$0.07 profit per gallon on average.

Source: ((https://www.statista.com/statistics/197637/annual-gasoline-station-sales-in-the-us-since-1992/#:~:text=United%20States%3A%20gasoline%20station%20sales%201992%2D2023&text=In%202023%2C%20gasoline%20station%20sales,dollars%20recorded%20a%20year%20earlier.))

((https://www.ibisworld.com/industry-statistics/market-size/gas-stations-united-states/))


How Much Money Do Gas Station Owners Make?

How Much Money Do Gas Station Owners Make

The earnings of a gas station owner can vary depending on their location, additional services they offer, location, size, etc.

However, on average, gas station owners make anywhere between $40,000 and $100,000 annually in revenue.

Here’s an overview of the revenue gas station owners makes in the United States as per region:

  • Overall: $40,000 – $100,000
  • West: $60,000
  • Midwest: $61,000
  • Northeast: $69,000
  • South: $66,000

Gas Station Profit Margin Explained

The short answer to this question is yes, but the longer one is a bit complicated.

Let us see the profit pipeline of gas to understand this better.

Gasoline begins its journey as crude oil and is most commonly sourced from states like North Dakota and Texas. Once the raw oil is extracted from the field, this raw liquid is:

  1. Sent to refineries to get processed into gasoline.
  2. It is then sent to bulk storage containers via a pipeline.
  3. It is then transported to gas stations via freight trucks, where it is kept in 20k-gallon underground drums.

By the time gas reaches the gas station, the profit margin becomes meager.

Here’s a rough calculation that shows how much profit margin is left from start till the end of the process described above:

Steps involvedProfit Percentage Left Profit Left
Crude Oil51%$2.09
Refinery 17%$0.70
Taxes (Federal + State + Fees)17%$0.70
Transport8%$0.32
Markup 7%$0.28
Gas Station profit after overhead1% – 1.4%$0.03 – $0.07

So, the profit margin of a gas station is only 1% – 1.4%, which allows the gas station owner to earn only $0.03 to $0.07 per gallon.

So, for example, if you make sales of 4k gallons at $0.05/gallon in a month, then your per day earnings from selling gas on your gas station would be just $200-300/day.


Is Owning A Gas Station Profitable?

Owning A Gas Station

As you can see from the above calculation, the profit margin in the gas station business is shallow (1% – 1.4%), which is nothing when compared to the profit margin in the retail or QSR industry, for example.

So owning and running a gas station alone is not that profitable; however, if you offer an additional service such as a car wash, food service, etc., or simply open a convenience store along with it, then you can make a good profit in this business.

Check out the section below to see the difference it can make in your profits if you offer an additional service at your gas station.


Gas Station Runnning with Convenience Store Earnings

Did you know today, 80% of gas stations have convenience stores on site? And as per a study done by the National Association of Convenience Stores, it was seen that 40% of customers went inside the convenience store, and 1 out of every 3 customers ended up purchasing something from the store.

Additionally, the products inside these stores, such as Energy drinks, lotto tickets, sunglasses, etc., totaled only 30% of the average gas station’s revenue but brought 70% in profit.

Here’s a graph showing the profit margin of certain items being sold at the convenience store:

profit Margin of Typical Items at Convenience Store

Factors That Affect the Earnings of a Gas Station

Self service Gas Station

There is not one but so many factors that affect the earnings of a gas station. So, if you are planning to open one, then here are some things you should know:

1. Type of Gas Station

The most important factor that affects the earnings of a gas station is what kind of gas station it is. From self-service and independent to franchise-owned, there are multiple types of stations you can open.

  • Gas Station with Convenience Store: Most gas stations in the U.S. also feature a convenience store, which is actually one of the best ways to maximize your income as a convenience store owner.
  • Full-Service Gas Stations: In a full-service gas station, you will find attendants pumping gas for customers. Owners who want to offer extra services can opt for this option. However, you will have to consider the increased labor cost in this.
  • Gas Station Franchises: You can also buy gas station franchises where you can leverage the benefit of an existing brand name and value. However, you must be willing to have only partial control in this.
  • Independent Gas Stations: In this, you are basically your own boss; you own the gas station. However, you would have to do the groundwork to build a successful business.
  • Self-Service Gas Stations: The majority of gas stations today operate on this model, where customers fill gas in their vehicles themselves. However, the success of this model depends highly on your location and number of customers.

2. Location 

Another major thing that affects the profitability of gas stations is the location. The better your location is, the greater your profit will be.

Type of locationBenefitsEarnings
Near HighwaysConvenient refuel spot, good customer trafficIncreases revenue
High Traffic AreasLot of traffic, lots of customers, high visibilityHigh profitability
Commercial AreasRegular need for commutersGood earning potential
Rural Areas Only option for peopleCan be profitable
Residential AreasDaily fuel needsConsistent income

3. Size

Depending on your location, it is important to build a gas station that has a reasonable size.

For example, if your gas station is in a high-traffic area, then the size should be large enough to cater to a large number of people for better convenience.

Similarly, if your gas station is in a rural area, it might not have to be as big as the one in a residential area.

Some other points that you should keep in mind while deciding the size of the gas station are:

  • Space for expansion
  • Number of pumps you want to add
  • Parking facilities

4. Services Offered

The kind of services you offer at your gas station can also largely impact its revenue. Here are some examples and services that one can offer at a gas station:

  • Car Wash: By offering a car wash service, you can very easily increase your revenue. Car wash businesses are always in demand, so offering this additional service could be really good for you.
  • Food Services: People get hungry when they are traveling or when they have been driving for miles. So, offering refreshments such as coffee, snacks, or even a vending machine could help you increase your earnings.
  • Mechanic Services: If you have good space in your gas station, then you can also hire mechanics and offer mechanic and repair services. Although this option requires hiring staff and additional investment, it will allow you to maximize your gas station earnings.
  • Convenience Store: Lastly and most importantly, you can start a convenience store along with your gas station. You can either start an independent store or buy a convenience store franchiseThe high-margin products you can sell via a convenience store can help you make a lot of money.

5. Local Competition

There is competition in every industry today, and no matter how big or small a business is, everyone is affected by it. Let us see how your local competition can impact your profit:

  • Brand Loyalty: If your neighboring gas station has been in the area for a long time, then customers will naturally choose them over you until & unless you have something more to offer. Similarly, if a neighboring gas station is a franchise of a well-known brand, then customers might be inclined to make their gas purchase from them.
  • Incentive Programs: Discounts and offers attract customers like Flame for a moth. And if your competitor is running some attractive discounts, your customers will go to them.
  • Pricing Battles: If your competitor lowers the prices, then to stay competitive, you will be forced to slash your prices, too. Pricing battles erode profit margins.
  • USP: A business can stand itself out only by offering a unique selling proposition. It could be offering anything that your competitor is not. For example, your competitor might be offering car wash services, so to attract customers, you will also have to add a USP.

6. Gas Prices

Gas prices fluctuate, and every fluctuation directly affects the profit margin. So, understanding their ebb and flow is essential. Here are more details on how the change in gas prices can affect your gas station’s profitability:

  • Seasonal changes: Gas stations, too, see fluctuation in demand depending on the season. For example, the summer season sees the most demand. So, your profitability during such seasons may increase or decrease depending on how well you manage your gas station and stock.
  • Supply chain disruptions: Things like geopolitical issues or natural disasters may disrupt the supply chain, which can lead to a sudden increase in prices. Obviously, such disruptions affect the price of gas and fuel and thus your profitability.
  • Fluctuation in the global market: The cost of crude oil in the international market affects gas prices. Gas station owners may see squeezed profits when costs hike.
  • Taxes and Regulation: Environmental regulations and tax on gas vary by location. So, depending on which state you live in, you will have to bear this cost, which will cut down your profit margin.

7. Taxes and Regulations

There are different types of taxes and regulations that you may have to follow depending on your location and state. Suffice it to say this added cost can trim your profit margins; unfortunately, there is no escaping these costs.

So here are some common types of taxes and regulations you may have to bear when running a gas station:

  • Licenses and permits
  • Fuel taxes
  • Sales Taxes
  • Environmental rules
  • Labor laws
  • Local zoning
  • Safety regulations

Operating Expenses of a Gas Station

Operating expense is one of the biggest expense in running a gas station, and so understanding these expenses can help you come up with cost cutting stratergies.

Type of ExpenseIncludesAffect on Profit
Labor CostsSalaries and benefitsAllows better service, but it increases expenses
Fuel CostsPrice of purchased fuel/gas High cost of fuel can decrease profit margins
Card Processing FeesPayments made to card companiesSince most customers pay using card, this can trim profits
MaintenanceRepair and upkeep of stationPrevent business losses and frequent breakdowns in the long run
UtilitiesWater, waste disposal, electricity, etc. More usage can increase expenses
Lease/RentCost of the property or land being usedA fixed expense that you cannot escape
InsuranceCoverage against various risksA fixed expense that protects against unexpected events

Independent Vs. Franchise Gas Station: Which One is Better?

If you are hoping to enter the gas station industry, then you might have come across two ways to get started: Franchise or Independent business. There are pros and cons to both options, so let us compare these options so that you can identify which one would be better for you.

Factors to ConsiderIndependent Gas StationGas Station Franchise
Investment You can cut expenses and mold the investment to fit into your budgetHave to bear the initial investment amount asked by the franchisor
Brand Value Have to do the groundwork required to build a brand name & valueCan benefit from existing brand name & customers
Control You get full control over your business You get partial control
Flexibility in OperationsFull flexibility Low flexibility
RiskHigh riskLow risk
ResponsibilityFull responsibility on your head Lower responsibility
Bulk Buying PowerLow at first High bulk buying power of franchisor allows you to benefit from lower gas cost
Marketing Have to do it yourselfWill get full support & strategy plan from franchisor

How Will Electric Vehicles Impact Gas Station Businesses in Future?

e vehicle

The electric vehicle market can be the biggest threat to those looking to enter the gas station business in 2024. However, it is hard to tell at this time how great of a negative impact the EV market will make on the gas station business.

This is because less than 1% of cars on roads today are EVs, but the EV industry is seeing a rapid surge in demand. And 4 in every 10 consumers are saying that they will consider buying an EV for their next car. Not to mention, EV stations are popping up everywhere all over the country.

Our suggestion? You can start a Gas Station business, because let’s face it, gas-run vehicles are not going to disappear completely. However, consider providing an EV charging station as well if it is permitted in your state.

This will allow you to cater to both kinds of customers, increase revenue, and reduce risk.


Wrap Up

Getting into the gas station business is quite a head spinner. There are so many costs involved in the business and so many factors to consider, such as meager profit margins, services you can offer, etc.

With the rise in the EV market, there is also a potential threat involved in this business. So, you must consider all the aspects mentioned in this guide before you invest your hard-earned money into this business.

We hope you were able to find this blog post: Is owning a gas station profitable? Useful.


FAQ’s

How much does it cost to start a gas station in the U.S.?

Starting a gas station is not cheap. You can expect to spend anywhere between $250,000 to $2,000,000 to open a gas station in the U.S. However, the actual amount will differ based on your location, size, gas station type, and services offered, among other things.

Is starting a gas station worth it?

Since the profit margin in the gas station business is pretty dismal (1% – 1.4%), starting a gas station alone is not worth it. However, if you open a convenience store along with it, then you can definitely start a gas station business.

What are the most profitable items to sell at a gas station?

The most profitable items to sell at a gas station include:

  • Toiletries and personal care items
  • Snacks & Beverages
  • Tobacco Products
  • Healthy & Beauty products, etc.

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