How to Open a Gas Station in 2024

Opening a gas station offers a compelling opportunity within the fuel and convenience retail industry, where consumers consistently rely on fuel for transportation and often seek quick access to essential goods. According to the National Association of Convenience Stores, an average convenience store selling fuel has around 1,100 customers per day, or more than 400,000 per year. With gasoline being a crucial commodity and the demand for convenience items steadily growing, the gas station sector remains a vital and profitable market for entrepreneurs to consider.

In this industry, success is closely tied to strategic location selection, efficient operations, and understanding consumer behavior. Gas stations located in high-traffic areas or near major highways can capitalize on the steady flow of customers, while those offering additional services like car washes, convenience stores, or quick-service food options can enhance profitability by catering to diverse customer needs.

By aligning your gas station with the specific demands of your target market, such as focusing on competitive fuel pricing, premium services, or a broad range of convenience items, you can establish a strong and lasting presence. This guide will walk you through the essential steps and considerations for opening and running a successful gas station, providing you with the insights needed to navigate this dynamic and essential industry.

How to Open a Gas Station: Your Complete Checklist

1. Choose Your Concept

When opening a gas station, considering different concepts can help tailor the business to the needs of its target market. A traditional gas station concept primarily offers fuel services and may include a small convenience store with basic items such as snacks, drinks, and tobacco products. A gas station with a quick-service restaurant (QSRs) might feature fast-food restaurants or coffee chains like Subway, McDonald's, or Starbucks, appealing to travelers who want a meal or snack while refueling. Alternatively, an urban gas station with specialty services might focus on space efficiency and offer premium fuel, gourmet coffee, or specialty products like organic snacks. Consider these factors:

• Research Different Formats: Look into the pros and cons of each type of gas station. Consider factors such as start-up costs, operational expenses, and the target market.

• Visit Existing Gas Stations: Gain insights by visiting other gas stations to observe their operations and customer experiences.

• Analyze Your Market: Determine which format would best suit the location and demographic you plan to serve.

• Budget Considerations: Align your choice with your budget. Some formats, like a traditional gas station, might require less initial investment than a gas station with a quick-service restaurant.

2. Set Up Your Business Structure

The business structure you choose will influence everything from liability protection to tax obligations and operational flexibility. In the U.S., businesses can choose from five business structures: Sole proprietorship, partnership, limited liability company (LLC), S Corporation, or C Corporation. Smaller businesses tend to set up as an LLC, as it gives owners some flexibility while protecting them from legal or financial liabilities related to the business. As you open more locations, you may elect to change to an S Corporation or C Corporation for the tax benefits. Choose from the following options:

• Sole Proprietorship: A sole proprietorship is the simplest form of business structure, ideal for small operations. One important note is it offers no separation between personal and business liabilities, meaning your personal assets could be at risk if the business incurs debt or is sued.

• Partnership: A partnership might be appropriate if you’re going into business with one or more partners. Similar to a sole proprietorship, this structure does not offer personal liability protection, but it allows for shared responsibility and decision-making.

• LLC (Limited Liability Company): An LLC is a popular choice for gas station owners as it provides personal liability protection while allowing profits and losses to pass through to your personal income without facing corporate taxes. This structure combines the benefits of a corporation and a partnership.

• Corporation: Forming a corporation, either as an S-Corp or C-Corp, offers the highest level of liability protection and can be beneficial for larger operations or if you plan to seek significant investment. However, corporations are subject to more regulations, and in the case of C-Corps, you may face double taxation on profits.

Consult with a business attorney or accountant to determine the best structure for your gas station, considering factors like liability, taxes, and future growth.

3. Write Your Gas Station Business Plan

Every business should have a comprehensive business plan. This crucial document serves as the roadmap for your gas station, outlining your vision, strategy, and the steps necessary to succeed. It also communicates your vision to investors and other potential stakeholders. Here are the key elements to include:

• Executive Summary: The executive summary lays out your vision and concept, including your gas station’s mission statement, core values, and a brief discussion of potential costs, operational plans, and marketing plans.

• Market Analysis: Gas stations have a fair amount of competition and tend to cater to highway travelers and neighborhood drivers, which is why it’s crucial to understand the competition. This analysis demonstrates that you understand your target market and competitors, and have analyzed the potential of your gas station’s location. 

• Marketing Strategy: Good marketing plans change over time, but your business plan will illustrate the broad strokes of how you plan to market your business. Discuss the channels you’ll use, from social media to loyalty programs, and promotional offers, to build awareness and how you want to represent your business in marketing materials.

• Operations Plan: An operations plan details staffing needs, customer policies, technology, suppliers, expected costs, and more of the details that investors will want to know about how your business runs each day.

• Financial Projections: Financial projections are crucial, providing detailed financial forecasts, including expected revenue, expenses, and profitability over the first few years of operation.

Another advantage of developing your gas station business plan is that it helps you clearly define your company’s mission and vision, providing a solid foundation for growth. 

After 72 years in business and expanding to over 700 locations, Steve Sheetz, Chairman of the Sheetz Family Committee, highlighted the key driver to the long-term success of Sheetz gas stations and convenience stores:

4. Finances, Sales Forecasts, and Operating Expenses

Your gas station business plan will touch on some numbers in the operations plan, but you should also create a more dedicated financial plan. Work with an accountant you trust and who knows your business model. They’ll be able to help you get granular with fixed and variable expenses and know the general sales figures for the average gas station.

When you know how much it will cost to run your business every month, you can figure out item pricing, supplier relationships, and more details that will help you forecast sales. It’s important to understand exactly how much business you need to do each month to stay in the black and when you can expect to break even on your investment. Compile this information:

• Sales Forecasts: Develop realistic sales projections based on market research, location analysis, and industry benchmarks. Consider seasonality, local events, and economic factors that could impact fuel and convenience store sales.

• Operating Expenses: List all expected expenses, including fuel costs, rent or mortgage payments, utilities, employee salaries, insurance, taxes, and maintenance. Don't forget to include costs for any additional services like car washes or quick-service food operations.

• Break-Even Analysis: Determine the point at which your gas station will become profitable by comparing your fixed and variable costs to your revenue projections. This analysis will help you understand the minimum sales volume required to cover expenses.

• Cash Flow Management: Plan for fluctuations in cash flow, particularly during the initial months of operation. Ensure you have sufficient working capital to cover expenses until the business becomes self-sustaining.

Terrible’s Road House, a gas station located in Jean, Nevada, is home to the world’s largest Chevron. It has 96 pumps, 60 restroom stalls, and a 50,000 sq ft convenience store.

Image Source

5. Funding and Loans

The average cost to open a gas station ranges between $250,000, on the low end to multiple million on the high end. You may not be able to do it out of pocket, in which case you’ll need funding. Here are several avenues to explore:

• Personal Savings and Investments: Many entrepreneurs start by investing their own money or seeking investments from friends and family. This can be a viable option if you have sufficient savings or a strong network willing to support your venture.

• Bank Loans: Banks offer many business loans for aspiring business owners. With good credit and a strong business plan, you could lock in a favorable interest rate and loan terms. 

• Small Business Administration (SBA) Loans: A potential option for gas station owners, especially those who may not qualify for traditional bank loans, are SBA loans. These government-backed loans offer lower interest rates and longer repayment terms. 

• Equipment Financing: Specifically for purchasing equipment, this type of financing is often used for items such as fuel pumps, refrigerators, and other essential machinery. The equipment itself may serve as collateral for the loan.

• Franchise Opportunities: If you’re considering opening a branded gas station, some franchises offer financing options or have relationships with lenders that can facilitate funding.

6. Legal Requirements to Open

Opening a gas station involves navigating various legal requirements and obtaining the necessary licenses. Local, state, and federal regulations ensure your business operates safely and ethically, protecting both your customers and your investment. Research these requirements:

• Business Licenses and Permits: Obtain the necessary licenses and permits to operate a gas station, which may include a general business license, fuel storage permits, environmental permits, and health department approvals for any food services.

• Zoning Laws: Ensure your chosen location complies with local zoning regulations for gas stations. Some areas may have restrictions on where gas stations can be located, particularly near schools or residential areas.

• Environmental Regulations: Gas stations must adhere to strict environmental regulations, particularly regarding the storage and handling of fuel. You may need to install special equipment to prevent leaks and spills and undergo regular inspections.

• Insurance: Purchase comprehensive insurance coverage, including general liability, property insurance, workers’ compensation, and environmental liability insurance. This protects your business from potential lawsuits, accidents, and environmental damage.

• Franchise Agreements: If you’re operating a branded gas station, carefully review the franchise agreement, which outlines the terms and conditions of your relationship with the franchisor. This includes branding, supply contracts, and operational requirements.

7. Location Selection

Location is everything for a gas station. You want to be the place where every driver stops for fuel, a car wash, or to grab a snack. While there may be limited real estate available, a prime location can significantly impact your business’s visibility, traffic, and profitability. Be sure to:

• Traffic Patterns: Analyze local traffic patterns to identify high-traffic areas where drivers are likely to stop for fuel. Consider proximity to highways, intersections, and other businesses that attract regular customers.

• Accessibility: Ensure your gas station is easily accessible, with convenient entry and exit points. Consider the direction of traffic flow and whether drivers can safely and easily turn into your station from both directions.

• Competition: Evaluate the competition in your chosen area. While some competition can indicate a healthy market, too many gas stations in close proximity may reduce your potential customer base.

• Nearby Amenities: Position your gas station close to complementary businesses, such as restaurants, shopping centers, or service stations, can increase foot traffic to your gas station.

• Future Development: Consider the long-term potential of your location. Research any planned developments in the area, such as new residential communities or commercial projects, that could increase demand for your services.

While you may be opening a single gas station, there’s wisdom to learn from South Dakota’s Wall Drug Store. Located in what had been known as “the geographical center of nowhere,” Wall Drug Store offered road-weary travelers free ice water during the Great Depression. That one simple gesture turned this pit stop into a roadside attraction now drawing more than 2 million visitors each year.

Image Source

8. Design Your Layout

Designing the layout of a gas station to maximize sales requires strategic planning and attention to customer behavior. Consider the following:

• Layout: Design a layout that encourages customers to explore the store while finding what they need. Place high-margin items, such as snacks and beverages, in prominent locations, and ensure the store is easy to navigate.

• Lighting and Signage: Use bright, energy-efficient lighting to create a welcoming atmosphere. Clearly label sections and products with easy-to-read signage, guiding customers through the store and highlighting promotions.

• Product Displays: Optimize shelving and displays to maximize visibility and accessibility. Consider using end caps and impulse-buy areas near the checkout to increase sales of high-margin items.

• Cleanliness and Maintenance: Regularly clean and maintain the store to ensure a pleasant shopping experience. This includes keeping shelves stocked, floors clean, and restrooms in good condition.

• Customer Flow: Ensure the store layout allows for smooth customer flow, minimizing congestion at the checkout and throughout the aisles. Consider the placement of the checkout counter to optimize efficiency and customer service.

9. Selecting Suppliers and Vendors

Unlike independent grocery stores, most gas stations don’t carry an abundance of specialty products. Gas stations should appeal to the masses, so it makes sense to work with large food suppliers that can deliver brand-name drinks, snacks, and other products. Review these details:

• Fuel Suppliers: Establish a relationship with a reputable fuel supplier. Consider factors like pricing, delivery schedules, and fuel quality. If you're part of a franchise, your franchisor may have preferred suppliers.

• Convenience Store Inventory: Select vendors that can provide a wide range of products, from snacks and beverages to automotive supplies. Consider local distributors for fresh products and national vendors for consistency.

• Car Wash Equipment: If you plan to offer a car wash, partner with a vendor who can supply high-quality, durable equipment. Consider their maintenance and repair services as part of the agreement.

• Technology and POS Systems: Choose vendors for your Point of Sale (POS) systems, security cameras, and other technology that offer reliable customer support and integration with your inventory management.

• Contract Negotiation: Negotiate contracts with suppliers to ensure favorable terms, such as bulk discounts, flexible payment options, and consistent delivery schedules. Regularly review these contracts to ensure they continue to meet your business needs.

10. Hire Staff

Efficiently operating a gas station requires you to hire several key positions, including managers, cashiers, maintenance workers, and possibly security personnel. Assess your needs:

• Staffing Requirements: Determine the number of employees you'll need for different roles, such as cashiers, stock clerks, maintenance workers, and management. Consider the hours of operation and peak times when additional staff may be required.

• Hiring Process: Develop a hiring process that includes job descriptions, application screening, interviews, and background checks. Look for candidates with strong customer service skills, reliability, and experience in retail or gas stations.

• Training and Development: Provide comprehensive training for new hires, covering everything from operating the POS system to handling emergency situations. Regularly offer ongoing training to keep staff updated on new procedures, products, and safety protocols.

• Employee Retention: Create a positive work environment by offering competitive wages, benefits, and opportunities for advancement. Recognize and reward outstanding performance to boost morale and reduce turnover.

• Compliance with Labor Laws: Ensure your hiring practices and employment policies comply with federal, state, and local labor laws, including minimum wage, overtime, and workplace safety regulations.

11. Supply Chain Logistics

Effectively managing your supply chain ensures that your gas station remains well-stocked and operates smoothly. This involves coordinating with suppliers, managing inventory, and ensuring timely deliveries. Pay attention to:

• Inventory Management: Use inventory management software to track stock levels, manage reorders, and minimize waste. Keep a close eye on fast-moving items and seasonal products to ensure you always have enough on hand.

• Supplier Relationships: Maintain strong relationships with your suppliers to ensure reliable deliveries and negotiate favorable terms. Communicate regularly with suppliers to stay informed about product availability, pricing changes, and delivery schedules.

• Delivery Scheduling: Coordinate with suppliers to schedule deliveries during off-peak hours to minimize disruptions to your business. Ensure you have adequate storage space for inventory and that deliveries are checked for accuracy upon arrival.

• Supply Chain Efficiency: Continuously review and optimize your supply chain processes to reduce costs, improve efficiency, and minimize disruptions. This may involve negotiating better terms with suppliers, consolidating orders, or finding alternative suppliers in case of emergencies.

• Emergency Preparedness: Develop contingency plans for supply chain disruptions, such as delays or shortages. This may include keeping extra stock of essential items, establishing relationships with backup suppliers, and having a plan in place for quickly resolving issues.

As the predecessor of the modern-day convenience store, Lonnie and Barbara Allsup opened Lonnie’s Drive-in in Roswell, NM, in 1956. Stocked with staple convenience store goods such as bread, milk, cigarettes, seasonal fruit, and soft drinks, that one store has transformed into more than 400 locations. 

Image Source

Licenses and Permits Needed to Open a Gas Station

Opening a gas station requires obtaining several licenses and permits to comply with federal, state, and local regulations. These legal requirements are essential to protect public safety, the environment, and your business. Here’s a guide to the critical licenses and permits you'll need:

1. Business License

• Description: A general business license is necessary for legally operating any business. This license is issued by your local city or county government and authorizes you to conduct business within the jurisdiction.

• Application Process: The application process typically involves filling out forms with details about your business, such as its name, address, and ownership structure, and type of operation.

• Cost: Fees vary by location and may depend on your estimated gross receipts or the number of employees.

2. Zoning Permit

• Description: Zoning permits ensure your gas station location complies with local zoning laws. Gas stations are usually classified as commercial operations, so you must confirm that the property is zoned for this type of business.

• Application Process: Contact your local planning or zoning department to verify that your site is zoned appropriately. You may need to submit site plans and undergo a zoning review process.

• Cost: Zoning permit fees vary but can range from a few hundred to several thousand dollars, depending on the project's complexity and local regulations.

3. Environmental Permits

• Description: Due to the handling and storage of hazardous materials like gasoline and diesel, gas stations are subject to stringent environmental regulations. You'll need permits for the installation and operation of underground storage tanks (USTs), spill prevention, and air quality control.

• Application Process: Contact your state's environmental protection agency or equivalent to determine necessary permits. You'll likely need to submit detailed plans for fuel storage systems, including tank specifications and spill containment measures.

• Cost: Environmental permit costs can range from $1,000 to $10,000, depending on the requirements and scope of your operation.

4. Fuel Storage Permit

• Description: Fuel storage permits allow you to store gasoline, diesel, and other fuels on your property, ensuring your storage tanks meet safety and environmental standards.

• Application Process: Apply for this permit through your local fire department or environmental agency. You'll need to provide details about the type and capacity of your storage tanks, as well as safety features like spill prevention and leak detection systems.

• Cost: Fees for fuel storage permits can range from $500 to $5,000, depending on the tank size and jurisdiction.

5. Health Department Permit

• Description: If your gas station includes a convenience store that sells food or beverages, you'll need a health department permit. This ensures your food handling, storage, and preparation processes meet local health and safety standards.

• Application Process: Apply through your local health department, providing information about your store layout, food storage equipment, and sanitation procedures. Your facility will likely undergo a health inspection before the permit is issued.

• Cost: The cost of a health department permit varies by location and the extent of food service offered, but typically ranges from $100 to $1,000.

6. Alcohol and Tobacco Sales Permits

• Description: If you plan to sell alcohol or tobacco products in your convenience store, you'll need additional permits. These permits are heavily regulated and require compliance with state and federal laws.

• Application Process: Apply for an alcohol sales permit through your state's Alcohol Beverage Control (ABC) agency. Tobacco sales permits are typically obtained through the state’s taxation or licensing agency. Be prepared for background checks and to provide detailed information about your business operations.

• Cost: Alcohol and tobacco permits can be expensive and vary widely depending on the state and the types of products sold. Fees can range from a few hundred to several thousand dollars.

7. Weights and Measures Certification

• Description: Gas stations must have their fuel pumps certified by the local Department of Weights and Measures. This certification ensures that the pumps dispense the correct amount of fuel and that customers are charged accurately.

• Application Process: The certification process typically involves an inspection of your fuel pumps by a state or county inspector. You'll need to schedule regular inspections to maintain certification.

• Cost: The cost for weights and measures certification is usually a few hundred dollars per pump, with fees varying by location.

By securing these licenses and permits, you’ll ensure that your gas station operates legally and efficiently, minimizing the risk of costly fines or business disruptions. It's advisable to consult with legal and business professionals to navigate the complexities of the permitting process and to ensure compliance with all local, state, and federal requirements.

Ready, Set, Go! 

To make sure you haven’t missed any steps in the process of opening your gas station, write your business plan using Toast’s Gas Station Business Plan.