How To Open a Gas Station
If your entrepreneurial spirit is fueled by the idea of providing gasoline and essentials to drivers, you might want to open a gas station.
Starting a gas station can be an expensive and complex undertaking. But there are millions of cars on the road, all in need of fuel and essential goods.
If you want to enter the gas station business but are unsure where to start, this step-by-step guide can help you get your gas station startup going.
1. Choose a Location
Location is a significant factor in the success of your gas station. Consider locations in areas with heavy traffic or just off freeway exits. Customers will often choose to visit the nearest gas station when the fuel light goes on.
If you choose a corner location, it is also a good idea to offer entrances from both intersecting roads. Convenience can be a significant factor in the success of a gas station. Before you finalize your gas station location, check your local zoning laws to ensure a gas station will be allowed.
If you purchase an existing gas station, there are a few extra considerations to keep in mind. Although it can be handy to have gas pumps and tanks installed, you should check to make sure the previous owners followed all applicable laws.
Most notably, you should ensure no environmental issues or compliance problems with the existing gas tanks. Old, worn-out gas tanks risk leaks, which can contaminate water supplies and opens your business up to liability.
2. Name Your Gas Station Business
If you are opening a franchise, you will probably already be operating under a well-known name and can skip this step.
For independent gas station owners, choosing a name can be one of the most critical steps of starting a small business. It would be best if you chose a name that is easy to pronounce and memorable. You should also make sure that the name is not trademarked or already taken by another business. Otherwise, you could be liable for trademark infringement.
The United States Patent and Trademark Office (USPTO) offers a searchable trademark database to help you. Your state's office of the secretary of state can also help you to find out if a business name is already taken. Many states also offer searchable databases of LLC names. A final step before deciding on a business name is to check social media and domain name availability.
3. Decide on Your Business Structure
Most gas station business owners choose to form a limited liability company (LLC) or corporation. These structures offer tax benefits and personal asset protection that sole proprietorships and partnerships do not.
By opting for an LLC or a corporation, you can protect your personal assets from your business's liabilities. To register as an LLC or corporation, you will need to file paperwork with your state's office of the secretary of state.
4. Decide Whether Your Gas Station Should Be Full-Service
Most gas stations now operate as self-service gas stations, where customers pump their own gas. A limited number of gas stations also offer full-service or minimum-service.
At full-service stations, gas station attendants pump the gas and sometimes check tire pressure. At minimum-service stations, attendants pump gas for drivers but usually do not provide other services.
If you are opening a gas station in New Jersey, you will need to open a full-service or minimum-service gas station. New Jersey law does not allow customers to pump their own gas due to safety concerns.
Keep in mind that state laws are subject to change. You should always check your state's gas dispensing laws and talk to a lawyer to make sure you are following applicable laws as you open your gas station.
5. Make a Marketing Strategy
Creating a good marketing plan is a crucial step toward building a successful gas station. If you are opening a gas station franchise, you will probably benefit from drawing from an existing customer base.
If you are opening an independent station, you will need to create a marketing plan to make your target market aware of what you offer and where you are. Your marketing plan should contain research about your geographical market and your customer base. This will help you identify your customers and their needs.
6. Advertise Your Location
You chose your location strategically, so you should make the most of it by having clear signage outside your gas station. It is a good idea to have signs that drivers can see from a few blocks away.
If you work with a sign contractor, they will probably know the local sign laws and can apply for a sign permit if necessary. You may also want to research freeway signs. If customers know that your gas station is coming up, they may exit specifically to visit you.
Your state's department of transportation can help you find out how to post your gas station's signs along roadways legally. It is also a good idea to get your business listed on online and mobile maps. Some of these apps and websites allow customers to rate businesses. So, make sure your employees are customer-focused and your facility is in good shape.
7. Write a Business Plan
With a location and marketing strategy in place, you can finalize your business plan. A comprehensive business plan should detail the marketing, management, operation, and direction of the business.
Your business plan should be a detailed description of your gas station and should describe:
- Your business goals
- Your business partners — if any
- Your business structure
- Your marketing plan
- Your product and fuel suppliers
- Your breakeven analysis
- Financing plans and goals
- Your products and offerings — This includes how many gas pumps you will offer, air stations, car washes, auto repair services, restrooms, and convenience store offerings
As you draft your business plan, keep in mind that you can modify it as your business develops and grows.
8. Plan Your Convenience Store
Most gas stations include some type of convenience store for their customers. A convenience store is an excellent way of generating a profit and can add to customer satisfaction. Sometimes it might even pay off to lower your gas prices, even just by a few cents, to attract customers into your store.
Weary travelers are often looking for refreshments to take on the road or perk them up after a long drive. Some everyday convenience store items you might consider offering include:
- Snacks and beverages
- Tobacco products
- Lottery tickets
- Local memorabilia
The convenience store is often a significant source of profit for gas stations. You should do an ongoing analysis of your sales and build on your convenience store successes as you grow your business.
When you are pricing your gas and products, it is important not to increase your prices during a state of emergency. Doing so could bring penalties against your business for price gouging.
9. Seek Financing
Opening a gas station can be a profitable but costly business. The start-up costs and ongoing costs can be high. They include the cost of buying your location, franchise buy-in fees, licensing fees, fuel costs, stock, and more.
Most gas station startups require outside financing of some form. With a well-considered business plan in hand, you will be able to approach investors with confidence. You may also consider applying for a small business bank loan.
10. Get the Required Licenses and Permits
The licenses and permits you need will vary according to state. States may have regulations and require permits on things such as:
- Fire inspections
- Health and safety protocols
- Underground storage tank safety
- Pump licenses
- Retail dealers' licenses
- Licenses to sell alcohol and tobacco
- Your ability to sell alcohol from your gas station will depend on your state. Some states do not permit alcohol sales at gas stations.
Your state's department of transportation can help you learn more about the licenses and permits you will need as a gas station owner.
The environmental protection agency (EPA) closely regulates owners and operators of gas stations. They have special rules about the underground storage tanks (USTs) that hold gasoline. They will require you to show that you have enough financial resources to pay for the cleanup of any leakages of gasoline from your tanks. You can show your financial responsibility to the EPA through:
- Your insurance policy
- Coverage by a state fund that pays for leakage cleanups
- A financial test
If you pass the financial test, the EPA will consider you self-insured against fuel leaks. But it's a good idea to have a comprehensive insurance policy. The right insurance can help to give you and your business a financial safety net.
11. Get the Appropriate Insurance
Your business insurance should include coverage in case of a gasoline leak or other equipment malfunctions at your station. You will also need good coverage to protect you in the unfortunate event that a customer is injured at your business.
If your gas station employs staff, you should also check to ensure that your insurance includes workers' compensation coverage.
12. Find a Gas Supplier
If you are opening a franchise, the parent company might already have a preferred gas supplier. But if you are opening your own gas station, you should shop around with many oil companies to secure the best price possible.
Once you find a reliable supplier, you should sign a contract to finalize your agreement. The contract should cover issues like pricing, fees, royalties, delivery times, and penalties. It's a good idea to ask an attorney to review your contract to make sure it is drafted to reflect the terms you and the gas supplier agree upon.
13. Get an Employer Identification Number (EIN)
An EIN is a number that the Internal Revenue Service (IRS) issues to businesses. They use this unique number to identify businesses. You will need an EIN to open your business bank account and hire employees. You can apply for an EIN online through the IRS's website.
14. Hire Staff
Your staffing needs will depend on the type of gas station you decide to open. If you open a full-service or minimum-service gas station, you will need more gas station attendants to be outside at the pumps.
If you choose to operate your gas station 24 hours a day, you will need a few members of staff who are willing to work the third shift. Your business should have a security policy to help ensure that employees and customers are safe, especially during overnight hours.
15. Establish Security Protocols
Unfortunately, gas stations can be susceptible to crime. For safety reasons, it's a good idea always to have at least two employees at the gas station. It would help if you also considered installing visible security cameras outside and inside your station's common areas.
In addition to recording suspicious activity, visible cameras can act as a crime deterrent. Just make sure to follow your state's privacy laws and avoid positioning cameras near restrooms or break rooms. Your state's labor agency can provide you with more information on privacy expectations in the workplace.
What is Price Gouging?
Natural disasters, epidemics, wars, or other events can all cause a state of emergency. At these times, consumer demand spikes for essential goods like food, fuel, and water. Price gouging is when retailers exploit this temporary increase in demand and overcharge desperate customers.
To avoid being accused of price gouging, you should be aware of the laws in your state. If you are caught price gouging, there can be hefty financial penalties and even criminal charges. The best policy is to charge the same price before and during emergencies.
Most states determine whether a retailer is price gouging by comparing prices before and during the emergency. If you increase your prices by ten percent or more during a state of emergency, many states will consider that to be price gouging. Other state laws provide that retailers shall not sell goods at excessive prices.
Other Gas Pricing Issues
Some states, such as Minnesota and Wisconsin, have additional laws on gasoline pricing. These laws provide minimum pricing thresholds, requiring gas stations to mark up their gas by at least certain percentages above cost. Local laws may also require that gas stations post clear signs showing their pricing.
You should talk to an attorney or check your state laws to determine if your state currently has gas pricing rules.
Should You Open a Gas Station Franchise?
Many new gas station owners decide to open a franchise rather than starting from scratch. There are many benefits to franchising. For example, the franchisor may offer you valuable training and information. They also might have corporate legal counsel that you can consult with. By opening a franchise, you will also do business under a known brand name proven in the marketplace. This means that there will be an existing customer base to draw from.
The drawbacks of opening a franchise are mainly financial. There can be high buy-in costs for franchising, which makes the overall cost of starting your business higher. There might also be ongoing costs if the franchisor charges royalties and fees for the life of your business. As a franchisee, your business choices might also be more restricted. For example, you might not be able to choose your suppliers or your store layout. The choice of whether to franchise comes down to your business needs, preferences, and budget.
If you consider buying a gas station franchise, asking the franchisor to fill out a franchise agreement questionnaire is an excellent place to begin. You will get some basic information through the questionnaire, such as the franchise fee and the expected benefits.
If you decide to purchase a franchise, you and the franchisor will sign a franchise agreement. This agreement forms a binding contract between you and the franchisor. It is a good idea to ask an attorney to look over this agreement before you sign it.
How an Attorney Can Help
Opening a gas station is a lot of work and a big expenditure. So, it is vital to make sure everything is done legally to avoid future headaches. Contact a business attorney today if you have questions about licenses, franchising, pricing, or other legal issues.
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