How to start a gas station: what changes when you sell fuel

On this page

1. Step 1: Choose your fuel business model
2. Step 2: Check the site for fuel
3. Step 3: Set up fuel supply with a jobber
4. Step 4: Learn the tank and environmental rules
5. Step 5: Set up the forecourt
6. Step 6: Understand fuel pricing and margins
7. Step 7: Manage card fees
8. Step 8: Run the convenience store side
9. Step 9: Build daily, weekly and monthly fuel routines
10. Where Advantage fits

A gas station is two businesses on one lot. One is a convenience store. The other is a fuel business with its own suppliers, equipment, regulators and math. This guide covers the fuel side and how it changes the store. For the store itself, start with our guide on how to open a convenience store.

Fuel is regulated by federal, state and local agencies, and the rules vary a lot by state. Nothing here is legal or environmental advice. Use this guide to build your list of questions, then take them to your state environmental agency, your fire marshal, your state weights and measures office, an environmental consultant and an attorney.

Step 1: Choose your fuel business model

Decide early how you will own and supply the fuel. That choice decides who sets the pump price, who owns the fuel in the tanks, and who pays when equipment breaks.

Branded or unbranded

A branded station sells fuel under a major brand’s name and signs, through a supply agreement, often with a jobber that carries the brand. You get the brand’s name and its card programs. In return you agree to image standards, a minimum volume and a contract term. Branded deals can include money for signs or upgrades that must be paid back if you leave early, so read those terms twice.

An unbranded station buys fuel without a brand, usually priced off the unbranded rack price. You have more freedom on price and signs, and you build your own name. Whichever way you go, ask the supplier how they decide who gets fuel when supply is tight.

Who owns what

Station deals come in a few common shapes. Contracts differ, so read yours to see who pays for repairs, upgrades and environmental compliance.

Arrangement	Who owns the fuel in the tanks	Who sets the pump price
Owner-operator	You	You
Lessee dealer (you lease the station from a supplier)	You, usually bought from that supplier	You
Commission agent	The supplier, who pays you a set amount per gallon	The supplier

Step 2: Check the site for fuel

Everything in the store guide about traffic, visibility and zoning still applies. Fuel adds its own checks:

• Make sure a fuel truck can enter, park at the fill ports without blocking the pumps, and leave without backing into traffic.
• Check that drivers can reach the pumps from both directions and read the price sign in time to turn in.
• Ask the city or county about permits for curb cuts, canopies and price signs.

Environmental checks if you are buying

If the site already has tanks, you are buying their history. Before you commit:

1. Hire an environmental consultant for an environmental site assessment. Your lender may require one.
2. Ask the seller for tank records: tank and piping age and materials, install and upgrade dates, leak detection records, test and inspection reports, and any notices from regulators.
3. Ask your state environmental agency about the site’s tank registration and any past leaks or open cleanup cases. You can often request these records.
4. Ask how the current owner meets the financial responsibility rules, which call for proof that the owner can pay for a cleanup, for example through insurance or a state fund. Ask whether that coverage can continue under you.
5. Have a petroleum equipment contractor inspect the dispensers, card readers, tank monitor and piping.
6. Have your attorney spell out who is responsible for contamination found later.

Building a new station adds tank installation, permits from several agencies and a longer timeline. Bring in your environmental consultant and equipment contractor before you buy the land.

Step 3: Set up fuel supply with a jobber

A jobber is a fuel distributor. It buys fuel at a terminal and delivers it to stations, branded or unbranded. Read a jobber contract as carefully as you read your lease.

How your fuel cost is built

Your cost per gallon has four main parts:

• The rack price, which is the wholesale price at the terminal and can change daily.
• Freight, the cost to haul the fuel to you.
• Taxes and fees, which are federal, state and sometimes local, and vary by state.
• The jobber’s margin, the amount it adds per gallon.

Ask your jobber to show each part on the invoice. If they quote one delivered price, ask how it is calculated and when it changes.

Questions to ask a jobber

• How is my price calculated, for example rack plus a set number of cents per gallon?
• When and how do you collect payment?
• Who orders loads: me, or you through remote tank monitoring?
• What is the minimum load, and what happens if a load does not fit in my tanks?
• Do you bill on gross gallons or net gallons (adjusted for temperature)?
• What are the contract term and minimum volume, and what is the penalty for missing it?
• Who owns and maintains the pumps, card readers, tank monitor and signs?
• What happens at the end of the contract, or if I leave early?

If payment is drafted from your account at delivery or soon after, you pay for the fuel before you sell it. Plan your cash for that.

Receiving fuel

Treat every load like a grocery delivery, only bigger:

1. Before the delivery, take a tank reading from the tank monitor or by sticking the tank, and confirm there is room for the load.
2. Make sure the driver puts each grade in the right tank. Label your fill caps clearly.
3. After the delivery, take another reading. The rise in the tank, plus anything sold during the drop, should match the delivered gallons on the ticket within a small tolerance.
4. Keep every delivery ticket and match it to the jobber’s invoice.

Step 4: Learn the tank and environmental rules

Underground storage tanks are regulated by the U.S. Environmental Protection Agency and by state programs. Your state environmental agency is the office to call first. This section describes the kinds of things the rules cover, not the rules themselves.

In general, expect rules on:

• Registering your tanks, and telling the state when ownership changes.
• How tanks and piping are built and protected from corrosion.
• Leak detection, with records you keep.
• Spill and overfill prevention equipment, and periodic tests and inspections.
• Training for the people responsible for the tanks, including staff on site.
• Reporting and cleaning up leaks and spills.
• Financial responsibility, meaning proof that you can pay for a cleanup.
• Closing or removing tanks.

Other offices may be involved too. The fire marshal covers fire code items such as emergency shutoffs and extinguishers. Weights and measures inspectors, from your state or county, check pumps so customers get what they pay for, and may check price signs and pump labels. Your state or regional air quality agency may require vapor recovery equipment in some areas.

Build a compliance calendar. List every test, inspection, record and renewal, who is responsible, and when it is due. Keep the records in one place where an inspector can see them. Missing paperwork can be a violation even when the equipment is fine.

The tank monitor and daily reconciliation

An automatic tank gauge, often called a tank monitor, is a probe in each tank with a console in the store. It reports fuel and water levels and can run leak tests. Learn to read it, and check for water in the tanks regularly.

Every day, compare what you should have with what you do have. Book inventory equals yesterday’s measured inventory, plus deliveries, minus gallons sold. Compare that with today’s measured reading. Small differences are normal, because temperature changes fuel volume and tank charts are not exact. A difference that keeps growing in one direction can point to a leak, a pump that needs calibration, a short delivery or theft. Your state may require these records as part of leak detection.

Step 5: Set up the forecourt

The forecourt is everything outside the store: pumps, canopy, lighting, price sign and the space between them.

Equipment

• Dispensers, each with nozzles, hoses and breakaway fittings.
• Card readers at the pump. Ask your processor and equipment contractor about the card networks’ rules for outdoor card readers, including chip cards.
• A fuel controller that links the pumps to the register, so the cashier can turn on pumps and each sale is recorded by grade.
• An emergency stop that shuts off the pumps, placed where your fire code requires.
• A canopy, lighting, and a price sign customers can read from the road.
• Spill kits, trash cans, and air and water if you offer them.
• The phone number of an equipment contractor who can come quickly when a pump goes down.

Keep three prices in agreement

The price on the street sign, on the pumps and in the register should always match. When you change prices, change all three and check them. A sign that shows a lower price than the pump annoys customers and may break your state’s price posting rules.

Prepay, postpay and drive-offs

Decide whether customers pay before they pump, after, or a mix by time of day. Prepay prevents drive-offs. Postpay is friendlier for regulars. Either way, train cashiers to watch the pumps they turn on, keep cameras on the pumps, and log every drive-off with the pump, grade, amount and time.

Step 6: Understand fuel pricing and margins

Fuel margin is counted in cents per gallon: the pump price minus what that gallon cost you. Two things make it harder than it looks. Card fees take part of it, and the fuel in your tank is a mix of loads bought at different prices.

A worked example with made-up numbers

Every number below is hypothetical. It shows the math, not what fuel costs or earns anywhere.

Line	Per gallon
Rack price	$2.47
Freight	$0.05
Taxes and fees	$0.45
Jobber margin	$0.03
Delivered cost	$3.00
Pump price	$3.25
Gross margin	$0.25

Now take out card fees. Say a fill-up is 10 gallons, or $32.50, and say your card fee is 2% of the sale plus 10 cents per transaction. That is $0.65 plus $0.10, or $0.75, which works out to 7.5 cents per gallon. On that card sale, your margin falls from 25 cents to 17.5 cents a gallon. A cash sale keeps the full 25 cents.

Now a week. Say you sell 8,000 gallons and 80% are paid by card:

• Card gallons: 6,400 at 17.5 cents, or $1,120.
• Cash gallons: 1,600 at 25 cents, or $400.
• Fuel margin after card fees: $1,520.

Before card fees, the same gallons would show $2,000. In this example, card fees took $480, almost a quarter of the fuel margin.

The example also gives you a floor. With these made-up fees, the break-even price for a card sale is about $3.07 a gallon. Below that, every card sale loses money on the fuel.

Your cost is an average

Fuel goes into a tank that already holds fuel. Say the tank has 4,000 gallons you bought at $3.00, and you add a 6,000-gallon load at $3.10. The tank now holds 10,000 gallons that cost $12,000 plus $18,600, or $30,600. That is an average of $3.06 a gallon.

Measure your margin against that average, the cost of the fuel now in the tank. If you use the price of the last load instead, your margin will jump up and down with every delivery and will not match your profit. When you set prices, also watch what the next load will cost. Ask how your back office calculates fuel cost, and check it once by hand.

Setting your price

No formula works everywhere, but a routine helps:

1. Know your average cost in the tank and the cost of the next load.
2. Know your floor, the lowest price that covers cost and card fees.
3. Check nearby competitors’ prices at the same times each day.
4. Set a target margin range for each grade and price within it.
5. Change prices on purpose, not in reaction to every move across the street.
6. Watch gallons. A price that drops your volume also drops the store visits that come with it.

Step 7: Manage card fees

Fuel margins are counted in cents, but card fees are charged on the whole sale. As the example shows, that makes card fees one of the first costs to manage at a station.

How card pricing works in general

Each card sale carries three kinds of cost. Interchange goes to the bank that issued the card, at rates set by the card networks. Network fees go to the card networks. Your processor adds its own markup on top.

Processors package these costs in different ways. Interchange-plus pricing passes through the actual interchange and network fees plus a stated markup. A flat rate charges one rate for all cards. Tiered pricing sorts sales into price tiers, which can make the true cost harder to see.

Questions for a processor at a fuel site

• How do pre-authorization holds work at the pump, and what does the customer see?
• Which fleet cards and fuel cards can I accept, and what are their fees and settlement times?
• Who pays for chargebacks and fraud at outdoor card readers?
• Do you support my register, my pump card readers and my fuel brand’s card program?
• How long is the contract, does it renew automatically, and what is the early termination fee?

Read your statement every month

Divide your total processing fees by your total card sales. That is your effective rate. With made-up numbers, $1,000 in fees on $50,000 of card sales is an effective rate of 2%. Track it every month. If it creeps up and your card mix did not change, ask your processor why.

If you want to post different prices for cash and card, check your card network rules and your state’s laws first, and ask your processor how it must be done.

Step 8: Run the convenience store side

The store guide covers the basics. A station changes a few things:

• Your customers arrive in cars, and some pay at the pump and never come in. Give them reasons to walk inside: clear signs at the pumps, a well-lit path, clean restrooms, and what drivers want, such as drinks, snacks, coffee, ice and motor oil.
• Your cashiers run the pumps as well as the counter. Add pump authorization, prepay refunds, small spills and the emergency stop to your training.
• Your shift close gets longer. Each shift should record fuel sales by grade, tank readings and drive-offs along with the drawer and lottery.
• Your reports need fuel and inside sales side by side, each with its own margin.

Fuel safety for staff

Make sure every employee knows:

• Where the emergency stop is and when to use it.
• How to handle a small spill with the spill kit, and who to call for a large one.
• What to do if a driver pulls away with the nozzle still in the car.
• Your state’s spill reporting rules, posted where staff can find them.

Step 9: Build daily, weekly and monthly fuel routines

Daily

• Take tank readings at the same time each day or at each shift close, and check for water.
• Compare book and measured inventory.
• Match each delivery to its ticket.
• Check that the street sign, the pumps and the register show the same prices.
• Walk the forecourt: pumps and card readers working, hoses in good shape, lights on, trash emptied.

Weekly

• Margin per gallon by grade, after card fees.
• Gallons by grade compared with last week.
• Jobber invoices against delivery tickets.
• Competitor prices, drive-offs and pump problems.

Monthly

• The compliance calendar: tests, inspections and records due.
• The book-to-measured difference for each tank over the month.
• The card processing statement and your effective rate.
• Volume against any minimum in your supply contract.
• Fuel tax and other filings with your accountant, if your state requires them of retailers.

Where Advantage fits

Advantage is back office software for independent convenience stores and gas stations. For fuel, it tracks jobbers and fuel deliveries with the delivery slip scanned, works out margin per gallon from the weighted-average cost of the fuel in each tank, records tank readings at shift close, shows tank variance for each shift, and sends low-fuel and fuel delivery alerts to your phone. It also reads store sales from Verifone Commander and Gilbarco Passport registers, sends item price changes and mix-and-match deals to the register, and closes shifts at the store with a guided checklist. See what works with Advantage.