Franchise or Independant: Which Gas Station is the Best Choice?

If you’re considering purchasing a gas station, great idea! Now the important question is whether you should purchase a franchise or an independent. To ensure you’re making the best choice, take a bit of time thinking about comprehensive answers to questions similar to these . . .

Question #1: Who’s responsible for environmental problems?

Environmental compliance issues are the biggest difficulty in buying a station. If you run afoul of environmental laws, and have to pay for costly clean-ups or new equipment, it could be the end of your enterprise. I’m not exaggerating! Here are some situations that you might not have thought about . . .

• Underground leaks. If one of your tanks leaks, who pays for the cleanup - you, or the gas company who sold you the franchise?

• New equipment. If every station in your state is suddenly required by law to install a new kind of vent for underground tanks, you will have to pay for that equipment if you’re an independent.

• Site remediation. If you sell your station, who pays for removing the underground tanks, cleaning up the soil and getting the certification that states your property’s remediation (clean up) has been approved by the state?

Question #2: If you buy a franchise, can you stop worrying about environmental problems?

In general, the answer to this question is yes. Your parent company (Exxon, Mobil, etc.) will install any new equipment that the state requires, and will step in to do the clean-up if one of your tanks suddenly develops a leak underground.

However, you should never make any assumptions in this area. Both you and your attorney should comb through your franchising agreement carefully to find out exactly what is covered, and what isn’t!

Question #3: If I’m buying an independent, what do I really own?

If you purchase an independent station that has no ties to a major brand of gasoline, the answer to this question is reasonably clear. You’re most likely purchasing the business as an entity, in addition to the real estate where the business is situated, along with the tanks, pumps and other equipment that you will have to utilize to sell gasoline. However, the picture can become complicated somewhat if you are buying the business, but not the real estate (land, buildings). You and your attorney need to pin everything down.

Question #4: If I am buying a franchise station, what do I really own?

The answer to this question can actually be quite a bit more complicated than you’d think. After you purchase, for instance, you may find that you own the building – but not the land and equipment, which are still owned entirely by the parent organization. Or you could lease the building and the land, but have the canopies, pumps and other equipment owned by the parent company.

Remember, different franchising organizations set up their ownership packages in entirely different ways. To find out if the deal is right for you, you’ll need to go over all franchise plans and documents closely with your attorney.

Question #5: If it’s a franchise, who pays for what?

If you purchase a franchise, you will likely be more than surprised to discover all the things that your parent organization expects you to pay out for. A few or even all of these points may not be covered, so remember to ask before you make any decisions:

1. Insurance and Repairs – You may have to pay to insure and maintain the parent company’s pumps, signs and canopies.

2. Rent Increases – If the parent company leases you the premises, be prepared to get socked with large rent increases every two or three years. Try to get these terms spelled out in the franchise agreement.

3. Promotional Items – When the parent company decides to sell a new kind of coffee in your convenience store, or to offer special gas discounts on Tuesdays, and decides to advertise those offerings with special signs – will you be required to pay for them?

4. Payroll and Benefits – Don’t expect the parent company to pay salaries or provide benefits for your employees. It’s the one area where you’ll find that you’re suddenly operating like an independent business.

Richard Parker is the President and founder of the prestigious Diomo Corporation - The Business Buyer Resource Center. His celebrated materials, seminars and consulting have encouraged thousands of aspiring business buyers from around the World to pursue their dream of buying a business.