Keys to Site Selection
So, you've decided to enter the fuel station business. We can't wait to help you realize your plans. Whether you're acquiring an existing fuel station or building a new one, these questions will help you determine the potential success of each site.
What is the level of competition around the new site?
When you're choosing a site, we know it can be tough to interpret competition. Of course, your instinct might tell you to avoid investing in an area that has existing competition. But did you know in many cases, competition can be a great sign of potential success?
You'll want to avoid investing in an area that is already noticeably over-saturated with gas stations. A popular high-density area may have a large number of stations, so consider carefully how you will offer more value than the competition. If you have to win business over multiple competitors, you may be positioning yourself for a challenging future.
The natural growth of cities presents an opportunity. Look at parts of the city where natural growth will increase the fuel volume of an area. Understand what new players will be arriving in that same area by looking at zoning and city planning documents that are accessible to the public.
Also look closely at nearby big-box retailers offering significant fuel discounts. Understand the discount gap between the local stations and the big-box retailers offering gas. Examine the nearby grocery stores and wholesale clubs without a gas offering and evaluate if you think there is a chance they may expand into fuel. You will also want to research whether or not those grocery stores offer fuel at other locations
However, don't be afraid of competition. In some cases, trying to build in a location with zero opposition can be more frightening than high competition. Healthy competition indicates that there is demand in the area. With that said, even if there is low competition but rapid growth, it could result in higher sales volumes.
Also, consider investing in site modeling. There are a number of reputable companies that will, for a fee, create a digital model of the site you are planning to build at the specified location. They can predict gasoline volume, convenience store sales and the potential for alternate profit centers.
Lastly, invest in a good architect who specializes in gas stations and who is familiar with the city and state ordinances. Ask for and check references.
Is it accessible to a high-traffic roadway (interstate or highway)?
Location is among the top two considerations of gas station consumers when choosing a fuel station.* Consumers will even pay more to avoid turning into an area that makes entering or exiting difficult. Make sure you have a presence along a key street or highway that will bring you a steady stream of new consumers. And take into consideration how the traffic flows during different times of day. The site itself must not only be easily accessible, but also positioned on the side of the street that gets the heavy flow of traffic. If you're not on the path, you'll be asking a lot from your consumers.
Are there any future construction plans/projects that would impact your site accessibility?
Check construction records and plans within the area. If a major road or interstate will be closed or moved, your steady stream of consumers may be reduced to a trickle. That lag in business can be difficult to make up for.
What are the state/federal environmental laws for a gas station, and what is the history behind this site?
Understand the laws and regulations you will need to observe as a site owner. Most importantly, check the history of the existing gas tanks for documentation on leaks and/or environmental issues. You don't want to clean up a mess someone else is leaving behind.
If you are purchasing an existing station, you should also investigate some other aspects:
Is there a fuel supply contract that is assigned to you when you purchase the station?
Find out if you are required to stay with a certain brand based on the contract you're signing or if you have freedom to choose any brand. Make sure to obtain a copy of that contract and seek legal advice to help answer any questions you might have.
Does the store have a healthy history of fuel and convenience store revenue?
Most gas stations can't survive on fuel sales alone. If you don't have a healthy convenience store business, it will be difficult to stay in business.
Is the site up-to-date with modern signage?
If your site doesn't have modern-looking signs and canopies, consumers will likely assume the interior matches. Make sure the site you are buying is modern and up-to-date, or that you have plans and funding to either rebuild or refurbish the site. When branding with Phillips 66, you will benefit from our expertise and market presence. You will also gain access to exclusive programs that will help you enhance your site.
Are there enough pumps to adequately serve your consumer base?
Are there enough pumps and parking spaces to adequately serve your consumer base? You need at least 4 pumps** and 6 front parking spaces*** to adequately serve a busy site and generate enough traffic to maintain a profitable c-store. Too few pumps or parking spaces will make it hard to attract enough consumers to your site.
Why is the owner selling?
Don't always assume an owner is selling to spend more time with their family. Uncover the root reason (i.e., did they sell the site to reinvest in another property, or was the site less than profitable?). Ask yourself, “How can I change this site for the better?” “What am I going to do differently to compete and thrive?” If you don't have many answers, and the site isn't profitable, you may want to keep looking.
An investment in a gas station is a major decision. Make sure that before you sign a contract, you've answered all of these questions. Please keep in mind that this list is not meant to be all-inclusive. If you have additional questions about branding a gas station or site, contact a Phillips 66 representative during normal business hours.
*Source:NACS, 2014 Consumer Fuels Report
**Source: Phillips 66 Brand and Image Standards
***Source: NACS "What is a Convenience Store"