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Franchise or independent Pros and cons for the potential gas station buyer

Franchise or independent? Pros and cons for the potential gas station buyer

As with any franchise vs independent decision, it boils down to a simple choice: safety or freedom?

If you are considering buying a petrol station, there are several factors to consider, including whether you want to operate as a franchise, under the brand of a major oil company, or as an independent. 

There are pros and cons to both arrangements, but as with any franchise vs independent decision, it boils down to a simple choice between safety and freedom. 

Independent =  freedom

Pro: You call the shots.

From the services you offer to the hours that your station is open. While a franchise provides ready-made solutions from the oil company, independent petrol station owners have the flexibility to do what they feel is right for their markets.

Independent petrol station owners have total freedom to competitively source their products from available distributors. That leaves some room for price negotiation; however, most enter into long-term contracts with suppliers in order to take advantage of discounts. 

Pro: You may be able to receive financial help

If you buy from an independent owner, the seller could finance a sizable portion of your purchase. 

Pro: If you want to eventually sell your station, you can sell it to whoever you like without a parent company getting involved. 

Con: The independent owner assumes all responsibility

You are entirely responsible for the business from the branding and marketing to meeting environmental standards, which can be very expensive to correct.

Franchise = safety

Pro: No need to build up brand reputation.

Shell, Citgo and the other big oil companies have already done that. All you will need to do is staff and maintain your station based on the parent company’s standards.

Pro: A franchise provides insurance and protection against environmental problems.

If there turns out to be issues at your site, the franchisor, not you, is responsible for correction and clean up. If new state laws require equipment upgrades or a tank starts to leak, typically the parent company will be on the hook for these expenses. 

Pro: Most oil companies offer ongoing education and support opportunities so your station is profitable.

After all, they have a vested interest in your success.

Con: If you decide to one day sell your franchise, you will need to have your buyer approved by the franchisor.

Con: You will be obligated to buy your gasoline from the franchisor.

That means they set the price and you’ll have to pay it. You will operate your station under the franchisor’s name, use their promotions and follow their rules. Some may find this restrictive.

How to make sure you are buying a franchise or an independent

Before you do anything, it’s important to find out who actually owns the land as well as the business entity. 

During your due diligence process insist on knowing who owns the property, if there are mortgage payments and whether they are being made on time, and the duration and terms of any lease held by the seller.

Sometimes the oil company may only hold a lease which is being sublet to you and could expire. 

Regardless of your choice, be sure to read your contract carefully. Talk with other petrol station owners about their experiences and take advantage of resources to educate yourself about your prospective new career. 

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Bruce Hakutizwi

About the author

USA and International BusinessesForSale.com Manager for BusinessesForSale.com, a global online marketplace for buying and selling small medium size businesses. The website has over 60,000 business listings and attracts over 1.5 million buyers to the site every month.

@BizForSaleUS

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