For many years, gas stations have been a common sight on our highways. However, are they wise investments? Like many things in life, the solution is not simple. Before making an investment in a gas station, there are several things to think about.
First, it’s critical to comprehend how gas station operators generate revenue. The sale of fuel accounts for the majority of a gas station’s revenue. The profit margin on fuel, however, is famously tiny and frequently only a few cents per gallon. Gas stations sometimes rely on the sales of convenience store goods like snacks, drinks, and cigarettes to make up for this. With markups of 30–50%, these products often have larger profit margins.
A gas station’s location is also crucial to its success. A gas station located on a busy highway or close to a busy crossroads is more likely to make money than one located in a rural or sparsely populated location. A gas station might be a profitable investment if it is situated in a busy area with little rivalry.
Thirdly, franchise gas stations like Circle K can provide owners with a certain level of protection and assistance. However, depending on the region and other factors, the revenue a Circle K franchise generates can differ significantly. According to Franchise Direct, a Circle K franchise can have an initial investment between $211,450 and $1,601,000 and have a possible annual gross profit of $1.3 million.
Convenience stores inside of gas stations often have a profit margin in the United Kingdom of 20 to 25 percent. But it can change based on the environment and the level of competition. Convenience stores within gas stations can make $1 to $3 million in annual revenue in Canada, with a profit margin of roughly 15-20%.
Finally, whether or not gas stations are a viable investment relies on a number of variables, including location, competition, and the capacity to make money from convenience store merchandise. Despite the poor profit margin on fuel, it might be offset by the sale of other goods. Circle K franchises, for example, can provide security and support, but location and other factors can still affect profitability. Finally, prior to making an investment in a gas station, comprehensive investigation and appraisal are essential.