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Gas Stations / Service Stations &
We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of gas station businesses. Below is a brief synopsis of the industry.
Description of Business
Gasoline service stations primarily engaged in selling gasoline and lubricating oils. These establishments frequently sell other merchandise, such as tires, batteries, and other automobile parts, or perform minor repair work, with average annual sales of $1,530,287/firm.
General Industry Information
The retail gasoline business is expansive, with annual revenues over $125 Billion. According to the Bureau of Labor Statistics, there were 81,684 establishments as of the recent census, employing 614,000 workers.
Gas stations were once operated by individual retailers, who purchased gasoline from wholesalers. Increasingly, gas companies are engaging in vertically oriented business plans, purchasing and franchising their operations. In doing this, some gasoline wholesalers are being pushed out of the industry, as retailers are buying directly from oil manufacturers. Exxon Mobil is the top American gas company, as well as service station parent company, whose refined oil was sent to 42,000 retail stations (source: Hoovers).
Many existing stations are looking to expand their convenience store offerings, a move which is often made to increase operating profits. Most newly built service stations are streamlining the layouts of gas stations with convenience stores.
General trends of automation have permeated this industry, including credit/ debit card payments. The automation has enabled service stations to offer payment at the pump for customers. Generally, the automation allows gas stations to operate with fewer employees, a fact reflected in the high sales per employee ratio for this business.
Red Flags and Risks
Competitive pressures have thinned profit margins for many operators. Increases in expenses can quickly hinder an operation, so cost management is crucial. Because it is possible for a single employee to operate a gas station, workers have become particularly vulnerable to theft and other crimes. Buyers should consider the safety of employees, and check the facility’s surveillance and other safety controls. Buyers may be interested in checking with the Congressional Energy and Commerce Committees to review pending legislation pertinent to this business. Environmental legislation affects this industry significantly, especially with regards to the underground storage tanks. Fiberglass tanks are preferred, and tank condition needs to be inspected by a third party professional during the due diligence period. This inspection should report on any leaks or rust in the tanks. Retroactive liability for environmental damage caused by faulty storage tanks can put an operation out of business. A very important item to review is the gas station rental lease and any franchise agreements. Frequently, franchise transfer fees apply. Location is vital, with freeway access and visibility fueling sales from regular commuters.
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