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How To Open a Gas Station

Gas pump

Starting a gas station can be expensive and complex. But, with millions of cars on the road needing fuel and goods, a gas station has the potential to be a profitable business venture.

Starting any new business requires careful business planning. Entrepreneurs must also make several legal decisions and account for all laws and regulations.

This step-by-step guide will outline how to break into the gas station industry and launch a successful, legally sound gas station.

For specifics on opening a convenience store, see FindLaw's How to Open a Convenience Store.

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Choose a Location for Your Gas Station

Choosing the right business location is a significant factor in your gas station's success. Consider convenient locations in areas with heavy traffic or just off freeway exits. Customers often visit the nearest gas station when the fuel light goes on.

If you choose a corner location, consider offering entrances from both intersecting roads. Before you finalize your gas station location, check your local zoning laws to ensure a gas station will be allowed.

There are a few extra considerations if you purchase an existing gas station. Already having gas pumps and tanks installed can reduce costs. Ensure the previous owners followed all applicable laws for installation — namely NFPA 30A, which sets guidelines to prevent explosions and fires in fuel-dispensing equipment.

Also, ensure existing gas tanks have no environmental issues or compliance problems. Old, worn-out gas tanks risk leaks, which can contaminate water supplies and expose your business to liability.

Name Your Gas Station Business

If you are opening a franchise for your gas station business, you will operate under a well-known name. The franchisor handles this step for you.

For independent gas station owners, choosing a business name can be one of the most important steps for your small business. Choose a name that is easy to pronounce and memorable. Imagine how it sounds and how it will look on your sign and branding.

Make sure your desired name is not trademarked or already in use by another business. Otherwise, you could be liable for trademark infringement. Most states' secretary of state or business administration offices offer searchable databases of registered business names.

For federal trademarks, the United States Patent and Trademark Office (USPTO) has a searchable trademark database of trademarked business names.

A final step before deciding on a business name is to check social media and domain name availability.

Decide on Your Business Structure

Most gas station business owners structure their businesses as limited liability companies (LLCs) or corporations. These business entities 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 must file paperwork with your state's secretary of state office.

While both corporations and LLCs offer personal liability protections, corporations have a more formal management structure and pay more in taxes. A corporation may be the best structure if you plan to scale your business significantly, like expanding to a chain of gas stations.

If you opt to run a franchise, you must still decide on a business structure.

Decide Whether Your Gas Station Should Be Full-Service

Most gas stations now operate as self-service 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 must 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. The same is true in certain parts of Oregon. To find self-service laws by county in Oregon, visit a self-service status map.

Keep in mind that state laws are subject to change. Check your state's gas dispensing laws and talk to a lawyer to ensure you follow applicable laws as you open your gas station.

Make a Marketing Strategy

An effective marketing plan is crucial to building a successful gas station. If you open a gas station franchise, you will benefit from brand recognition and an existing customer base. If you open an independent gas station, you must be more comprehensive with your marketing efforts.

Regardless, your marketing plan must make your target market aware of what you offer and where you are. The research in your business plan about your market and target audience should inform the marketing channels and methods you use. You must first know your customers and their needs before executing effective marketing activities.

In today's digital age, a strong online presence is key. Consider the following ideas:

  • Create an accessible, user-friendly website.
  • Stay active on your social media channels, consistently posting fresh content and promotions.
  • Purchase targeted advertisements on platforms like Google Ads, Facebook, and Instagram.
  • List your gas station on map services like Google Maps, Apple Maps, and GPS systems.

Customers also appreciate rewards programs, which many chain gas stations employ. Reward frequent customers with gas discounts, free beverages, and other perks. Most rewards programs are completely digital and linked to customers' phone numbers.

Plan to adjust your efforts as you go. The best marketing plans pivot and evolve to meet customer needs and stand out in a competitive market.

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 your business.

Your business plan should serve as a roadmap for business growth and a tool to attract investors and lenders. It should describe:

  • Business goals
  • Business partners — if any
  • Business structure
  • Thorough market analysis and market research
  • Marketing and advertising strategy
  • Product vendors and fuel suppliers
  • Breakeven analysis
  • Financing plans and goals
  • Products and offerings

You may need to modify your plan as your business develops and grows. If you modify the plan that a financial lender or institution approved, make sure you give them the revised plan.

Drafting your business plan can be the most daunting part of the small business process. The U.S. Small Business Administration (SBA) offers free or low-cost business counseling, including help with business plans. You can also use FindLaw's Creating a Business Plan section for more tips and resources.

Advertise Your Location

Maximize your commercial location by having clear signage outside your gas station. Ensure signs are visible to drivers from at least a few blocks away. You may also want to research freeway signs. If customers know that your gas station is approaching, they may exit specifically to visit you.

Most local jurisdictions require certain permits for signs. If you work with a sign contractor, they will likely know the local sign laws and apply for the permit if necessary. Your state's department of transportation can also tell you how to post your gas station's signs along roadways legally.

Consider listing your business online and with mobile maps. Some of these apps and websites allow customers to rate businesses. So, ensure your employees are customer-focused, and your facility is clean and in good shape.

Plan Your Convenience Store

Most gas station business models also include some type of convenience store. A convenience store is an excellent way to boost profit margins and customer satisfaction. Sometimes, lowering gas prices by even just a few cents can incentivize customers to fuel up and purchase goods from your business.

This is a competitive industry. Carefully plan your gas station's business model and how you will maximize sales and profit. This is especially important if you're a small gas station owner competing against large, well-resourced chains.

Motorists often look for refreshments to take on the road or perk them up after a long drive. Some everyday convenience store items you offer include:

  • Snacks and beverages
  • Toiletries
  • Magazines
  • Tobacco products
  • Coffee
  • Lottery tickets
  • Local memorabilia

The convenience store is often a significant source of profit for gas stations. Do an ongoing sales analysis and adjust your convenience store offerings as you grow your business. Your target market research from your business plan should guide this process. Increase your potential for profit by offering products your target audience wants to buy.

Besides a convenience store, consider other amenities customers expect to find at a gas station. These can include:

  • Car wash
  • Electric car charging
  • Clean, comfortable restrooms
  • Air stations and pumps
  • Automotive repair services
  • ATM

When 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.

Seek Financing for Your Startup Costs

Opening a gas station can be a profitable but costly business. The startup costs and ongoing costs can be high. They include:

  • Buying your location or commercial rent
  • Franchise buy-in fees if purchasing a franchise
  • Licensing fees
  • Fuel costs
  • Inventory and stock
  • Staffing and payroll

Most gas station startups require outside financing. Use your well-researched business plan when approaching investors. Also consider a small business loan through a bank or credit union.

You may be eligible for a Small Business Administration (SBA) loan. Some businesses have more success securing an SBA loan due to reduced lender risk.

Get Required Business Licenses and Permits

The licenses and permits needed vary by state. States may have regulations and can require permits for:

  • Fire inspections and certificates of occupancy
  • Health and safety protocols
  • Underground storage tank safety
  • Pump licenses
  • Retail dealers' licenses
  • Licenses to sell alcohol, tobacco, and lottery items

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 and local business authorities can help you learn more about the licenses and permits you will need as a gas station owner.

Meet EPA Requirements

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 require you to prove you have enough financial resources to pay for the cleanup of gasoline leakages 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. Still, consider a comprehensive insurance policy. The right insurance can give your business a financial safety net.

Get Appropriate Business Insurance

At a minimum, your gas station will need general liability insurance and worker's compensation insurance.

General liability insurance covers theft, property damage, customer injuries on business property, and other unforeseen events. Most states require workers' compensation if you have even one employee.

You should also include coverage for fuel tank contamination or equipment malfunctions. When determining the right coverage, consider your business's unique risks and liabilities. Also, consider what you can afford to pay in premiums and deductibles in case of a claim.

Find a Gas Supplier

If you are opening a franchise, the parent company might already have a preferred gas supplier. If you are opening an independent gas station, shop around with several oil companies to secure the best price.

Once you find a reliable supplier, sign a contract to finalize your agreement. The contract should cover:

  • Pricing
  • Fees
  • Royalties
  • Delivery times
  • Penalties

It's a good idea to ask an attorney to review your contract before you sign. An attorney who has your best interests in mind can ensure it reflects the terms you and the supplier agree to.

Get an Employer Identification Number (EIN)

An Employer Identification Number (EIN) is a number the Internal Revenue Service (IRS) issues to businesses. They use this unique number for identity and tax purposes. You need an EIN to open your business bank account and hire employees.

You can get your EIN instantly and at no cost on the IRS website. Beware of commercial sites that charge a fee for an EIN — some of them look similar to the official IRS site.

Hire Staff for Your Gas Station

Your staffing needs will depend on the type of gas station you open. If you open a full-service or minimum-service gas station, you will need more gas station attendants to manage the pumps. Other hires may include:

  • Cashiers
  • Stockers
  • Car wash attendant
  • Maintenance and janitorial staff

If your gas station is open 24 hours, you must find staff willing to work the third shift. Your business should have a security policy to help ensure the safety of your employees and customers.

Look for a customer service background in potential candidates. Employees should contribute to a positive in-store experience for your customers. You should also run a background check on each employee you hire.

Review applicable hiring and employment laws before you staff your store. For example, it is illegal to ask certain questions during an interview. You also must verify every employee's identity and employment eligibility.

If you hire staff under 18 years old, it is also important to know the laws for hiring minors.

Establish Security Protocols

Gas stations, especially those open overnight, can be susceptible to crime. For safety, always schedule at least two employees per shift. Also, consider installing visible security cameras outside and inside your station's common areas.

Visible cameras can also deter crime by recording suspicious activity. Follow your state's privacy laws and avoid positioning cameras near restrooms or break rooms. Your state's labor agency can provide more information on protecting your store while not violating workplace privacy expectations.

Understand Common Gas Station Business Issues

Owning a gas station business is like owning many other small businesses. There are a few unique issues you should know before starting yours.

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.

Being aware of the laws in your state can help you avoid price gouging. If you are caught price gouging, expect hefty financial penalties and 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 an emergency. Many states consider it price gouging if you increase your prices by 10% or more during a state of emergency.

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 consult 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 open a franchise rather than start their business 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 that is proven in the marketplace. This means there will be an existing customer base.

The drawbacks of franchising are mainly financial. There can be high buy-in costs for franchising, which raises the overall cost of starting your business. 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 be unable to choose your suppliers or store layout. You will have less freedom in how you run your business and limited creativity.

Whether to franchise comes down to your business needs, preferences, and budget.

If you are considering buying a gas station franchise, ask the franchisor to complete a franchise agreement questionnaire. This will give you basic information, such as the franchise fee and expected benefits.

If you decide to purchase a franchise, you and the franchisor will sign a franchise agreement. This agreement forms a binding contract. Having an attorney review the agreement before you sign it is beneficial.

How an Attorney Can Help With Your New Gas Station Business

Any type of entrepreneurship is rarely a simple venture, and opening a gas station is no different. Some small-business owners benefit from getting professional legal help. An experienced local business attorney can handle the more complicated legal aspects of your business formation. This includes licensing, choosing a business structure, hiring laws, zoning, and more.

Starting a gas station requires a significant investment of your time and money. You'll want to get it right the first time. Contact an attorney in your area today to learn how they can help your new business.

Another option is FindLaw's trusted, simple-to-use online business formation tool. This DIY tool guides you through each step of your business process, from business idea to opening day. Its services and support also help you meet all legal requirements for your gas station.

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