Gas stations always seem to be busy, but is the cost of owning one of these businesses worth it? We take a look at how much gas station owners make, which factors affect profits, and things to watch out for if you decide to buy or open a new gas station.
Gas Station Owner Salary Overview
The average annual salary of gas station owners can vary widely depending on which part of the country you’re in.
For gas station owners in the Northeast, you could expect to earn an average of around $69,000 per year. If your station is in the West, you’re more likely to make around $60,000 annually on average.
Gas station owners in the Midwest could earn around $61,000 on average annually, while operating a gas station in the South could earn you around $66,000 on average per year.
Of course, this amount will be affected by whether you own one station or many, how many other gas stations you’re competing with, the amount you’re able to charge for gas and remain competitive, and how many additional services and amenities you offer.
Some factors affecting profit are easy to spot, while others may catch you by surprise.
Factors That Affect Profit
Every industry has expenses unique to that specific field, and some fees and operating expenses are the same regardless of the type of business you own. We break down some of the biggest profit-eaters for gas station owners below.
Location
The address of your prospective business may be one of the most important factors to take into consideration when deciding whether to own a gas station. Of course, if you’re in a location far away from busy roads, you’ll have a harder time getting customers to stop by.
But there are other issues with location besides just traffic. If you’re located in an area with plenty of free or low-cost reliable public transportation, you may struggle to generate profits since people are less likely to drive a car in that scenario.
You may also end up paying higher business taxes in some locations than you would in others.
Another factor to consider when it comes to choosing a location is where your competition is located. While having a rival gas station directly across the street from you could benefit both businesses, having too many competitors around could harm your revenue.
Credit Card Processing Fees
While not unique to gas station owners, credit card fees are rarely thought about ahead of time. Usually, the realization that processing fees are eating into your profits only comes when you review your bank statements.
Credit card processing fees can fluctuate between 1.7% and 3.5% per transaction. On a $100 fill-up, gas station owners could pay $3.50 plus another small fee. Depending on how much profit you bring in every year, this could be either a small annoyance or a massive expense.
Do your homework in the beginning, so you understand how much each of the major credit card companies will charge you for the privilege of accepting credit card payments.
Gas Prices
While most people only think of the price at the pump when they think of “gas prices,” gas station owners have to purchase gasoline, too. And your cost is generally based on refining costs, distribution costs, and crude oil prices.
Surprisingly, the cost of crude oil only accounts for around 50% of the price of gasoline, so while it’s easy to blame “big oil,” they’re not the only ones who affect gas prices.
You may also be charged state or local underground storage fees to store all that fuel, which also affects how many cents per gallon you can charge your customers.
Unfortunately, all of these factors are beyond your control, and you can only charge so much for gas and have customers come back to your station. Because fuel profit margins are so tight, it’s possible that you could lose money selling gasoline.
That’s why it might be a good idea to look into offering additional amenities to your gas station, so you can have more than one revenue stream available.
Amenities Offered
If you provide customers with more than just fuel, you’re more likely to earn a higher profit. In fact, according to the National Association of Convenience Stores, around 80% of fuel purchases in the United States are made at convenience stores, which offer additional services, such as:
Hot food (carry-out pizzas, hot sandwiches, etc.)
Snacks
Beverages
Self-serve beverage fountains (coffee or soda)
Microwaves for customer use
Public restrooms
You may want to add a few extras, depending on your location, like:
Dog-walking areas
A gift shop with local souvenirs or practical travel items
A full restaurant with wait staff
Showers for long-haul drivers
Of course, some of these amenities will cost you a lot more to offer than others and may not make much sense for your location.
For example, a full restaurant will require wait staff, cooks, maintenance/cleaning staff, and an accountant or bookkeeper, at the very least. That’s not even counting the costs for regular food supplies, cooking supplies, and serving ware.
If your gas station is located on a busy city intersection, it probably won’t make much sense to provide a restaurant for customers; but if you’re on a busy highway with few nearby dining options available to travelers, then adding a restaurant could be a great idea.
It’s really up to you to determine how many bells and whistles you’d like to add to your humble gas station, whether it becomes a convenience store selling snacks and bottled beverages, or whether it’s a full-on travel plaza with a restaurant (or two).
Profit vs. Income
The question of profit versus income often trips up new business owners, who get a nasty surprise when calculating their average annual income. While your income will come out of the profit your gas station earns, so will every other expense you have during the year.
That includes things like:
Building maintenance and repair
Fuel costs
Liability insurance
Franchise fees (if applicable)
Lease or mortgage expenses
Business loan repayments
Utilities
Signage
You may have additional annual expenses, depending on the type of gas station you own.
Only after all of your expenses for the year have been deducted from your total profits will you have an accurate idea of your annual income.
Stand Out in a Crowded Market
It’s not an understatement to say that there’s a gas station on nearly every street corner. So, besides offering first-rate amenities and doing a media blitz, what else can you do to stand out in the crowded gas station market?
One thing that matters now more than ever is ensuring customers have a secure payment transaction, and the best way to do that is with a robust point of sale system. Customers are far more likely to return to your store over a competitor if your payment process is smooth, simple, and secure.
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