By: Bernadette Reyes of E
A gas station may be expensive to put up, yet motorists’ inexhaustible demand for fuel makes it quite a viable business. The business is not likely to go out of style soon, as oil is an essential commodity, but success largely depends on its location. It’s not the only thing to consider though. For one thing, the product is highly combustible, so strict compliance in product handling and other safety precautions must be a big consideration as well. You must also consider whether you want to go the franchise route or build your own brand from scratch. Both have pros and cons. So before you pump it up, consider the
CAPITAL. The required capital needed to open an average-sized gas station may range from P3 million to P5 million. For franchised brands, this amount includes the franchise fee. Bulk of the capital goes to inventory, construction of the facility and equipment. The return on investment usually takes three
years or more.
LOCATION. Choose a location within the regular route of vehicles. “It should be in a high-traffic area that is classified as either commercial or industrial,” says Archie Gupalor, vice president for the national sales division of Petron Corp. The higher the vehicle traffic, the greater potential for fuel demand. Also, you need to study historical, present and future developments in the area. “Plans to put up commercial centers, for example, are a good indicator of increased commercial activity in the future. This kind of development can drive vehicle traffic, and, effectively, fuel demand in the area,” says Rehum Jay Rabadan, SeaOil’s assistant manager for franchise development. Opting to lease the property for the gas station is more practical because it reduces the amount of taxes that a franchisee needs to pay. “Also, if the area does not yield volumes as projected, a franchisee can relocate more easily since the property is only leased,” says Abigail Ho, government affairs and institutional linkages manager of SeaOil.
LOT AREA. Lot area for a gas station usually ranges from 600 sq m to 1,000 sq m with allowance for frontage. However, in areas with fewer motorists, a smaller space may suffice. “The minimum lot area to set up a Petron Bulilit station is only 150 square meters,” Petron’s Gupalor says. This setup would have two to three pumps that can be expanded as demand increases.
PERMITS. Aside from the usual business permits and registrations (from the Department of Trade and Industry, barangay hall, mayor’s office, Bureau of Internal Revenue, among others), a gas station proprietor must secure an environmental compliance certificate (ECC) from the Department of Environment and Natural Resources. SeaOil’s Monasterial says the ECC is proof that the gas station will not cause a significant negative impact on the environment. The ECC serves as a badge recognized by the Department of Energy.
PRODUCTS. Oil companies with refineries such as Shell and Petron import crude oil and process it locally to prepare the final product for distribution. However, smaller gas stations may purchase supplies from another station. Monasterial says product sourcing is faster, more reliable and cheaper for franchisees than for those who set up their own gas station. Independent gas stations “won’t have security of supply.
For example, when world prices of oil rise, bigger companies typically hold on to their stocks instead of selling them to other gas stations.” To increase sales, a station may sell lubricants and liquefied petroleum products.
TERMS OF PAYMENT. Petroleum products are expensive. To help dealers, some companies offer term payments. For SeaOil, dealers may choose to pay for lubricants after a month. Payment terms for fuel products are even better. “It’s only after the third delivery that we ask our dealers to pay their fi rst delivery,” said SeaOil’s Monasterial. To get the best deal, talk to as many oil companies as you can.