How to Start a Gas Station: Location, Cost and Profit Potential

When opening your gas station, keep these essential aspects in mind:

1. Location — Choose a high-traffic location with good visibility and accessibility. Proximity to highways, residential areas, and commercial zones can increase customer traffic.
2. Franchise — Choose one of the following franchises: Shell, Chevron, or BP (British Petroleum).
3. Licenses and permits — You will need fuel storage permits, health department permits, fire department permits, and environmental permits.
4. Fuel supply — Establish agreements with reliable fuel suppliers. Consider partnering with major oil companies or independent suppliers based on pricing, terms, and brand recognition.
5. Equipment — Invest in high-quality fuel pumps and dispensers with modern payment options, including credit card readers and contactless payments.
6. Register your business — A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple. Form your business immediately using ZenBusiness LLC formation service or hire one of the best LLC services on the market.
7. Legal business aspects — Register for taxes, open a business bank account, and get an EIN.
8. Loyalty programs — Implement loyalty programs and promotions to attract and retain customers. Offer discounts, reward points, and membership benefits.
9. Convenience store — Stock a variety of products, including snacks, beverages, automotive supplies, and convenience items. Consider offering hot food and coffee to attract more customers.

Step 1: Decide if the Business Is Right for You

Pros and cons

Starting a gas station has pros and cons to consider before deciding if it’s right for you.

Gas station industry trends

Industry size and growth

• Industry size and past growth – The US gas station and convenience store industry is worth $469.8 billion in 2022 after expanding 34% in the last two years.((https://www.ibisworld.com/industry-statistics/market-size/gas-stations-with-convenience-stores-united-states/))
• Growth forecast – The US gas station and convenience store industry is projected to grow by 2.7% in 2022. 
• Number of businesses – In 2022, 66,598 gas station and convenience store businesses are operating in the US.
• Number of people employed – In 2022, the US gas station and convenience store industry employs 843,890 people.((https://www.ibisworld.com/industry-statistics/employment/gas-stations-with-convenience-stores-united-states/)) 

Trends and challenges

Trends in the gas station industry include:

• Contactless payments and services like curbside pickup are becoming more and more common in gas stations and convenience stores. 
• Electric car plugs are an opportunity for gas stations to increase their customer base and revenue.

Challenges in the gas station industry include:

• The number of people working from home is increasing, decreasing gas demand. 
• Gas stations must be up to date with requirements for chip credit cards or they will not be protected by credit card companies from fraud. This is an added expense for gas stations. 

Consumer spending

• Average consumer spend – The average US household spends nearly $5,000 per year on gas.((https://www.cnbc.com/2022/05/18/households-are-spending-the-equivalent-of-5000-a-year-on-gasoline.html)) 

Price differences across the country

• More expensive – Gas prices are the most expensive in California, Nevada, and Hawaii.((https://www.cnbc.com/2022/03/14/most-and-least-expensive-states-to-buy-gas.html))
• Less expensive – Gas prices are the least expensive in Kansas, Missouri, and Oklahoma.

How much does it cost to start a gas station business?

Startup costs for a gas station range from $250,000 to $350,000 and could be much higher. Costs include a 30% down payment on land and gas station construction, as well as the inventory of gas and convenience store items.

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$150 - $200	$175
Business licenses and permits	$100 - $300	$200
Insurance	$100-$300	$200
Business cards and brochures	$200 - $300	$250
Website setup	$1,000 - $3,000	$2,000
30% down payment on land and gas station construction	$150,000 - $200,000	$175,000
Inventory of gas and convenience store items	$100,000 - $150,000	$125,000
State gas station permits	$2,000 - $3,000	$2,500
Total	$253,550 - $357,100	$305,325

How much can you earn from a gas station business?

Gas prices obviously fluctuate, and convenience store item prices vary. The average person who visits your gas station might spend $30. Your profit margin after all costs will be about 10%. 

In your first year or two, you might have 100 customers a day, bringing in $1,095,000 in annual revenue. This would mean $109,000 in profit, assuming that 10% margin. As you begin to get regular customers, those numbers could double. With annual revenue of $2,190,000, you’d make an outstanding profit of $219,000.

What barriers to entry are there?

There are a few barriers to entry for a gas station. You biggest challenges will be:

• The significant startup costs
• Beating rivals in a very crowded market

Step 2: Hone Your Idea

Now that you know what’s involved in starting a gas station, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.

Why? Identify an opportunity

Research gas stations in your area to examine their products, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a gas station with electric car plugins, or a gas station with a convenience store that offers fresh sandwiches. 

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your products and on-site services

Your products will be your gas and convenience store items. You could add additional revenue by having an air machine for tires or an ATM machine. 

How much should you charge for gas and convenience items?

Gas prices will be determined by the market, as will your convenience store items. You should aim for a profit margin of about 10%. 

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will be anyone with a car, so you should spread out your marketing to include sites like TikTok, Instagram, and Facebook. 

Where? Choose a gas station location

When choosing a gas station location, it’s essential to consider several factors.

First, analyze the area’s traffic flow and identify high-visibility locations with easy access for vehicles.

Second, research local competition to ensure your station will not be overshadowed by a more dominant player.

Third, examine the demographics of the surrounding community to gauge demand for fuel and convenience store items.

Finally, review local zoning laws and environmental regulations to ensure the site can be developed for a gas station.

Step 3: Brainstorm a Gas Station Name

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “gas station” or “convenience store”, boosts SEO
• Name should allow for expansion, for ex: “QuickFuel Stop” over “Commercial Vehicle Fueling”
• A location-based name can help establish a strong connection with your local community and help with the SEO but might hinder future expansion

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Gas Station Business Plan

Here are the key components of a business plan:

• Executive Summary: A concise summary outlining the gas station business plan, highlighting key aspects such as mission, objectives, and potential for profitability.
• Business Overview: A brief introduction to the gas station business, including its location, facilities, and the value it offers to customers.
• Product and Services: Explanation of the fuel and convenience products offered, emphasizing any unique features or services provided by the gas station.
• Market Analysis: Examination of the target market, customer demographics, and trends in the area to justify the demand for a gas station in that location.
• Competitive Analysis: Assessment of existing and potential competitors, identifying strengths, weaknesses, and strategies to gain a competitive edge in the market.
• Sales and Marketing: Strategies for promoting the gas station, attracting customers, and increasing sales, encompassing advertising, promotions, and customer loyalty programs.
• Management Team: Overview of the individuals responsible for the gas station’s day-to-day operations, highlighting their relevant skills and experience.
• Operations Plan: Detailed plan outlining the daily operations, from fuel procurement to staff management, ensuring efficiency and customer satisfaction.
• Financial Plan: Projections of the gas station’s financial performance, including startup costs, revenue forecasts, and profit margins, providing a comprehensive outlook for potential investors.
• Appendix: Supplementary materials, such as permits, licenses, market research data, or any additional information supporting the gas station business plan.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to gas stations. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your gas station will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a gas station business. 

Step 8: Apply for Gas Station Business Licenses and Permits

Starting a gas station business requires obtaining a number of licenses and permits from local, state, and federal governments.

Check with your state for specific gas station license and permit requirements. 

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your gas station business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks. 

You may want to use industry-specific software, such as LS Retail, SSCS, or PDI, to manage your inventory, fuel supplies, purchasing, and reporting.

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.

You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

Marketing

Here are some powerful marketing strategies for your future business:

• Professional Branding — Ensure your branding reflects reliability and efficiency. Maintain consistent branding across signage, staff uniforms, and the appearance of your gas station.
• Website Optimization — Develop a straightforward website detailing your location, services, and promotions.
• Local SEO — Optimize your site for local searches related to gas stations and convenience services. Regularly update your Google My Business and Yelp profiles to strengthen your local search presence.
• Social Media Engagement — Use platforms like Facebook and Instagram to promote special offers, share new product updates, and engage with customers.
• Content Marketing — Establish a community blog to share car care tips and local event information, helping to build local connections. Distribute regular newsletters to update customers on new services and special offers.
• Direct Outreach and Partnerships — Network with local businesses and community groups to offer special deals and loyalty programs. Collaborate for cross-promotions to enhance customer value.
• Experiential Marketing — Run promotions on fuel, car washes, or in-store products. Participate in local community events to boost visibility and brand goodwill.
• Customer Loyalty Programs — Implement a rewards program to offer benefits to frequent patrons, encouraging repeat visits.
• Customer Feedback and Engagement — Foster customer relationships through regular feedback opportunities, demonstrating your dedication to service improvement.
• Targeted Local Advertising — Advertise in community newspapers, on local radio, and online to reach a broader local audience.
• Signage and Visual Marketing — Maintain prominent, well-lit signage to attract passing motorists and enhance station visibility.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your gas station meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your gas station business could be: 

• Your one-stop shop when you’re on the go
• Gas up and grab a hot coffee for the road
• Gas, pastries, coffee and much more! 

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a gas station business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in gas stations for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in gas stations. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a gas station business include:

• Gas Station Clerks – make sales, customer service
• General Manager – scheduling, ordering, accounting
• Marketing Lead – SEO strategies, social media

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Gas Station – Start Making Money!

Gas stations provide an essential product, along with snacks and drinks. Even with the emergence of electric cars, gas stations are not going away anytime soon. If you want to serve your community and make good money at the same time, starting up your own gas station could be just the ticket!

You know what’s involved now, so it’s time to find the perfect location and launch your successful gas station. 

Quick Answers

How profitable is a gas station?

The key to having a profitable gas station is volume. You’ll need a location that has a large amount of traffic. A convenience store connected to your gas station also significantly improves profitability.

How can you ensure that your gas station is accessible and meets the needs of different types of customers?

To ensure that your gas station is accessible and meets the needs of different types of customers, you can provide a range of fuel options, such as regular, mid-grade, and premium gasoline, as well as diesel and alternative fuels like ethanol and biodiesel. It’s also important to ensure that the gas station is accessible to customers with disabilities, including wheelchair ramps, handicapped parking spaces, and accessible restroom facilities.

What makes a successful gas station?

A successful gas station should provide quality fuel and a range of convenient services to customers. It should also have a clean and well-maintained facility, a professional and friendly staff, and competitive pricing. Location is also important.

How much gas does a gas station hold?

The amount of gas a gas station can hold varies depending on the size of the station and the number and size of the underground storage tanks. A small gas station may hold up to 10,000 gallons of fuel, while a larger station may hold up to 50,000 gallons or more.

How much energy does it take to run a gas station?

The amount of energy it takes to run a gas station can also vary depending on the size and services offered. Some of the energy needs include lighting, heating and cooling, and running equipment such as pumps, compressors, and refrigeration units.

How can you ensure that your gas station business complies with safety and environmental regulations?

To ensure that your gas station business complies with safety and environmental regulations, you should stay up-to-date with any local, state, and federal laws and regulations related to the operation of a gas station. This may include regulations related to the installation and maintenance of underground storage tanks, handling, and disposal of hazardous materials, fire safety, and employee training.