whats involved in starting up a petrol station?

Discussion in 'Scotland' started by carrera15, Sep 3, 2009.

  1. carrera15

    carrera15 UKBF Newcomer Free Member

    Posts: 27 Likes: 1
    Im looking for some advice. I have seen a petrol station forecourt that looking to buy.

    Does anybody know whats involved?

    The petrol station in question was run(badly) up until recently when it closed down.

    The owner had leased it outand now has put it up for sale.

    How does the supply of fuel work?
    Ive heard that you have to put down a deposit for fuel, is this true?

    Thanks in advance for any and all help
     
    Posted: Sep 3, 2009 By: carrera15 Member since: Sep 3, 2009
    #1
  2. stugster

    stugster UKBF Legend Free Member

    Posts: 9,312 Likes: 2,067
    My first thought would be how else you could use the space rather than selling petrol. At the moment in Edinburgh, there are loads of drive-thru car washes springing up where they high-pressure wash your car for £6.

    Would a petrol station have good margins compared to a carwash?
     
    Posted: Sep 3, 2009 By: stugster Member since: Feb 1, 2007
    #2
  3. carrera15

    carrera15 UKBF Newcomer Free Member

    Posts: 27 Likes: 1
    Yeah I would open a car wash if the property wasnt so expensive, as it is the actual buisness until it closed was very profitable there was a very high turnover for it being a single forecourt, there is room for expansion aswell which is why its still in my view an excellent proposition, the only thing is I have put in everything I have to buy the buisness, I wouldnt have much left if any, to put towards a fuel deposit
     
    Posted: Sep 3, 2009 By: carrera15 Member since: Sep 3, 2009
    #3
  4. carrera15

    carrera15 UKBF Newcomer Free Member

    Posts: 27 Likes: 1
    As with regards to a car wash margins the only overheads are the chemicals (which are diluted down alot!) water electricity and minimum wage paid to the workers!

    It is reckoned that it cost around 15pence(!) worth of chemicals to wash a car so yes the margins are good
     
    Posted: Sep 3, 2009 By: carrera15 Member since: Sep 3, 2009
    #4
  5. adventurelife

    adventurelife UKBF Ace Full Member

    Posts: 2,043 Likes: 622
    Do your research and then do some more. Petrol stations are going out of business all the time!

    It needs to be in an excellent location with lots of passing trade. I know that sounds blinking obvious but have you counted the passing trade on different days of the week and then measured it against trade at other petrol locations.

    Competition is huge with the supermarkets discounting on fuel so again, location, location, location.

    The margins on fuel are tiny so you need to sell a huge amount see above about location:rolleyes:

    The petrol companies normally require a huge deposit and payment upfront for delivery of fuel!! This may change when you build a long lasting relationship but then again they have no reason to give credit!

    So taking the above into consideration you are not really opening a petrol station you are opening another type of business that happens to sell petrol as a by product and as a come on for potential customers to purchase from the real profit making business.

    What that business should be is up to you after you have done the research into what would do well in the location.

    Shop? garden center? car wash? car sales? ironmongers? etc . Most end up with several revenue streams as it is the only way to make them work.

    I like old petrol stations my main business is located in one:) Cheap and on main roads:)

    If you buy it and are in the right location I pay to advertise in petrol stations that have the right monthly footfall:) Something else that needs measured !
     
    Posted: Sep 4, 2009 By: adventurelife Member since: Dec 2, 2007
    #5
  6. carrera15

    carrera15 UKBF Newcomer Free Member

    Posts: 27 Likes: 1
    Hi, thanks for your help.

    The actual station has a large shop which I plan to run, there is also a large lock up at the rear of the forecourt and from what I have seen there is a la of both passing cars and pedestrians. The shop is the main shop in the area and the nearest is a tesco around 2 miles from it, so im really not looking for much revenue from the petrol side of the buisness!

    There is large scope to introduce food to go type seervice which I am currently looking into also id like to introduce things like cash machine, etop ups and such things to bring more customers into the shopThe problem was the fuel as I have asked esso shell and bp by email but all they do is direct you to their respective websites ont offer as much insite into the fuel supply (deposits, bonds etc) thankfully the current owner has indicated that hed be willing to help me with a fuel deposit in terms of a 3 year interest free loan, so alll is looking good.

    Im also toying to introduce opthalmic and pharmacy services in the rear store (Ive friends in those fields who would be willing to applications in and run them with me) as there are none in the area except at the tesco, but my main worry was the fuel but hopefully thtas sorted now, will keep you posted, thanks again for everybodys help
     
    Posted: Sep 4, 2009 By: carrera15 Member since: Sep 3, 2009
    #6
  7. cybercynic

    cybercynic UKBF Newcomer Free Member

    Posts: 22 Likes: 1
    A car wash is an expected service on any filling station of decent volume, as are vacuum and air lines. I've just left the business myself after fifteen years. Best way to make money in this game...................move to a country who don't use you as an unpaid tax collector
     
    Posted: Sep 20, 2009 By: cybercynic Member since: Sep 1, 2009
    #7
  8. chanduck

    chanduck UKBF Newcomer Free Member

    Posts: 1 Likes: 0
    Hi ,

    Hope you have successfully acquired business,am also planning to buy a petrol station , wondering if you can post your experience.

    thanks
    shaker
     
    Posted: Oct 2, 2009 By: chanduck Member since: Oct 2, 2009
    #8
  9. Naughty Vend

    Naughty Vend UKBF Newcomer Free Member

    Posts: 950 Likes: 179
    As a previous operator of a petrol site... :p

    You'll find that the refinery will not want to deal with you until you prove you have sales, big time is over a million metric litres and actually below that some of the big boys will just not be interested so go with someone more hungry like Jet or Q8. Not too crappy a brand because consumers are savvy and think cheap fuel is bad fuel.

    There's a host of regulations, environmental is a pain in the ass and your tanks will need inspected before use, allow for the shrinkage / evaporation and always get your fuel delivered at night when it's colder... think about that one because you only make a few pennies per litre. Which then returns you to "risk" because one drive-off will cost you, think of it like this... a drive off will not take a tenner they will take a full tank (at least - not including cans and oil drums in the back seats) which is say fifty litres @ £1.04 per, that's nett cost of fifty quid which at £0.04 per liltre profit is one thousand two hundred and fifty litres of sales from paying customers just to break even / recover from. Still want to get into this business...? The solution is pay at the pump only with chip + PIN or the new near field readers, problem with that is the customers don't come into the shop which is where you profit is really made...

    If it were me, whilst I don't know enough to make a proper decision but knowing from your post that a shop is needed... fill the tanks up with concrete and rip the place down. Build flats with a shop or two in them and plenty of parking, lease the shops...
     
    Posted: Oct 5, 2009 By: Naughty Vend Member since: Aug 5, 2007
    #9
  10. cybercynic

    cybercynic UKBF Newcomer Free Member

    Posts: 22 Likes: 1
    I concur entirely. look out for small white vans with drivers in dayglow vests filling up with open rear doors, 100 litres!!!!!!!!!
    Then there's the minimum wage cashier who works extra shifts to maximize his income on dodgy credit cards
     
    Posted: Oct 5, 2009 By: cybercynic Member since: Sep 1, 2009
    #10
  11. carrera15

    carrera15 UKBF Newcomer Free Member

    Posts: 27 Likes: 1
    Hi im just getting my funding toghether but all things equal should be ready to takerover in the near future.

    The main issues with buying it was actually trying to get the fuel supply sorted. Most of the larger suppliers are looking for a site that can sell 2800 kls per year upwards, and are looking for a sizeable lump sump upfront either in the form a bank guarantee or cash deposited into an account, luckily that im buying from will put this down for me. After that youve got you're shop to stock, get a pos system and also repair the forecourt to THEIR standard and essentially thats you ready to rumble.

    As ive got no experience in the petrol buisness I will be getting a rep from the fuel supplier to work with me for around a week to help me through.

    As my background is in retail, i am looking at the bottom line in terms of sales. Fuel itself you dont make much on, around 3p per litre in my case, but other things like car wash, paypal, lottery and your shop is where you will make your money. The way I see it if the income from fuel alone can cover your costs for mortgage on the place and you feel you can make enoother things i would look at it, in my opinion.

    At the end of the day it all comes down to bottom line figures are you able to make enough over the course of a year to cover everything AND make a living?
     
    Posted: Nov 5, 2009 By: carrera15 Member since: Sep 3, 2009
    #11
  12. KidsBeeHappy

    KidsBeeHappy UKBF Newcomer Full Member

    Posts: 7,357 Likes: 1,582
    Sorry, haven't read all previous posts in detail. But important question, have you checked with Trading Standards regarding the condition and compliance of the tanks and pumps. Costs associated with updating and replacing these are HUGE, and you tend to find that that petrol stations come on the market just before they need major capital upgrades.
     
    Posted: Nov 5, 2009 By: KidsBeeHappy Member since: Oct 9, 2007
    #12
  13. carrera15

    carrera15 UKBF Newcomer Free Member

    Posts: 27 Likes: 1
    Hi

    Yeah I been talking to the esso rep for my area and hes everything, the only thing that really needs done is changing the lights and painting the canopy. Basically the company that leased the site before just spent around 30K on the place, for shop fit out and refurbishment, so all is good on that front.
     
    Posted: Nov 5, 2009 By: carrera15 Member since: Sep 3, 2009
    #13
  14. papverpoppies

    papverpoppies UKBF Newcomer Free Member

    Posts: 6,713 Likes: 2,214

    With 600 petrol station a year going out of business (and with so little profit on each litre sold) why would you want to buy a petrol station.

    You already say that your profits will be from the other things you plan to sell and develop on site, so why not just buy a store?

    There was a post on this board 3 days ago, and most people who replied said it was a NO goer, especially for a small independent set up - owing to the supermarkets, and the bigger companies.

    If this place had to close down, I imagine it closed down for a reason, no one closes down a good profit making business - they surely sell it as a going concern.

    Poppy
     
    Posted: Nov 5, 2009 By: papverpoppies Member since: Apr 8, 2009
    #14
  15. KidsBeeHappy

    KidsBeeHappy UKBF Newcomer Full Member

    Posts: 7,357 Likes: 1,582
    That isn't what you need to worry about, what you need to worried about is buried underground, and the one person that will have a full copy of the spec and standards of what's under all that concrete is Trading Standards. Don't trust the fuel reps, they're just selling fuel, they're not going to tell you that what you have is substandard and requires replacing in 2 years. And don't trust the seller.

    Talk to trading standards. And get a copy of all recent inspection reports.
     
    Posted: Nov 5, 2009 By: KidsBeeHappy Member since: Oct 9, 2007
    #15
  16. papverpoppies

    papverpoppies UKBF Newcomer Free Member

    Posts: 6,713 Likes: 2,214
    Have you actually understood what you have written here?

    Why are you buying this business - when in your own words, you are not looking for that side of the business to bring in much revenue.

    It is going to cost you a fortune, and sure the fuel reps etc etc will help you, and help with the finance in so much as filling up the tanks (why would they not)? after all, its you that has got to pay for it all, irrespective of whether you sell the fuel or not.

    Personally from the questions you have asked - I would say you need to be careful, or else all that money you are borrowing will soon be gone.

    Have you actually secured a business loan based on a 'business plan' or are you obtaining loans?

    There are folks out there, who will tell you, whatever they know, you want to hear!

    Make sure you do not fall into their trap.

    Poppy
     
    Posted: Nov 5, 2009 By: papverpoppies Member since: Apr 8, 2009
    #16
  17. carrera15

    carrera15 UKBF Newcomer Free Member

    Posts: 27 Likes: 1
    Hi Poppy

    What i actually meant was the money I make from the fuel will basically cover all my costs, so therefore I wont be making much(ie in my pocket) from the fuel, the shop side of it is were I will be making my money.

    I kinda know what youre saying, ie it may not be worth it, but with all due respect, you dont know the area and you dont know the kind of figures we are talking about.

    The reason the last person went bust was simple, at the time when fuel prices were at around 129p per litre he had bought fuel (his company owned multiple forecourts) a vast amount of wet stock at what was at the time a good price, belived to be around 125p, when the prices went back down to pound levels he ineffect lost a quarter of his buisness, the fuel company called in his bonds and he went belly up!

    Yeah I know that there are so many petrol stations that go out of buisness, but this site is on the main road in and out of the area, and is in the centre of the main retail area of this place.
     
    Posted: Nov 5, 2009 By: carrera15 Member since: Sep 3, 2009
    #17
  18. gillyfleur

    gillyfleur UKBF Regular Free Member

    Posts: 100 Likes: 19
    Do you know how much fuel the site was selling p.a. previously ?
    You need to work on 3 - 4 pence per litre margin
    Shop will do 10 - 11 % margin on cigarettes, maybe 30% on the rest of the shop sales overall - depends if you intend to premium price.
    Oil company will want a minimum bond of £40K but that doesn't have to be cash, it can be a bank guarantee, but will depend on volume.
    The best you can expect is 3 working days credit on fuel - timing of a delivery is therefore crucial to get the maximum credit - Thursday night or Friday morning delivery may not leave your bank until Wednesday and evening deliveries might be better as it's cooler but then it depends on the terminal the fuel leaves from - i can't remember what the stats on the Scottish terminal were like (it's been a while since I was involved in the industry to that extent), 14 days credit from a stock supplier such as Palmer & Harvey.
    Are you going to trade 16 hours or 24 hours a day ? will affect staffing costs - 24 hours a day = 168 hours per week @ £5.80 per hour = £974.40 + Eers Ni, plus a cleaner 20 hours per week (unless you do it yourself), plus a shelf stacker @ 20 hours per week plus if it's busy you might need to double man in busy times
    You mention an Esso TM. Are you going to stick with Esso for fuel supply ? A good move if you are. An Esso, BP or Shell pole sign can add 15 - 20% to your volume.
    Also Esso will charge you seperately for your fuel card transactions and you'll get your card money in 3 days (whereas some of the others take 21 days to give you your charge card money back) so you know what you're paying and you'll get a better margin on your fuel so can price more competitively. Try to avoid Texaco - too expensive as they pay your so your pole sign price will always have to be dearer so customers won't be so keen
    What else can I tell you ? Just to qualify my comments I currently have 8 petrol station clients and spent 15 years working in the industry on the site accounting side of things so I do know a bit about it. I've done business plans for 2 of my clients to get bank funding to do exactly what you're doing (and one was an ex Esso site. So far he's spent approaching £700K but it's valued as a trading business at approx £1.3 million now - but he's doing 4 million litres and making about £3K per month because of his finance costs so don't expect to get rich quick. His will come when he's managed to re-finance a better bank deal and his equipment leasing is paid)
     
    Posted: Nov 5, 2009 By: gillyfleur Member since: Oct 7, 2008
    #18
  19. carrera15

    carrera15 UKBF Newcomer Free Member

    Posts: 27 Likes: 1
    gillyfluer

    The fuel sales were 3.5M per annum with 25K a week shop sales and also 63k a year car wash sales.

    Hi ive got a contract with esso waiting to be signed, ill be living on site as there is a flat above so I will be working at least 15 hours a day (been doing that for the past 9 years as it is). Stock wise, a very close friend of mine owns and runs one of the main cash and carries in glasgow so thats sorted aswell, youve just confirmed what I was led to believe. The only difference is that this site has all new terminals and all the fixtures and fittings are owned outright by the owner including fuel pumps, the only thing that isnt is the car wash machines, but they for themselves.

    Im currently trying to get finance at good rate but I have been quoted at 3.5% at best and 12.9% worst case. If it means me not making much for the first year or two, until I get a better rate of finance I am prepared to do that.
     
    Last edited: Nov 6, 2009
    Posted: Nov 5, 2009 By: carrera15 Member since: Sep 3, 2009
    #19
  20. willitbe

    willitbe UKBF Newcomer Free Member

    Posts: 785 Likes: 142
    Living at a Petrol Station:|:|:|.

    Really?. I would have thought that was a no-no.

    I have honestly never seen a petrol station with living quarters!
     
    Posted: Nov 6, 2009 By: willitbe Member since: Aug 25, 2008
    #20