There is an independent gas station near me that also has a couple of other locations. They do not have a mini-mart at any of their locations. They offer full service at no extra charge, and they are usually 15-20 cents per gallon cheaper than anywhere else. How do they stay in business? I have often heard a gas station makes far more money on hot dogs, sodas, and lottery tickets, than gas. This station sells gas, and that’s it. They don’t have a repair station or restaurant attached to the store either. Just gas.
They have a business model that works for them, despite not optmizing profits. The dude who runs it has probably decided that it gives him the money he needs and he doesn’t want to do anything else. In chains/larger companies, the goal is to maximize profit, so they have a very different mindset.
The other thing to keep in mind with an owner/operator model (assuming this is one) is the business’s profit is his salary. So he can report paying himself a salary, and not have the business show a profit. Or he can pay himself a negligible salary, and take the profit as a dividend (assuming he’s incorporated). In a larger operation there has to enough business to pay salaries and make a profit for the owner.
I believe property costs are a pretty big part of a gas station’s costs. It’s possible that the independent chain purchased the land back when property values were lower and retail gas margins were higher. Now, with the land owned outright, they don’t have to pay for leases or mortgages on expensive prime commercial property.
By having the lowest price perhaps he sells a lot more gas than other places, which means he can get a better price on his gas, which means he may be making more money per gallon than the guy down the street who doesn’t sell as much gas as he does and relies more on sales of cokes and potato chips…
or he’s one of these types that is losing money but not enough to realize it yet
Another thing to consider.
A place that JUST sells gas has to be about the easiest business to run there is. If the dude owns a handful of them it probably still is only an easy full time job.
Yeah, he could probably make MORE money running a handful of convience store type gas stations. But then imagine the headache of doing that. Either you need employees that actually can run something and or you also have to deal with all that inventory of non gas stuff.
Dude probably eeks out a nice living without much more than paying some bills and keeping an eye on things.
We should all probably be so lucky.
Do the stations do repairs/maintenance? Do they sell lots of oil, tires and batteries? That’s probably where they make money.
I was thinking that myself.
I would think that the important question is - Where does he buy his supplies from?
I know Europe is different but I used to buy fuel at a filling station on a main road that catered mainly for trucks. He only sold diesel, a small selection of ready made snacks and coffee from a machine. His fuel was a good 10% cheaper than the big chains and the coffee was free.
One reason he was cheaper was that he had a huge storage capacity - some 1/2 a million litres I believe. Because of this he could buy direct from Rotterdam when the price was low. The other reason was that his overheads were minimal. The pumps were old, there were pot holes on the forecourt and there was usually only one person working there at any time, even though he was open 24/7.
Walmart just opened their first gas station in town, and I asked a guy who was the manager of the other biggest station if they’re worried. He said they didn’t make any money at the pump, most of their profits came from inside sales. So unless his real-estate cost is low he’s doing himself a disservice just selling gas.
After being open a week, they price matched each other, but today Walmart is $1.82 and everyone else is $1.99. We’ll see how long that lasts.
Also important to ask. There was just one such p[lace next to where I used to work, great place to get gas when I was taking a long weekend trip. Pumps were a little rusty, but so what? Except, my car began to have starting problems, that went away when I stopped buying gas there. Possibly a coincidence. But you have to wonder … is that why its so cheep?
I have read that the profit on gas at a normal gas station is 2-3 cents/gallon. Undercutting by 15 cents makes me very concerned that the gas is very poor quality/adulterated.
This appears to be a shining example of: if it appears to good to be true, it probably is.
Subsidized in some way?
The OP said full service so depending how busy it is, he would have to have some employees. And people…they’re the worst.
I was about to suggest: Money laundering? But, seeing as three other posts have mentioned that already, I’ll just contribute this:
And this thread too.
(Somewhere in one of those threads I saw a speculation that the illegal back-room activity might be a massage parlor. Gee, ya think? At a gas station? I’ll have the full body rub, with extras, using 10W-40 please.)