How Much Does It Cost to Open a Gas Station? [Gas Station Startup Costs]

Gas Station Startup Costs

Opening a gas station requires a substantial investment, careful planning, and a solid understanding of your expenses. However, if you’re looking to launch this type of business, the revenue potential is huge. In fact, Projection Hub reports that the average gas station generates over $1.3 million in annual revenue.

While fuel sales have notoriously low profit margins of just 1% to 2%, you can make significantly higher overall net profits with an attached convenience store and other high-margin services. Convenience stores can achieve more retail like net margins that can range anywhere from 5.7% and 27.1%.

If your business can earn net margins in this range, you could expect to profit as much as $75,000 to over $300,000 per year, depending on your level of success. With this kind of profit potential, launching a gas station could be the perfect business venture. But how much does it cost to open a gas station? What kind of startup expenses can you expect to pay? And how can you minimize ongoing costs to achieve long-term sustainability and growth?

In this article we’ll answer all these questions and more, providing a breakdown of all the gas station startup expenses you can expect as you begin your venture.

Key takeaways

• The total cost to open a gas station depends on several key factors, including location, size, complexity, and method of land acquisition.

• The largest costs for opening a gas station will likely be your property purchase/lease, construction expenses, and equipment costs.

• Be sure to budget for working capital so you can pay for operational expenses, like staff wages and initial inventory, before you start generating revenue.

• While opening a gas station requires a big upfront investment, you can reduce ongoing operational costs by using technology like a comprehensive POS system.

How much does it cost to open a gas station?

While the average startup costs for opening a gas station can vary significantly, they typically fall between $250,000, on the low end to multiple million on the high end.

This range includes everything from basic setups in rural areas to full-service stations with multiple amenities in prime locations. Ultimately, the overall cost depends on several factors, such as:

• Location

• Size

• Complexity of the station

• Whether your lease or purchase the land

For example, the capital required to open a small gas station in a low cost of living area will likely be a lot less than one located in an affluent area with lots of visibility.

Breakdown of gas station startup costs

By understanding the costs you’ll encounter when opening your gas station, you can better manage your budget, forecast cash flow, and set realistic financial goals. 

Ultimately, this will help you prepare a comprehensive budget and secure the necessary funding to open your business.

1. Land acquisition

One of the biggest expenses you’ll face when opening your gas station is the cost of acquiring land. While leasing land can reduce your initial investment, it’ll add to your ongoing operational costs.

Additionally, it’s important to remember that purchasing or leasing land in high-traffic areas can be a lot more expensive compared to more rural areas. Despite the higher costs, however, they do offer a greater potential for revenue.

To select a site that can drive significant revenue but still falls within your budget, it’s important to consider factors like:

• Monthly lease payments or mortgage

• Property taxes

• Zoning compliance fees

Overall, depending on the location and size of your gas station, you can expect to spend anywhere from $50,000 to $1 million or more to purchase your land outright.

On the other hand, if you lease your land, they estimate that you can expect rent payments between $10,000 to $50,000 per month, with the cost of initial lease deposits ranging from $30,000 to $100,000.

• Total Cost of Gas Station Land Acquisition: $50,000 to $1 million or more

2. Construction, site preparation, and equipment

Depending on the property you purchase, it’s possible that fuel tanks and pumps may already be included in your land acquisition costs. However, if you plan to transform a different type of property into a new gas station, you’ll need to account for the cost of construction.

For example, you’ll need to pay for:

• Fuel Tanks: $25,000 to $30,000

• Gas Pumps: $16,000 to $21,000 each

• Equipment for Additional Services: For example, consider the cost of building car washes and/or setting up tire air pumps

Of course, you’ll also have to think about constructing the interior and exterior design of your convenience store facilities. These expenses can include

• Interior: Convenience store shelving, refrigeration, restrooms, customer areas, storage areas, food preparation areas, etc.

• Exterior: Landscaping, parking areas, lighting, canopies, and signage

• Technology: POS systems, fuel management software, and security systems

Ultimately, the cost of construction, site preparation, and equipment will depend on the type of property you purchase, size of your gas station, and the services you plan to offer.

• Total Cost of Gas Station Construction and Site Preparation: $1 million to $2 million or more

3. Permits, licensing, and legal fees

Opening a gas station requires stricter adherence to regulations compared to many other types of retail businesses. You’ll need various environmental, zoning, and operational licenses, such as:

• Air Quality Permit: Required if the station has equipment that emits air pollutants, like gas pumps.

• Underground Storage Tank Permit: Required for the installation and operation of underground fuel tanks.

• Hazardous Materials Permit: Needed for storing and handling large quantities of fuel and other hazardous materials.

• Stormwater Discharge Permit: Required if runoff from the gas station may enter local waterways.

• Zoning Approval: Ensure the property is zoned for commercial use, specifically for gas stations.

• Building Permit: Required for any construction or modifications to the site, such as building the station, installing tanks, and setting up the pumps.

• Business License: Required to legally operate any business.

• Fuel Distribution Permit: Required to store, sell, and distribute gasoline or diesel.

• Fire Safety Permit: Ensures that your gas station meets fire safety standards for fuel storage and dispensing.

• Weights and Measures Certification: Ensures fuel pumps dispense the correct amount of fuel.

• Occupational Safety and Health Administration (OSHA) Compliance: Ensures the station meets federal safety standards for employees handling hazardous materials.

• Sanitation Permit (if applicable): Needed if the station includes a convenience store or food service.

In addition to the cost of the permits, you’ll also need to think about legal fees for ensuring compliance with all local, state, and federal regulations.

• Total Cost of Gas Station Permits, Licenses, and Legal Fees: $10,000 to $50,000

4. Initial inventory

While you’ll need to manage the cost of inventory on an ongoing basis, it’s important to consider the cost of initial inventory as you launch your gas station. This not only includes initial fuel purchases, but also your initial convenience store inventory, like drinks and snacks.

Ultimately, this expense will vary based on several factors, such as expected sales volumes and supplier pricing.

• Total Cost of Gas Station Initial Inventory: $20,000 to $100,000

5. Insurance

It’s also essential to secure insurance coverage to protect your business against liabilities, including environmental risks, accidents, and property damage. According to Way, some of the key types of coverage you’ll likely need are:

• General Liability Insurance

• Commercial Property Insurance

• Pollution Liability Insurance

• Crime Insurance

• Cyber Liability Insurance

• Business Interruption Insurance

• Umbrella Liability Insurance

• Workers Compensation Insurance

• Underground Storage Tank Insurance

• Liquor Liability Insurance

Overall, the cost of insurance coverage can vary widely based on coverage level, location, size, hours of operation, and your claims history.

• Total Cost of Gas Station Insurance: $10,000 to $40,000 per year

6. Marketing and initial promotion

Launching a new gas station requires an initial marketing push to attract customers. Some strategies you’ll likely want to invest in include:

• Promotional Signage and Events: Use grand opening banners, special offers, and discounts to attract attention and entice new customers. Consider hosting a grand opening event with giveaways or discounted fuel.

• Advertising Campaigns: Invest in a mix of online and offline channels, such as social media ads, local newspaper ads, or even billboards.

• Public Relations: Send press releases to local media outlets or sponsor community events to increase your visibility and establish goodwill with the community.

Ultimately, the amount of money you should spend on your initial marketing push will depend on your gas station’s visibility. 

For instance, if your business is located next to a busy highway, you may not need to invest much. However, for gas stations in extremely competitive markets or those without much visibility, marketing will be essential for securing steady business.

• Total Cost of Gas Station Initial Marketing and Promotion: $5,000 to $20,000

7. Working capital

One more important cost to budget for as you launch your gas station is working capital, which you’ll need to cover initial operational expenses before you begin generating revenue.

Some of the costs you’ll need working capital to cover include:

• Staffing and Management: Be sure to consider all expenses related to labor, including salaries, benefits, and payroll taxes.

• Utilities: Gas stations consume a significant amount of electricity for pumps, lighting, refrigeration, and HVAC systems. These costs will vary based on energy usage and local utility rates.

• Inventory Replenishment: You’ll need to regularly restock fuel and convenience store items to meet customer demand.

• Capital and Loans: This includes expenses like interest on loans or lease payments for equipment and property.

Overall, it’s essential to include a significant amount of money in your working capital budget. This will ensure you’re able to continue operating while your business gets off the ground and you start attracting more repeat customers.

• Total Cost of Gas Station Working Capital: $50,000 to $200,000

Minimize your gas station’s operational costs with technology

As we’ve seen, there are a lot of costs you’ll need to account for when you open your gas station. However, once you’ve made your initial investment, you could be well on your way to running a profitable business.

To achieve long-term success though, it’s essential that you streamline your operations to control costs and provide a stellar customer experience to drive repeat business and sustained growth.

Fortunately, with Toast’s robust POS system, you can accomplish both of these things with the same platform. For example, you can offer loyalty programs, provide online ordering options, and use email marketing tools to improve customer retention.

Additionally, you can manage inventory and schedule staff to simplify your workflows. Better yet, you can use data from the system to gain critical insights into how you can improve your business. As Greg Parker, CEO of gas station and c-store Parker’s Kitchen, said in an interview with CSP Daily News: 

“In today’s competitive industry, it’s critical to focus on metrics. In order to make success achievable, you have to make it quantifiable. The most important thing is to understand the trends in the data and what they’re showing you. Identify your key metrics and follow them closely over time to measure your success and to identify areas of improvement.”

To discover all the ways Toast can help you run a more profitable gas station, be sure to check out all the awesome features!