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5 Reasons to NOT Buy a Gas Station


Here at Franchise City the vast majority of
calls we get from investors are for Subway, Gas Stations or a 7-11. Now all of us here are also franchise and
business owners – but how many of us own a Subway, a 7-11 or a Gas Station? The answer is zero. So I’ll leave that to your imagination why. Now I did once know a broker who owned a gas
station in a great location. It was worth about 2 million dollars. So let me begin by saying if you can afford
a gas station in a great location, and these don’t come up for sale very often because
they are good moneymakers, you could conisder buying it. But good location and traffic gas stations
are rare and typically sell for over 1 million. What people are usually calling us about however
is one of the “great deals” they saw on Bizbuysell or a similar website. You can see here how many are for sale some
of them as low as $13,000. And armed with exactly zero business knowledge
they speak with the seller who tells them how much potential there is in the business,
and how they have to sell because of a sick parent back home, or how another business
is taking up their time, but for the right person this location is a goldmine! You, the buyers eyes light up and you write
a check envisioning going on cruises as your gas station back in the USA pumps out the
cash. Of course once you actually invest you quickly
discover the downsides of running a gas station franchise. Well hopefully I can give you the other side
of the story. We hear the downsides often from people who
bought these franchises and now want to sell them, often at a loss just to get out. There is good and bad to every story, the
seller gave you all the good now lets give you the bad and you can make a decision from
there. Lets start with an interesting statistic. According to the NACS 2017 Retail Fuels Report,
59% of gas stations in the U.S. are one owner-operated. They own one store and often that store is
attended by the owner. That type of business is what we call buying
a job. The owners aren’t working in the business
because it makes so much money they are workimng there because they have to. Also interesting to note is that most major
oil companies have sold off all or most of their fuel station holdings. Do you think you as a small business buyer
have more market knowledge than the best business minds hired by the oil companies? Big oil is getting out of gas stations that
should be a warning sign as should the huge number of single store owner operators. Many of these are struggling business owners
making a living on very small margins. Which bring us to the next point 1. Small Margins. Here is a great infographic from the Orange
County Register on where $50 spent at the pump goes. $30.75 to the oil company, $7.00 to the refineries,
$6.00 on taxes, $4.00 to the delivery company, $1.25 on processing and transaction fees and
finally right at the end of the chain you get $1.00. And that number can and does change sometimes
even lower most owners suggesting an average of 1-3 cents net per gallon. If you speak with gas station owners as we
do or even just visit forums and chatrooms with actual gas station owners most will tell
you the gas is just a way to get people to the location and they actually make their
money on cigarettes, soft drinks, coffee, and snack foods. But a huge problem today is more and more
gas buyers are paying at the pump and not even entering the store making it even less
profitable. But you will still have non driving walk in
traffic leading us to reason #2 – rough customers 2. Most cheap gas stations are located in less
than desirable neighborhoods and open 24 hours a day. And lets face it most gas stations are often
frequented by some interesting people particularly in the late and early morning hours. We all watch Youtube and see some of the crazy
stuff that happens in convenience stores and gas stations. That will also be happening to you – is that
something you want to deal with? Ask your seller if they have ever had any
issues where they had to call the police, and Google the address and see if any crime
reports come up. There are over 7000 robberies each year at
gas stations and 15,000 at conveniece stores which is disproportionate in relation to other
businesses. 3. Franchising. Now there are many situations where the franchising
model works. In my opinion gas is not one of them. In fact if you are at the mercy of buying
only one companies gas at a fixed price, being unable to shop for better pricing, stuck with
every promotion they decide on as well as having to pay franchise royalties and fees
with your already slim margins, being profitable can be difficult. 4. Environmental issues.This is a problem specific
to gas stations. Are the tanks leaking? If so the cost of cleanup can be costly. Many unwary buyers found themselves on the
hook for huge bills because they chose to survey only assets that were above ground. 5. At the mercy of potential construction. Some unethical sellers pull a fast one and
after determing that weeks or months of construction will make thier location inaccessible put
it on the market. Always check with the local department of
transportation prior to making an offer on a gas station. Or any business for
that matter. Now in closing yes I understand that gas stations
and convenience stores CAN be a good business or franchise. In these videos I provide the negative side
because as we all know the seller is only giving you the good side. An business decision that has considered both
the bad and the good is an educated one. Don’t forget to like and subscribe and leave
your business and franchising questions down below. http://www.franchise.city/buy-a-gas-station/

Stephen Childs

100 Comments

  1. New regulations roll out in 2020…many small stations will be forced to close…or try to sell out to unwitting buyers. The major change in the new regulations is requiring underground containment to be installed and to be periodically tested to ensure water tightness. Most small stores do not have containment; many small stores are pre-1988, have steel lines (single wall) and single wall steel tanks. They are a ticking time bomb. So far they've mostly been grandfathered in, since their construction pre-dates the first regulations. But the new regulations require everybody to have this containment, regardless of when the store was bult.

    Also, it is unlikely that large franchises will buy out these small stores, unless they have an exceptional location. And if a store is bought out, it'll likely be torn down and a new store built in it's place. But the risk of uncovering old contamination and being liable to clean it up means large franchises will avoid doing this. (I do environmental compliance testing for a living; you'd have second thoughts about even buying gas from these small stores…if you could seen what I've seen!)

  2. I use to deliver soft drinks to gas stations, alot of owners are good people but not happy, always complaining and miserable, most of the time they can't find good employees so they are forced to work long hours, most good employees wind up embezzling the gas station I've seen all the time, This guy is right

  3. no.1 reason why someone wants to sell you a highly profitable business…sickness. either the current owner has health issues and needs to get well or they have to move back home to look after a parent. Ive personally heard this 3 times

  4. So if none of you own gas stations, 7/11s or ect, what franchises do you own.

  5. Agreed with most of these statements except for a few. My parents own a gas station and as soon as they sell I will not be taking up after them. The key to building your empire is finding a good RURAL area that is isolated with no chance of competition for miles with regulars in a middle income area. We have just that. Use the CASH FLOW of the gas station of as a stepping stone to a bigger business with the same mindset of climbing a corporate ladder. Thanks to the income and cash flow of a single gas station, we were able, and are continuing to build high in-demand housing from the ground up and raking in a cool 50k/month passively after taxes and expenses, which we could not have done without the business. The key is to finding a good small town OUTSIDE of a major city where citydwellers don't mind commuting from to save cost. TL:DR – Gas stations will not make you rich, but you will build the capital and credit to invest into something bigger and better if you place your eggs in the right basket.

  6. I always wanted to start a channel like this franchise business is the worst to be done in my life .. it ate my 6 years of my life … I tell everyone not to buy any company franchise bcoz ur running somebody else business ur working like ass .. and they will make money and their brand value is growing .. instead start ur own small shop u will earn more money than this franchise .. from india .. Jai hind vande mataram

  7. We all know in our heads what people he's talking about when he quoted interesting LOL

  8. Very well explained. Couldn't be more accurate. I owned a Shell gas station for 20 years on a main street in a small city. It was a money vacuum machine. I stopped selling tobacco after seeing close ones suffering from it. Hiring someone to manage the store was not possible due to the amount of money i was losing. I have been trying to sell the gas station for more then 10 years and i can't, even though its on the main street and anybody passing through the city to another city have to pass through my land. Now i took down the building and removed everything on the land because taxes are very high. I am trying to sell the land and went to multiple multiple brokers. The land is big enough to build a strip mall even but i am already giving up on building anything i just want to sell it.

  9. On top of that 5 reasons, name brand gas stations often have to compete with generic brands which are much cheaper. Cheap gasoline is dirty and less efficient but many people don't really care.

  10. Number ONE reason to buy a gas station! You really like having the gov't up your ass 24/7/365!

  11. Thanks for making this video. I was actually thinking about buying a gas station in the future.

  12. Wow. I was just on my way out the door to buy a gas station and just happened to catch this video. Great timing! You saved me a lot of grief!

  13. Believe me, if you have a good location you will be earning great money. My family owns stations and for 35 years we have had very minimal violence or crime there. Get you a good location be a boss and you can make one hell of a store. It’s all up to you, get out be proactive and be a BOSS! couple gas stations and your set! Great location means big money trust me.

  14. I have a question about a gas station or gas pumping station only. With all the new high tech, what if you knew of a location that used to be a gas station, it did close probably due to the amount of time you have to run the store. But what if you setup a pumping station only, these new gas pumps are all credit card paid, put your card in and get your gas, thats it.

    Lets say you had no one actually running the station, it was just a gas stop, no food, no snacks, no on needed to accept payment or any money. No actual store to rob, gas is paid for up front with a credit card, no card no gas.

    The location is out in the middle of no where, it used to be a gas station but its between cities, quite a few miles to get to a gas station, its out in the country.

    I live out of state now, I used to live there but my daughter still lives there now.

    I know nothing about this type of business or any business really. Is this a good idea, can it be done, is there some type of advantage to franchise or just own the pump with no franchise cost.

    I woke up this morning with this idea, have not talked with anyone about it. It seems like a good idea but I don't know what the legal issues may be. But, the argument was if its a mom and pop station, you have so time you have to put into the location, that it would be a bad investment, but what about this idea where the stop basically runs itself. I also don't know how much this will cost or if it can actually be done.

  15. My car is very good on gas and I keep the tank above half at all times so usually spend about $19 bucks weekly at the gas station and pay with my debit card. It’s safe to say that my local store has never made any money off of me.
    I also don’t ever go inside the store except once a month to buy a money order for my rent and don’t buy snacks either. Lol

  16. I think in future all gas stations will be small and automatic. It's look great – https://www.instagram.com/robotanks_llc/ It's cheap (up to 5x cheaper than usual gas station) + it's transportable (standard ISO container) + you don't need to hire 2-3 workers + you don't pay huge rent + you don't pay franchise + you can set lowest prices, because you already saved some money. You don't need to waste your time – you just checking online level of fuel at your station/stations. Later i will write some calculations from existing clients.

  17. I own a gas station and it’s a profitable business if you know you are doing. Plus, it beats working a 9-5 job being someone else’s Bitch. At least you’re your own Bitch right? 🤷🏽‍♂️

  18. I paid off my gas station and turned it into a truck stop. I make 3 million profit per year. That's my net not gross. The thing is that I did not get a commercial loan. That is why I was able to profit off my business. I bought the land too. I have stores that I put on rent by some franchise companies. Subways and Metro PCS.

  19. very accurate you could make better money opening a youtube channel telling your story of how bad it is.

  20. My friend owns a large Pilot truck stop with a Wendy's attached and liquor store as well. It is all fairly new and very nice and clean. He told me he loses $3,000 per month from shoplifters. Sad.

  21. Very good information. Some of my friends had considered buying a gas station and now I can share this information with them.

  22. Buy a Gas Station in Detroit I hear these days you would be in at the ground level only way is up……..

  23. So if the gas is only for getting the potential customers to visit your business does that mean scouting businesslocations next to gas stations is a very good idea?

  24. Well here in United state if you're a monk monk and buy a gas station you pay no taxes for years and then you sell to someone in the family…GOOD OLD U.S.A

  25. I own a petroleum service company and bill my guys out at $90 an hour which is low compared to my competitors but even at that rate the cost to repair certain equipment is astronomical because of the parts. $600 for a simple repair just so you can make 10 cent a gallon, I don’t understand how mom and pop shops stay in business.

  26. Thanks looks like I won’t be buying a gas station any time soon lol this would explain why the gas station down the street opened up last year and closed 3 months later, the entire family was working it, husband, wife and the kids, and it still failed, they were only renting it but did 37k renovations

  27. If you’re Arab they government will pay you to open these discusting place.

  28. In the past, when my Father refueled his car. We would go to the Store nearby the gas pumps and buy drinks,snacks Etc

  29. Franchising means the risks are offloaded to the franchisees while the franchisors harvist all the benefits. It is a borderline scam.

  30. What is it in the YouTube algorithms that implies I want to buy a gas station!?

  31. I just about bought one in 2005 in B.C. Canada for $250 grand ! However I could /would be on the hook for a large lawsuit maybe with( Big Oil companies that formerly owned land ) because of pass leaks and spills that contaminate the water table between two lakes.
    BC environment laws and enforcement
    Are pathetic , sad but true !

  32. 1 cent per gallon? Then charge another cent per gallon and you double your profit $_$

  33. Why don't all gas station owners chipp in and buy an oil company.

  34. He forgot the moron gas station owners who jack their food prices up to hilarious meme levels when there's a grocery store selling all the same shit at less than half the price across the damn street…

  35. Most people are buying electric cars … what use is the gas station?

  36. Convenience is where you make your money in america. and yes location fits in Convenience. as well as other things like impulse buys, fast cash washes, cheaper if you by cash.

  37. Thanks I have suspected that many of these "opportunities" are money losing scams.

  38. I probably go into a gas station store lass than 5 out of 100 stops. And that is to get a receipt.

  39. In the uk since ive been buying fuel 65% percent of gas stations have closed. complying with tightening regulations and turnover are the main reasons. Oil companies in the uk have done the same and sold there stations . Shell have started putting in EV chargers as the future transport infrastructure.

  40. I work at a chevron 7 days a week night shift. Plot twist I make 40k so yeah there money pits. I sold a 30$ usb cable so yeah money.

  41. Rockefeller’s only ones making 💰. Well when it comes to gas lmao.

  42. Man what inspired me to open a gas station is my grandpa! He is a freakin millionaire well he opened a gas station but he also worked in Chrysler and now he is living the life he owns a big ass mansion next to a lake idk man this is giving me second thoughts I wanna be rich but idk how

  43. Experience varies … first career was running a small truck stop which we later purchased but even in the beginning we earned 12 times rent for small two bedroom rental house. This site should be renamed "Reasons to never own a small business" as advise here seems negative on almost everything. Consider Elon Musk who was stupid enough to organize auto company and rocket launch company back around 2001. Narrowly escaped bankruptcy with both companies but now he smokes dope with Joe Rogan while online 🙂 Competent driven people often win success regardless of the naysayers__

  44. I am a realtor , Similar to trying the slum lord business. Beware before entering

  45. which franchising business in the us is good? to start with?

  46. Let me ask you this; what do you think about buying Vape Franchise?
    I was thinking to buy one for an overseas country, Jordan.

  47. often NOT ofTen silent "T"!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  48. I am literally in the process of trying to purchase a gas station.

  49. Business is so difficult only the best scammers make it. If you are an honest man they will skin you alive.

  50. I start watching you since 2 days. I quite like your videos and your opinions. But kindly 2 suggestions. Please don't make your video Black&white effect 2nd if you'd use a lavalier Mic. will be perfect to hear your valuable voice clearly. Regards.

  51. I dont even want to walk into a gas station. Let alone own 1

  52. When looking to purchase a pre-existing business it should be treated as a red flag when the seller is trying to hype up how great the business is doing. I've never met anyone that sold a profitable/successful business unless it was a situation where they were "bought out" by a competitor (see this a lot with service industry businesses), or they were facing litigation and figured they would loose the business anyway. Sale reasons usually revolve around poor performance/sales, cost to maintain the business is too high, poor upkeep of the building/facility, or area crime. And like the video mentions, there is very little profit made from fuel. Most fuel stations make their money from beer, cigarettes and snacks. I know a guy with a fuel station which lost their beer license for 9 months due to one of their clerks selling beer to a minor during an underage alcohol sales sting by area law enforcement which was being conducted due to repeated complaints about underage sales. The store owner almost went out of business FROM NOT BEING ABLE TO SELL ALCOHOL FOR ALMOST A YEAR due to his clerks mistake!

  53. Dumb fucks think they can invest a little and earn a lot. Same mentality like those idiots who invested in Bitconnneccccttttt and then blamed everyone else but themselves when they lost the money. Fucking low IQ cunts.

  54. If you ever talk with the EPA you won't want this idea any more .. I owned an abandoned filling station and the whole thing can be a ** even if it's in the slush fund!! I'm in the states here

  55. Your ass will be working 7 days a week with a gas station. Just like a farmer

  56. #6 YOU AND YOUR STAFF are responsible for cleaning the toilets, esp. at 3 AM on New Year's Day!!! 😳😳😳

  57. In los Angeles in the past 12 years a lot of gas stations, liquor stores and car washed had to close down completely. The reason was federal government blocked their activities as money laundering for drug cartel in whole due to all the regulations in banking system right after the recession.

  58. He didn't even scratch the surface about the negative side of owner/operating a gas station.

    Trust me. Leave it to the big companies. Put your money in less risky and less dynamic business

  59. Two gas stations where I am closed because of these reasons. Thanks for always telling the truth about these businesses.

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