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Alexander Zhao
3 months
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#SideHustle

Are gas stations a profitable venture? Do most owners buy or franchise their stations?

Wait that is a big business and does not qualify as a side hustle, Anyway i am familiar with the industry, as i have once worked for one. And get ready for the terrible truth.
Most of the time, running a gas station is a “break even” business. You can expect your margin of gasoline to cover land carrying costs (either leased or owned), maintenance of basic equipment, bank charges (for taking credit cards) and salaries.

And that’s about it. This assumes you have a decent location where people frequently stop for gas. You might make a little more if you are far away from other gas stations, but how often will that be the case?

Most of that is because you and the gas suppliers will be playing a little competitive dance. Whether you get your supply from the same company or you’re an independent who buys from whoever can supply you, you will constantly be keeping an eye on retail and wholesale prices. Retail is easy - your competitors will have massive signs with their price on it (as do you). One morning, you get to work and see the guy down the street has dropped their price three cents (a liter, a gallon, doesn’t matter - gas customers will drive miles to save 25 cents on a fill up - truth). You get on the phone to your wholesaler who will say “yeah, match it we will drop our price accordingly” or “no way they can keep that up - deal with the lower volume for today and we will adjust your delivery schedule”.

So, how do you make money? By selling other stuff!

See that building in the background? That’s the real money maker - the convenience store! So, why don’t people shop elsewhere? Because they’re already at your store paying for gas!.

Gas station ownership is complicated. It’s definitely not a franchise situation. If you work together with an oil company, they will provide a lot of the stuff you need for free if you agree to keep buying your gas from them. Of course, if you want to switch, they will take it all back. They want to keep you happy so in addition to gas, they will offer you good margins on things like oil and windshield washer fluid. In a lot of cases, the company will buy the property and lease it to an operator. They will essentially provide a turnkey operation that they hope will be profitable for all involved.

Back in olden times, it worked the same except that instead of convenience stores, the big money maker was automobile repairs. Most people bought gas off of their mechanic. However, it’s harder for modern mechanics to work on modern cars so this model isn’t really viable any more except for things like oil changes and car washes.
Alexander Zhao

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