How to Choose the Right Gas Station for You - Franchise or Independant?
If you’re considering purchasing a gas station, great idea! But should you buy a franchise or an independent? To make sure you’re making the wisest choice, spend some time considering in-depth answers to questions like 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 a few instances that you may not have considered . . .
• 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 across your state is immediately required by law to hook up a new kind of vent for underground tanks, you’ll have to pay out for that new equipment if you’re an independent station.
• 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 purchase a franchise, can you stop concerning yourself with environmental issues?
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. You and your attorney have to comb through your franchising agreement to understand exactly what’s covered, and what’s not!
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. Although, this situation can become more complex if you’re buying the business, but not the real estate (land, buildings). You and your attorney should really pin every detail down.
Question #4: If I am buying a franchise station, what do I really own?
The answers to this question can be more complicated than you’d expect. After you buy, for example, you might end up owning the building – but not the land and equipment, which are owned by the parent company. 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 discover whether or not the deal is good for you, you should study all franchise plans and documents very carefully with your attorney.
Question #5: If it’s a franchise, who pays for what?
If you buy a franchise, you’ll probably be surprised to find out about all the things that your parent company expects you to pay 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 Diomo Corporation - The Business Buyer Resource Center. His inspiring materials, seminars and consulting have assisted thousands of business buyers with achieving their life long dream of buying a business.
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