How Much Do Gas Stations Make? (Average Gas Station Revenue Data 2024)

How Much Do Gas Stations Make? (Gas Station Profit Margin)

Although gas stations drive impressive levels of revenue, fuel sales have low net profit margins. In fact, Fortune reports that the net profit on every gallon of fuel is only about three to seven cents. Given that the average gas station sells about 4,000 gallons, or about $12,000 to $16,000 worth of gasoline, per day, you’d only make about $120 to $280 in net profits.

Fortunately, however, you can take advantage of other revenue streams, like convenience store sales, to significantly boost your bottom line. But what are typical margins for these revenue streams? Can gas stations still be profitable despite low margins on fuel? And how much do gas stations make overall?

In this article, we’ll answer all of these questions and more. We’ll begin by exploring typical expectations for gas station revenue and profits before looking at a breakdown of costs and how to optimize them. Lastly, we’ll share some tips for boosting revenue so you can maximize profitability.

Key takeaways

• While fuel sales typically account for the majority of gas station revenue, they also have extremely low net profit margins.

• Gas stations face several challenges to revenue growth, including thin margins, intense competition, volatile fuel prices, consumers shifting away from reliance on fuel, and regulatory hurdles.

• You can increase your gas station revenue and profit margins by adding higher-margin revenue streams, such as convenience store sales and car washes.

• Other effective strategies for boosting overall gas station revenue include leveraging technology, optimizing fuel pricing, and improving customer service.

Are Gas Stations Profitable?

Gas stations can be profitable, but fuel sales have extremely low profit margins. In fact, Fortune reports that the net profit margin of gasoline sales is typically less than 2%.

However, gas stations can increase profit margins by developing additional streams of revenue, such as:

• Convenience store sales

• Car washes

• Repair services

Additionally, large gas station chains can earn especially healthy profit margins due to their brand recognition, economies of scale, and other advantages. For example, IBIS World reports the following profit margins:

• 7-Eleven: 5.4%

• Alimentation Couche-Tard Inc.: 12.1%

• Casey's General Stores, Inc.: 27.1%

Ultimately, though, as a sole proprietor you’re more likely to earn net profit margins in the range of 3% to 5%. The more you can drive revenue through convenience store sales and additional services rather than fuel, the higher your margins are likely to be.

How much do revenue gas stations make?

While gas stations must contend with low profit margins on fuel sales, they do generate a significant amount of revenue. According to an analysis by Projection Hub, the annual average revenue for a sole proprietorship gas station was over $1.3 million based on tax return data.

Their analysis also found that net profit margins on fuel sales are generally only about 1%.

Meanwhile, The Hustle reports that convenience store sales only account for about 30% of a gas station's revenue, but often account for 70% of total profits.

So, if your gas station generates $1.3 million in annual revenue, you would expect $910,000 of that to be from fuel sales. With a 2% net profit margin, this is only $18,200 in net profits each year.

After deducting fuel sales from your total revenue, you’d be left with $390,000 in revenue from convenience store sales and other services. Since the average convenience store net profit margin is usually upwards of 10%, your total net profits from this side of the business would amount to $39,000 each year.

By combining the profits from both fuel sales and convenience store sales, you’d make a total net profit of $57,200. This is equal to an overall net profit margin of 3.7%, which is right in line with the average net profit margins for most retailers.

In this scenario, gas sales would account for about 32% of your net profits, while convenience store sales would account for about 68%.

5 challenges for gas station revenue growth

Growing revenue for a gas station can be challenging due to several industry-specific factors.  So, it’s important to be aware of these challenges to better strategize and navigate the complexities of the business.

Ultimately, it’s essential to approach these challenges with a combination of strategic planning and flexibility.

1. Thin profit margins on fuel

As we mentioned earlier, the profit margins on fuel sales are extremely thin, typically falling below 2%. This means that even a small fluctuation in fuel prices, taxes, or operational costs can significantly impact profitability. Since gas stations rely heavily on fuel sales to drive traffic, the low margin can be a major barrier to revenue growth.

To mitigate this challenge, you should focus on increasing the volume of fuel sales through competitive pricing and loyalty programs. At the same time, you should consider boosting revenue from higher-margin products, such as convenience store items and car washes.

2. High competition

Gas stations face stiff competition. In fact, according to Upside, most fuel retailers have at least one competitor within a .016 mile radius, and about 1.5 competing gas stations with a half-mile radius. This competition often forces gas stations to keep their prices low, further squeezing profit margins.

To overcome these difficulties, you should consider ways to differentiate your business from others. For example, you might think about offering unique products and services, such as:

• Gourmet coffee

• Locally-sourced products

• A well-maintained car wash

Additionally, investing in customer service and creating a welcoming environment can also help build customer loyalty, encouraging repeat business.

3. Volatile fuel prices

Fuel prices are subject to global market fluctuations, geopolitical events, and changes in supply and demand. This volatility can make it difficult to predict revenue and plan for long-term growth. 

Likewise, sudden spikes in fuel costs can lead to reduced consumer spending on other goods, further challenging profitability.

So, it’s important that you closely monitor fuel price trends and consider entering into supply agreements that provide some stability. 

Additionally, diversifying income sources, such as offering electric vehicle (EV) charging stations or expanding your convenience store offerings, can also reduce reliance on fuel sales.

4. Changing consumer behavior

Consumer behavior is shifting, with more people opting for electric or hybrid vehicles, which directly reduces the demand for gasoline. While we won’t see peak demand for road fuel until 2027, David Doherty, head of oil and renewable fuels research at Bloomberg New Energy Finance, says:

“A combination of EVs, fuel efficiency and shared mobility is knocking down demand for road fuels… This decline gets exacerbated post-2030.”

Additionally, the rise of remote work has led to fewer commutes, decreasing the frequency of visits to gas stations.

To stay ahead of these trends, it’s essential to explore alternative revenue streams, such as EV charging stations. Expanding services to include more food and beverage options can also help attract a broader customer base.

5. Regulatory and environmental challenges

Gas stations must comply with a range of environmental and safety regulations, which can be costly and time-consuming. These regulations include:

• Managing underground storage tanks

• Adhering to emissions standards

• Maintaining safety protocols 

Non-compliance can lead to hefty fines and reputational damage.

So, it’s key that you budget for ongoing compliance costs and invest in modern, environmentally-friendly equipment. 

Staying informed about regulatory changes and being proactive in meeting or exceeding standards can help avoid unexpected expenses and protect your gas station’s reputation.

Breakdown of gas station expenses

Running a gas station involves several operational costs that can significantly impact profitability. Some of the primary expenses you’ll need to think about include: 

1. Fuel Costs: The most significant expense, fuel costs are subject to market fluctuations. Gas stations typically purchase fuel at wholesale prices and sell it at a small markup.

2. Labor Costs: Wages for employees, including cashiers, maintenance staff, and managers, make up a substantial portion of operating expenses.

3. Utilities: Gas stations require electricity, water, and sometimes natural gas to operate fuel pumps, lighting, refrigeration units, and other equipment.

4. Inventory Costs: Stocking your convenience store with products like snacks, beverages, and automotive supplies requires a consistent investment in inventory.

5. Maintenance and Repairs: Regular upkeep of fuel pumps, tanks, and store facilities is essential to avoid downtime and ensure safety.

6. Insurance: Comprehensive insurance coverage is necessary to protect against potential liabilities, including accidents, environmental issues, and property damage.

7. Taxes and Licensing Fees: Gas stations must pay local, state, and federal taxes, as well as fees for various licenses and permits.

How to minimize gas station costs

While gas stations do have quite a few expenses to manage, you can implement several strategies to reduce operational costs:

1. Optimize Fuel Purchasing: Take advantage of bulk purchasing and negotiate favorable contracts with suppliers to reduce fuel costs.

2. Manage Labor Efficiently: Use scheduling software to optimize staff hours and reduce overtime. Cross-train employees to handle multiple roles, minimizing the need for a larger workforce.

3. Invest in Energy Efficiency: Upgrade to energy-efficient lighting, refrigeration units, and equipment to lower utility bills. Consider installing solar panels to offset electricity costs.

4. Streamline Inventory Management: Use inventory management systems to monitor stock levels and reduce waste. Focus on stocking high-margin products that move quickly.

5. Preventative Maintenance: Regularly maintain equipment to prevent costly repairs and extend the life of expensive assets. Schedule routine checks to catch issues before they become major problems.

6. Shop for Insurance: Regularly review insurance policies and compare quotes from different providers to ensure you’re getting the best coverage at the lowest cost.

7. Tax Planning: Work with a tax professional to identify deductions and credits that can reduce your tax burden. Staying compliant with tax regulations also helps you avoid penalties and fines.

Remember, by carefully managing these costs and implementing strategies to minimize them, you can improve your gas station’s bottom line and overall profitability.

How to improve gas station revenue

While optimizing costs is essential for achieving profitability, maximizing your revenue is just as important. Overall, this requires a combination of strategic initiatives aimed at increasing both fuel and non-fuel sales.

Be sure to consider the following methods to boost your gas station revenue.

1. Enhance the convenience store experience

While the majority of your revenue will likely come from fuel sales, convenience store sales have significantly higher profit margins. 

To improve your in-store experience and drive higher profit margins, consider these strategies:

• Diversify Product Offerings: Stock a variety of high-margin products like snacks, beverages, and ready-to-eat meals. Consider adding locally-sourced or premium items to help your store stand out and attract a broader customer base.

• Optimize Store Layout: Organize the store for easy navigation, with impulse-buy items near the checkout. Regularly update product displays to keep your offerings fresh.

• Promotions and Loyalty Programs: Implement promotions and loyalty programs to encourage repeat visits. Offer discounts or points on certain purchases that can be redeemed later for fuel or other goods.

2. Offer additional services

Convenience store sales aren’t the only way to increase revenue without boosting fuel sales. For example, consider providing other high-margin services, such as:

• Car Washes: A car wash can be a lucrative addition, especially if bundled with fuel discounts. Automated systems can minimize labor costs while providing consistent revenue.

• Repair and Maintenance Services: Offering basic auto repair services like oil changes, tire rotations, and minor repairs can draw in additional customers and create a new revenue stream.

• EV Charging Stations: As electric vehicles (EVs) become more common, installing EV charging stations can attract a new demographic of customers.

3. Leverage technology and data

Integrating modern technology can not only help you streamline your operations, but can also help improve your customer experience.

So, be sure to consider using the following tools to improve both essential aspects of your gas station:

• POS Systems: Implement advanced point-of-sale (POS) systems to track sales trends and customer preferences.

• CRM Systems:  Use Customer Relationship Management (CRM) tools to help tailor promotions and improve service based on customer data.

• Mobile Apps and Online Ordering: Develop a mobile app or online ordering system that allows customers to order items for pickup. This convenience can drive customer loyalty and increase sales.

4. Optimize fuel pricing and sales

While fuel sales have slim margins, they’re essential for driving traffic to the station. To increase your volume of fuel sales, consider implementing the following strategies:

• Dynamic Pricing: Use dynamic pricing strategies to adjust fuel prices based on competition, demand, and time of day. This can help you stay competitive while maximizing revenue.

• Fuel Bundling: Offer discounts on fuel when customers purchase specific convenience store items or services, encouraging higher overall spending.

5. Improve customer service

Finally, providing excellent customer service can be a great way to differentiate your gas station from competitors. To meet customer expectations, it’s important to consider these best practices:

• Training Staff: Invest in training your staff to be friendly, efficient, and knowledgeable. A positive experience can turn one-time visitors into regular customers.

• Collect Customer Feedback: Ask customers to complete surveys to understand how you can improve service, and take action on recccuring comments and suggestions.

• Maintain Clean Facilities: Keep your gas station clean and well-maintained. Clean restrooms, well-lit areas, and organized store shelves can significantly enhance the customer experience.

Use technology to boost gas station revenue and control costs

Despite low margins on fuel sales and intense competition, your gas station can achieve profitability by using the right strategies. Most importantly, by diversifying your revenue streams with higher-margin convenience store sales and other services, you can improve overall profitability.

However, it’s also important that you have the right tools to minimize your expenses while boosting revenue.

For example, with Toast’s comprehensive POS system, you can manage inventory, staff scheduling, and more in one easy-use-platform. Likewise, you can meet customer expectations and encourage more repeat business with features like loyalty programs and online ordering.