Starting a Gas Station and Convenience Store in the U.S.: 2025 Industry Insights

“Contemporary fuel and c-store design featuring EV charging and customer amenities.”

Entering the U.S. fuel retail and convenience store industry requires navigating a complex landscape of real estate, consumer behavior, tight margins, and evolving trends. This comprehensive guide provides an analytical, investor-focused overview of how to start and operate a gas station with an attached convenience store (“c-store”) in 2025. We cover strategic site selection, key customer demographics, product margins and financial benchmarks, competitive dynamics and barriers to entry, risk factors and long-term trends, and strategic recommendations for new entrants. All insights are grounded in up-to-date industry data and best practices.

Strategic Guidance on Site Selection

Choosing the right location is one of the most critical success factors for a new gas station and c-store. Not all high-traffic corners are created equal – investors must evaluate traffic patterns, accessibility, visibility, and local demand drivers with rigor before committing to a site. Below we outline how to analyze site potential and highlight geographic hotspots for fuel retail in the U.S.

Traffic Volume, Accessibility and Visibility

Successful gas station sites typically offer high vehicle traffic volume, excellent road access, and strong visibility. Average Annual Daily Traffic (AADT) counts on adjacent roads are a key indicator – locations on busy highways or at major intersections naturally capture more potential customers. However, traffic alone is not sufficient. As industry analysts note, “a high traffic count is no longer a guarantee of a successful gas station” in today’s market. Ingress and egress must be easy (e.g. a corner lot with multiple entry points) to encourage impulsive stops. The site should ideally be on the “going-home” side of the road for commuters (right-hand side in the direction of heavy evening traffic) to capture weekday traffic. Visibility to passing drivers is also crucial – clear signage and unobstructed sight lines from the road give a competitive edge. Many top-performing stations are located just off highway exits or along busy commuter routes where drivers can readily see and access the pumps.

In addition to raw traffic counts, quality of traffic matters. Understanding who is driving by and why can refine site selection. For example, a highway rest stop may see thousands of vehicles, but if much of that traffic consists of long-haul truckers who require specialized diesel services or travelers focused on speed, the site’s retail potential might differ from a station in a suburban area where local commuters regularly stop for coffee. A sophisticated site analysis considers demographics and trip purposes of passing traffic. Modern mobility data tools can profile the types of consumers in the traffic stream – e.g. what percentage are local vs. transient, or how many are commuters vs. commercial vehicles – to assess how likely they are to stop and what they might purchase.

Competitive context is another determinant of site viability. A high-demand location with few nearby competitors is ideal, whereas even a busy area can be a poor choice if multiple gas stations and hypermarket fuel pumps (e.g. at a nearby Costco or Walmart) are already aggressively vying for customers. Before investing, it’s important to map out existing fuel retailers in the trade area. Many gas stations face direct competition within only a few hundred yards. In fact, one analysis found that most fuel retailers have at least one competitor within a half-mile radius. Being near a large-volume discounter can squeeze margins and traffic, so new entrants should be wary of locations too close to such competitors.

Demographic and Regional Desirability

Beyond immediate site metrics, entrepreneurs should consider regional and neighborhood demographics that drive fuel and c-store demand. Key factors include local population density, car ownership rates, commuting behavior, and public transit usage. Generally, areas with higher car dependency and longer commutes offer stronger fuel sales. For instance, a suburban or rural community where residents must drive for most errands and work commutes will generate steady gasoline demand, whereas a dense urban center with robust public transportation may support fewer gas stations. Population density can cut both ways: a sparsely populated rural highway might see heavy thru-traffic (e.g. trucks and travelers) but limited local shopper base, while a high-density city neighborhood may have thousands of residents but relatively few drivers. Investors should thus align site choices with regions where driving is the norm and alternative transport is limited.

Geographic “hotspots” for gas stations in the U.S. correlate with high population states and car-centric regions. Texas, for example, leads the nation with over 16,400 convenience stores – more than 10% of the country’s total – reflecting its large population, expansive highway network, and reliance on private vehicles. Other top states by store count include California (about 12,169 stores) and Florida (9,732), followed by New York, Georgia, Ohio, North Carolina, Michigan, Pennsylvania, and Illinois. Many Sun Belt states (Southeast and South Central regions) are particularly attractive due to growing populations and limited public transit infrastructure, resulting in heavy per-capita fuel consumption. By contrast, some Northeastern states have lower per-capita fuel sales (due to mass transit and shorter driving distances), but they can still be lucrative in absolute terms given dense populations – for instance, New York State hosts over 7,700 c-store locations, largely outside of Manhattan.

Recent trends show that even traditionally saturated markets can offer pockets of growth. The Northeast U.S. has seen a surge in independent c-store openings, growing nearly 3% year-over-year in 2023 – almost double the rate of any other region. This growth is likely tied to reasonable real estate opportunities and underserved neighborhoods despite the region’s higher transit use. Meanwhile, one region that saw a slight contraction was the “Central” corridor (Upper Midwest and Plains), which lost a few independent stores, possibly due to population outflow in rural areas.

In evaluating a specific locale, demographics such as income levels and daytime population will shape the c-store product mix and sales potential. A station near an office park or factory might enjoy strong weekday daytime business (coffee, lunch, fuel for company vehicles), whereas one in a bedroom community might peak during morning and evening rush with commuter traffic. Areas with many young adults could mean higher sales of energy drinks, snacks, and prepared foods, while an area with families might see more grocery and beverage purchases. Crime rates and neighborhood safety also factor in – consumers are less likely to patronize a gas station in a high-crime area, especially after dark, so new builds often target safer locations or incorporate strong lighting and security measures to mitigate concerns.

In summary, the ideal site for a new gas station balances high traffic volume with easy access, strong visibility, and favorable local demographics. The best locations are often along busy corridors in growing, car-reliant communities with limited direct competition. Conversely, sites in transit-heavy urban cores, stagnant or declining population areas, or oversaturated strips of gas stations are riskier. Rigorous site selection – potentially aided by location analytics firms – is essential, given the significant capital investment and the fact that a poor location cannot be easily fixed after the fact.

Key Demographic Targets and Consumer Segments

Understanding the customer base is fundamental to driving revenue in the fuel and convenience retail business. Gas stations serve a broad swath of the population, but certain consumer segments disproportionately drive sales of fuel and in-store items. By identifying target demographics – defined by factors like age, income, vehicle usage, and purchasing habits – an entrepreneur can tailor marketing and product offerings to maximize appeal to those segments.

Core Fuel Customers: Commuters and Drivers

Unsurprisingly, vehicle owners are the lifeblood of a gas station business. Within that broad category, daily commuters represent a core segment. Americans who drive to work (often 20–60 minutes each way) are frequent fuel purchasers and also regular c-store visitors for coffee, breakfast, or snacks during their commute. Stations located along major commuting routes or near park-and-ride lots often see predictable rush-hour spikes. Commuters tend to be working-age adults (often 25–64 years old) with steady incomes. Many develop strong routines and brand loyalties – e.g. stopping at the same station each Monday for fuel or each morning for a favorite coffee. Capturing these habitual customers can provide a reliable revenue base. Loyalty programs and fuel price promotions specifically target commuters to encourage repeat business and preference for a particular brand.

Another key segment is professional drivers and fleets. This includes truck drivers (for stations offering diesel and truck amenities), rideshare and delivery drivers, taxi and service vehicle operators, etc. They often fuel more frequently than average consumers and may favor stations that provide amenities like high-speed diesel pumps, ample parking, or clean restrooms and food options for a quick break. For example, a station near a logistics hub or along a trucking route could cater to these needs and build a loyal base of commercial customers. Even local tradespeople (plumbers, landscapers, etc. with work vans) can become regulars, especially if offered fleet fuel cards or small discounts.

Travelers and road-trippers form another segment, especially for gas stations on highways or near tourist routes. Their needs center on fuel, restrooms, and convenient food/beverage options. They may be less price-sensitive on food and drink (splurging on snacks or premium coffee for the road) but highly attuned to fuel prices (driving a mile down the road to save a few cents per gallon). Clean facilities and recognizable brand names can attract this segment – for instance, families on road trips often choose well-known chain travel centers for perceived safety and consistency.

Convenience Store Shoppers: Age and Income Factors

Inside the store, demographics influence product preferences significantly. Overall, convenience stores are a staple of American life: fully half of U.S. consumers visit a c-store at least once a week, according to a 2024 survey. Urban residents actually use c-stores even more frequently (46% more likely than average to go multiple times per week), often because of quick access to everyday items. This highlights that c-stores don’t only serve drivers; in city settings, people might walk in for snacks or essentials. However, for gas station-based stores, the typical shopper is arriving by car – so there is heavy overlap between fuel customers and in-store customers.

Age plays a role in shopping behavior. Younger adults (Gen Z and Millennials) tend to purchase different items than older customers. For example, younger consumers are big buyers of energy drinks, flavored beverages, and snack foods, and they are more open to trying new products or prepared foods from c-stores. They also place high value on speed and technology – features like mobile payment or app-based rewards can attract a tech-savvy younger demographic. Older consumers (Gen X and Boomers) are more likely to buy traditional cigarettes (if they smoke) and lottery tickets and may stick to known brands for fuel. Notably, tobacco buyers (often male and spanning various ages) are extremely valuable to c-stores because they are high-frequency visitors – research shows nicotine customers are more likely to visit a convenience store daily or multiple times per week. These frequent trips for cigarettes or vaping products often lead to additional purchases like coffee or soda, boosting basket size. Thus, maintaining a loyal base of tobacco customers (while also navigating declining smoking rates) is a delicate but important demographic play.

Income level influences c-store usage patterns in complex ways. Consumers with lower incomes may rely on convenience stores for small, immediate purchases when money is tight or if they lack access to larger supermarkets (so-called “food desert” scenarios). They are more likely to buy fuel in smaller increments (e.g. $10 of gas at a time) and might be price-sensitive to fuel and staple food items. This segment is also a primary market for lottery and discounted tobacco products. On the other hand, higher-income consumers use c-stores as a time-saving convenience: they might pay premium prices for gourmet coffee, organic snacks, or prepared meals because it’s faster than going to a grocery store or café. This group responds well to upgraded store formats (clean, upscale designs) and quality fresh offerings. Notably, surveys have found that consumers are willing to pay around a 10% premium on snacks and prepared foods at convenience stores if it saves them an extra stop – indicating that even wealthier shoppers value the convenience factor.

Brand loyalty and fuel reward programs also cut across demographics. Many drivers become loyal to a particular fuel brand or chain due to reward points, fuel discounts (e.g. grocery store fuel points programs), or credit card tie-ins. For instance, a mid-income suburban family might always fill up at a certain branded station to accrue points for discounts on groceries, whereas a budget-conscious consumer might chase the lowest price in town regardless of brand. New station operators should recognize these patterns: joining a major fuel brand can bring in customers loyal to that brand’s network, while remaining independent may appeal to price-sensitive locals if you can price aggressively. Additionally, proprietary loyalty apps (like those offered by large chains or third-party apps like Upside) can draw repeat visits by offering cash-back or freebies, effectively segmenting customers by their deal-seeking behavior rather than traditional demographics.

In summary, key revenue-driving segments include commuters (fuel and coffee), professional drivers (diesel and snacks), younger consumers (seeking drinks, snacks, and quick meals), and tobacco shoppers (high-frequency visits). Age and income affect purchase mix – for example, males 18-34 might be core energy drink and beef jerky consumers, while older, lower-income customers might sustain lottery and cigarette sales. A savvy gas station strategy will cater to its dominant local segments (e.g. offering a good coffee program and breakfast sandwiches near workplaces, or stocking ample cold drinks and salty snacks near colleges). By aligning inventory and services with the preferences of target demographics, c-store operators can increase basket sizes and customer loyalty.

Product Margins and Financial Benchmarks

One of the most striking aspects of the gas station/C-store business is the contrast between fuel sales and convenience store sales in terms of margins and profitability. Fuel is a high-volume, low-margin product, while in-store items carry higher margins but lower volume. To plan financially, an investor must understand typical gross margins on various product categories, the cost structure of operating a station, and relevant industry benchmarks like profit margins and productivity metrics. This section breaks down those financial fundamentals.

Fuel: Volume Driver with Thin Margins

Gasoline and diesel sales often contribute the majority of a station’s revenue, but the gross profit per gallon is slim. Over the past several years, the average markup on a gallon of gas has been only about $0.35–$0.40 (35–40 cents) above the wholesale cost. Out of that markup, the net profit after expenses is roughly one-third, typically around $0.10–$0.15 per gallon. In percentage terms, if gasoline retails for about $3.50 per gallon, the station’s gross margin is around 10%, and the net margin (after paying wages, utilities, credit card fees on that sale, etc.) might be on the order of 3–5% of the pump price (a 1–2% net margin on fuel overall is common in the industry). These figures debunk the popular myth that gas stations reap windfall profits when gas prices rise. In reality, when wholesale costs surge, stations often cannot raise retail prices fast enough due to competition, compressing margins. Conversely, when oil prices fall, stations may temporarily enjoy a few extra cents margin if they bought cheaper inventory – but competitive price pressure usually passes savings to consumers quickly.

It’s worth noting differences between fuel grades. While regular unleaded is the bulk of volume, premium gasoline and diesel sometimes carry slightly higher cents-per-gallon margins. Customers buying premium (required by certain high-performance engines or by preference) are less price-sensitive and volume is lower, so stations may add an extra 5-10 cents margin on premium grades. Diesel fuel margins vary by location and customer – at truck stop chains, diesel is often a competitive, low-margin product to draw in truckers for ancillary sales, whereas at a local station serving mainly passenger vehicles or light trucks, diesel prices might include a bit more markup. However, regardless of grade, fuel margins remain thin relative to other retail products. An industry rule of thumb is that after overhead, a gas station’s profit is only a few cents per gallon – indeed, one analysis found average net profit of only $0.03–$0.07 per gallon. For a station selling 1.5 million gallons a year (~4,100 gallons per day), that equates to perhaps $75,000–$105,000 annual gross profit from fuel. Fuel sales are thus necessary to drive traffic and volume, but they are not where most profits are made.

Because margins are tight, fuel pricing strategy becomes critical. Many successful operators use fuel as a loss leader or breakeven product to attract customers who then spend money in the c-store or on services. In 2023, the average convenience store derived about 67.3% of its total revenue from fuel sales – but fuel accounted for only 38.6% of gross profit. The flip side is that in-store sales (32.7% of revenue) produced a hefty 61.4% of gross profit. This imbalance drives home the importance of the convenience store side of the business for profitability. Many gas stations would not survive on fuel income alone – one data point showed that if fuel gross profit were stripped out, 70% of convenience stores would operate at an in-store loss. Thus, while fuel brings people in, the c-store is the engine of profit, and pricing strategies must take this into account. Some stations price fuel very aggressively (even below nearby competitors by a few cents) specifically to capture fuel traffic, expecting to make up the difference – and more – when those customers come inside for a drink or snack.

In-Store Products: Higher Margins, Diverse Categories

Convenience store products carry much healthier profit margins than fuel. Gross margins (as a percentage of selling price) vary by category: they can range from the mid-teens up to 60% or more. The actual markup on cost is even higher for many items. For example, industry data show that cigarettes – a key in-store product but a low-margin one – have only around a 16% markup on cost, which translates to roughly a 14% gross margin (since the retailer might buy a pack for $5.00 and sell at $5.80). In contrast, candy and packaged snacks often have a 100% markup (buy for $0.50, sell for $1.00, a 50% margin). Packaged beverages like sodas or bottled water are marked up about 72% on cost, equating to roughly a 42% gross margin on each sale. Beer and wine are lower margin (20–30% range markup) due to competition and distributor pricing, whereas non-alcoholic packaged drinks and single-serve snacks command higher margins because consumers pay for convenience and branding.

The highest-margin items tend to be those prepared or dispensed on-site: coffee, fountain sodas, and fresh food. These products have low ingredient costs and benefit from value-added by the retailer. For instance, fountain drinks and coffee can have markups well above 100% – a cup of soda that costs the store $0.25 in syrup, cup, and ice might sell for $1.50, yielding a margin on the order of 80%. Hot brewed coffee is similarly lucrative; NACS data indicates hot dispensed beverages carry about a 170% markup over cost, or roughly a 63% gross margin. Prepared food (made or assembled in-store, like sandwiches, hot dogs, pizza, etc.) often sees margins in the 50–60% range, depending on pricing and waste. These high-margin categories have become a focal point for the industry – in 2024, foodservice (inclusive of prepared food and dispensed drinks) constituted nearly 40% of inside gross profit dollars for c-store operators. The strategic implication is clear: emphasizing foodservice and other high-margin offerings can substantially improve a station’s profit profile.

However, not all high-margin goods drive the bottom line equally, since volume matters too. Cigarettes, for example, have very thin margins (~14% as noted), but they still contribute significant profit in aggregate because sales volumes are high (for now) and they draw frequent customers. In 2023, cigarettes remained the single largest in-store sales category (by dollar sales) in convenience stores, though their growth is flat or declining. On the other hand, a niche item with 60% margin (say, a gourmet candy bar) might sell slowly. Industry leaders report that a half-dozen core categories make up almost 90% of inside sales and profits: packaged beverages, cigarettes, other tobacco products (OTP, like smokeless tobacco and vaping), beer, salty snacks, and candy, along with the entire foodservice category. An effective product mix will include a balance – the staple traffic drivers (fuel, cigarettes, beer, lottery) that might have lower margins but bring customers regularly, and the impulse/up-sell items (drinks, snacks, foodservice) that boost profitability.

Cost Structure and Industry Benchmarks

Running a gas station with a c-store involves managing a tight cost structure. According to industry financial data, cost of goods sold (COGS) – which includes fuel purchases from suppliers and wholesale cost of store merchandise – typically accounts for about 70% of revenue. This aligns with the earlier point that gross margins overall hover around 30% (higher on store items, very low on fuel, averaging out to ~30% of revenue retained as gross profit). Beyond COGS, the next largest expense is usually labor. Wages and benefits for employees are the second-largest expense, about 8% of revenue on average. Convenience retail is less labor-intensive than many other retail formats – a single store can often be run with a handful of staff per shift – which is why wages as a percentage of sales are relatively low. Many stores rely on part-time workers and have extended hours (even 24/7), meaning labor scheduling and wage rates are a constant management focus.

Other significant operating costs include: credit card fees, rent, utilities, maintenance, and insurance. Credit card fees deserve special mention – with roughly 75–80% of fuel transactions paid by card, the swipe fees on fuel sales alone eat into margins. These fees (often ~2-3% of the transaction) are one reason fuel net margins are so low, and industry groups have long complained that rising card fees pressure profits. In terms of fixed costs, rent or mortgage for the property typically runs around 1.5–2% of revenue, based on industry benchmarks. Utilities (electricity for pumps, lighting, refrigeration, HVAC) are another ~1% of revenue – a cost that some operators are trying to reduce via energy-efficient upgrades like LED lighting and high-efficiency coolers. Insurance and compliance costs (for underground tank insurance, liability, etc.) plus repairs/maintenance and miscellaneous administrative costs fall into an “other” bucket that can collectively be on the order of 10-15% of revenue. Notably, many gas station owners also face environmental regulatory costs (like tank replacement or monitoring equipment) which can be significant one-time capital outlays rather than ongoing expenses.

After accounting for all expenses, net profit margins in this industry are modest. For gas stations with convenience stores, typical net profit (before taxes) might range around 2–4% of total revenue in a stable year. This is in line with other low-margin retail sectors. In 2023, the industry-wide metric for EBIT (earnings before interest and taxes) in convenience retail was only about 1.8% of revenue, partly a reflection of high fuel costs that year boosting revenue without equivalent boost to profit. World-class operators can do better: major chains benefit from economies of scale and operational efficiencies. For instance, 7-Eleven Inc.’s U.S. segment had a net profit margin of around 5.4%, and Circle K (Alimentation Couche-Tard) about 12.1%, according to one analysis. Some exceptionally well-run companies like Casey’s General Stores (which has a strong foodservice program) have reported even higher operating margins in the mid-teens. These figures include all operations; for a single-station owner, a realistic expectation is a net margin in the low single digits. In practice, that means annual profit of perhaps $50k–$100k on $1–2 million in total sales for one store (again, highly dependent on fuel volume and in-store performance).

Another useful benchmark is revenue per employee. Convenience fuel retail is productivity-intensive – a small team handles a large volume of sales. An average store with $5 million in annual sales (fuel plus merchandise) and, say, 8 employees (mix of full and part-time) is generating over $600,000 per employee. Industry sources note that revenue per employee in this sector is lower than some retail sectors if measured in-store only (because c-stores are small-footprint), but when fuel is included, the figure is quite high due to the sheer dollar throughput of fuel. It’s not unusual for a busy station to pump 2 million gallons/year and have inside sales of $1 million – with maybe 10 total staff – resulting in $300k+ revenue/employee. This reflects the capital-intensive, low-labor nature of fueling operations, where pumps and equipment do most of the work and one cashier can oversee many transactions. Investors should still plan for competitive wages and training, as high employee turnover is common and can hurt service quality; many operators find that paying slightly above minimum wage can reduce churn and theft, ultimately saving money.

EBITDA margins (earnings before interest, taxes, depreciation, amortization) for gas station/c-store businesses might be a better indicator of operating performance since they add back non-cash costs. Given depreciation is only ~1% of revenue for the industry (equipment and improvements depreciated slowly), the difference between EBIT and EBITDA is small for many single-store operations unless they have significant debt service. As a ballpark, an EBITDA margin of 4-6% would be solid for an independent station. This might translate into valuation multiples in the range of 5–8x EBITDA for selling a station business (though market multiples vary widely with real estate value and other factors).

In summary, financial success hinges on driving high-margin sales in the store while tightly controlling costs. Fuel will bring dollars through the door but not much profit; the money is made by selling items with 30-60% margins to as many fuel customers (and walk-ins) as possible. Keeping labor efficient, minimizing shrink (theft/spoilage), and managing expenses like utilities and fees are all part of the low-margin management game. Industry benchmarks to watch include net profit margin (aim for ~3% or better), average sales per store (the 2023 average was about $5.6 million: $3.5M fuel + $2.1M in-store), and fuel volume per store (anywhere from 1 to 4+ million gallons annually depending on location). Comparing these metrics to peers can help an owner gauge performance and identify improvement areas.

Competitive Dynamics and Barriers to Entry

The fuel retail and c-store industry in the U.S. is highly competitive and fragmented, with a mix of major chains, oil company brands, and independent operators fighting for thin margins. New entrants face not only stiff competition but also a web of regulatory and logistical barriers. This section analyzes the competitive landscape – who the major players are and how national vs. local competition plays out – as well as the hurdles one must overcome to establish a new station.

Fragmentation and Major Players

At first glance, gas station branding can be deceiving. While you see big oil logos like Shell, Exxon, BP, or convenience brands like 7-Eleven and Circle K on many canopies, the majority of stations are actually owned by independent operators (franchisees or local businesses). In fact, about 60% of convenience stores are single-store operators – mom-and-pop businesses or family-run enterprises. Even among branded stations, oil companies themselves have largely exited direct retail operations; they license the brand and supply fuel, but the station is often owned by an independent franchisee. According to an IBISWorld analysis, gas stations average a net margin of only ~1.4% on fuel, which is lower than grocery stores or auto dealers – a tough business for big companies to invest in directly, hence the prevalence of franchise arrangements.

The top chains in convenience retail do hold a significant slice of the market, but it’s not a majority. As of 2023, the top 100 convenience store companies operated about 44,700 stores in the U.S.. That is roughly 29% of the total store count (which was ~152,000). The largest player is 7-Eleven Inc., with over 12,600 stores nationwide after its acquisition of Speedway. Second is Alimentation Couche-Tard (Circle K), with about 5,800 U.S. stores. Other big chains include Casey’s General Stores (~2,642 locations, concentrated in the Midwest), EG America (~1,572 stores, including brands like Cumberland Farms), GPM Investments/Arko (~1,517 stores), and regional giants like Wawa (~1,000 stores), Speedway (integrated into 7-Eleven), Pilot/Flying J (focused on highway travel centers), and Love’s Travel Stops. Notably, the top five companies combined still account for only around 16% of all convenience stores. This means the industry remains highly fragmented, with thousands of small and medium regional players. It’s not unusual for a local chain of 5-50 stores to dominate fuel sales in a particular town or region, while being virtually unknown nationally.

Competition in this sector is often hyper-local. A new station will primarily compete with other stations within a few miles (or even a few blocks). Fuel prices are highly visible and easily compared by consumers, leading to localized price wars. According to one data source, most gas stations have at least one direct competitor essentially next door (within 0.016 mile, likely a typo meaning a very short distance) and about 1-2 competitors within a half-mile. This proximity forces retailers to match or beat prices to avoid losing volume, which in turn keeps margins low. Price volatility in wholesale markets can lead some competitors to temporarily sell fuel at a loss to maintain customer traffic. Thus, competing on fuel alone is challenging; smart competitors differentiate via loyalty programs, store offerings, and service.

Local vs. national dynamics: National chains like 7-Eleven and Circle K benefit from economies of scale in purchasing and technology, and they often have sophisticated pricing algorithms for fuel and merchandise. They may also have deeper pockets to invest in amenities (e.g. state-of-the-art coffee bars or forecourt upgrades). However, local operators can be more nimble and community-focused – for example, a local owner might know many regular customers by name, stock regionally popular products, or adjust to local preferences faster than a corporate chain with a standard planogram. Additionally, not all markets have heavy chain presence. In some rural areas or city neighborhoods, the nearest 7-Eleven or corporate chain could be miles away, with independents filling the gap.

Major oil brands vs. independent fuel brands also play into competition. A new operator must decide whether to affiliate with a brand like Shell, BP, Chevron, etc., which can attract brand-loyal customers and often comes with support (and requirements) for image, fuel quality, and sometimes investment help. Branded stations usually pay royalties or fees (a few percent of revenue) to the brand and must buy fuel from the brand supplier (often at an indexed wholesale price). Independent stations (sometimes called “unbranded” or no-name) can shop on the open fuel market for the best price and keep more control, but they lack a nationally recognized name. Consumers who value perceived fuel quality or use branded credit cards might bypass unbranded stations, whereas price-motivated drivers might flock to them for slightly cheaper gas. According to industry narratives, many big oil companies retreated from direct retail operations because “selling gas generally isn’t very profitable” – leaving room for independent entrepreneurs under both branded and independent flags.

Barriers to Entry: Regulation, Capital, and Know-How

Starting a new gas station c-store from scratch comes with substantial barriers that aspiring entrepreneurs and investors must clear:

• High Capital Requirements: Developing a gas station is capital-intensive. The land itself is a major cost – stations require ample frontage and space for underground tanks, which often means a large lot in a commercially zoned area. In high-traffic locations, such real estate can be very expensive. Construction costs for the station and store building (canopy, pumps, tanks, convenience store build-out, signage, etc.) easily run into millions of dollars. Even acquiring an existing station typically involves significant investment or financing, as valuations factor in the real estate and the cash flow of the business. Additionally, inventory (fuel and store stock) must be purchased upfront. Fuel inventory alone can tie up tens of thousands of dollars (a single load of fuel can cost $30k+). Many new operators seek financing or partnerships due to these steep capital needs.

• Licensing and Environmental Regulations: Fuel retailing is heavily regulated. Every station must obtain permits for underground storage tanks (USTs) and comply with environmental regulations to prevent leaks and groundwater contamination. This involves installing approved double-walled tanks with leak detection, maintaining spill prevention equipment, and carrying environmental liability insurance. Regulators conduct periodic inspections, and any leakage incident can lead to costly remediation and fines. There are also zoning and permitting hurdles – local governments control where gas stations can be built, how many pumps, traffic impact, etc. Opening a new station often requires environmental impact assessments and adherence to specific construction standards (for example, canopy height, drainage for runoff, proper ventilation). On the c-store side, licenses are needed to sell regulated products: e.g. a tobacco retail license, beer/wine license (varies by state and locality), and often food service permits if you handle fresh food. Compliance with health department regulations (for prepared foods or coffee) and lottery licenses (if you choose to sell lottery tickets) add to the complexity. Altogether, the regulatory compliance burden can be a significant barrier, requiring expertise and causing delays or added costs before operations even begin.

• Supply and Distribution Agreements: A new station must secure a reliable fuel supply. If you go branded, this means signing a supply contract with a major fuel supplier or jobber, which can include requirements on minimum volume, purchasing all fuel from them, and maintaining brand standards. If unbranded, you’ll need relationships with fuel wholesalers or refiners to deliver fuel, which can be volatile; unbranded supply might be cheaper when fuel is abundant but could leave you paying steep premiums or unable to source in times of shortage. New operators without industry connections might find it tricky to navigate fuel purchasing at first. Similarly, stocking a convenience store requires setting up accounts with distributors for beverages, snacks, cigarettes, etc., and learning the logistics of inventory management. While not an insurmountable barrier, the operational know-how needed to manage supply chain and inventory is non-trivial.

• Competition and Saturation: As discussed, many areas already have numerous gas stations. The presence of entrenched competitors is itself a barrier – any new station in a developed market has to steal customers from others. Competitors may respond to a newcomer with aggressive pricing or promotions. If a location is truly under-served (no nearby stations), it’s often because volumes there would be low (e.g. very rural or low-traffic area) – meaning it might not be financially attractive in the first place. Essentially, most good locations are already taken. This barrier often leads new entrants to consider franchising or buying an existing station rather than building new, despite the challenges those routes also bring (for example, buying an old station might stick you with outdated tanks or the need to remodel to remain competitive).

• Economies of Scale: Big chains benefit from scale in purchasing fuel and products, marketing, and technology investments (like point-of-sale systems, pricing software, loyalty programs). An independent startup has none of those scale advantages initially. As noted earlier, large operators can achieve higher profit margins partly due to scale efficiencies. While one can gradually build scale by expanding to multiple locations, the first unit starts at a competitive disadvantage on cost of goods and overhead per store. This is a barrier in the sense that the playing field is not level – the newcomer must be sharper and more efficient to compete with the established players’ cost structure.

• Access to Capital and Financing: Because of thin margins and operational complexities, securing financing for a gas station can be harder than for some other small businesses. Lenders will scrutinize experience (having an industry-experienced partner or manager helps), the location’s feasibility study, environmental reports, and collateral (often the real estate itself). The risk of environmental liabilities can make banks cautious. Therefore, financial barriers can include needing significant down payment or equity investment and personal guarantees. This can deter less-capitalized entrepreneurs.

Despite these barriers, the industry does see new entrants each year, often entrepreneurial individuals or families, and sometimes new corporate players sensing opportunity (e.g. international companies acquiring U.S. chains, or grocery chains expanding fuel operations). In recent years, there has been consolidation as well – small operators selling out to midsize and large chains. But the flip side is, consolidation by big players can open niches for independents to differentiate in service or local appeal.

Regulatory changes can also alter barriers. For instance, a notable recent change was the 2021 EMV liability shift for fuel pumps – all stations had to upgrade pump card readers to chip-capable technology or else be liable for fraud. This was a costly upgrade (estimates of $100k+ for a full station retrofit) that some small operators struggled with, effectively increasing the cost of staying in business. A new station would presumably install compliant pumps from the start, but it’s an example of how evolving regulations (or, say, a city banning new gas stations to push climate goals, as a few California cities have done) can present hurdles to entry or expansion.

In summary, entering the gas station market requires substantial capital, careful navigation of environmental and retail regulations, and a strategy to outmaneuver tough competition. The barriers to entry are significant but not insurmountable – they reward those who do thorough due diligence, possibly partner with experts or established brands, and bring sufficient resources to weather the thin margins in the startup phase. Overcoming these barriers often becomes a competitive advantage in itself; once you’re established with a good location and all compliance in order, the same hurdles will deter would-be new competitors from popping up next door.

Risk Factors and Long-Term Industry Trends

The fuel and convenience retail business is in the midst of significant change. Prospective gas station owners must consider not just current market conditions but also long-term trends that will shape profitability and viability over the next decade. Below we discuss major risk factors – from volatile oil prices to the rise of electric vehicles – and evolving trends such as alternative fuels, health-conscious consumers, and new retail formats. Understanding these can help in formulating a future-proof strategy.

Volatility of Fuel Prices and Supply

Perhaps the most immediate risk factor is the volatility of crude oil and refined fuel prices. Gasoline is a commodity subject to global supply-demand swings, geopolitical events, and refining capacity issues. Wild swings in wholesale prices can compress margins (as discussed earlier) and also impact consumer behavior. For instance, when gasoline spiked above $4/gallon in 2022, many consumers cut back on driving or spent less inside stores – fuel demand is somewhat price-inelastic in the short term, but over longer periods, sustained high prices encourage carpooling, public transit use, or purchasing more fuel-efficient cars. Conversely, in periods of cheap gas, consumers might drive more or have extra disposable income to spend in the convenience store. Managing fuel price risk is thus an ongoing challenge: operators often use daily market data and even hedging contracts for large chains to buffer swings. But a small operator can be caught with a tank of high-cost fuel just as the market price plummets, forcing sales at a loss to stay competitive. Additionally, macro events (hurricanes, pipeline outages, wars affecting oil supply) can cause temporary shortages or cost spikes.

The year 2023 illustrated this dynamic: average U.S. gas prices actually fell about 11% compared to 2022, from $3.99 to $3.53/gal, due to easing crude costs. Industry fuel revenue consequently dropped 5.7% in 2023. For stations, lower prices meant slightly better volumes but also less total dollar throughput. Price volatility will remain a factor – station owners must maintain adequate working capital to absorb sudden cost increases and possibly invest in price sign technology (digital signage) to change prices quickly. On a strategic level, it’s wise not to over-leverage a business assuming today’s fuel margins or volumes will hold, since a price shock could disrupt cash flow.

Electrification and Alternative Fuels

Electric vehicle (EV) adoption is arguably the biggest long-term strategic threat to the traditional gas station model. EVs of course do not refuel at gas pumps; they charge via electricity. The U.S. is seeing exponential growth in EV sales: by 2023, EVs made up about 7%–8% of new car sales and over 16% of light vehicle production, and the trajectory suggests a much higher share by 2030. Forecasts vary, but one projection holds that gasoline demand could drop to 75% of current levels by 2040 due to EV uptake and efficiency gains. In the near term (next 5–10 years), gas-powered vehicles will still dominate the roads – there are over 280 million registered vehicles in the U.S., and only a few million are EVs today. However, each EV is essentially a customer lost to fuel sales forever. Stations in regions with high EV adoption (e.g. California, Northeast urban areas) may start to see fuel volumes erode gradually in the late 2020s.

Rather than pure threat, EVs could be an opportunity for forward-thinking operators. Many chains are adding EV charging stations to their locations, essentially turning part of the forecourt into an “electrified” fuel offering. The economics are different – EV charging sessions take longer (20-40 minutes for fast charge, vs. 5 minutes for a gas fill-up), which can actually be positive for c-store sales (a captive customer for half an hour is more likely to come inside and buy food or coffee). On the downside, the current revenue model for charging is in flux; electricity prices and charging fees may not yield the same per-customer gross profit as selling gasoline, especially considering demand charges from utilities and maintenance of expensive fast-charging equipment. There is also competition from dedicated EV charging networks and the fact that many EV owners charge at home. Nonetheless, as EV adoption grows, fuel retailers will likely evolve into “energy” retailers, offering a mix of gasoline, diesel, and high-speed EV chargers, possibly even hydrogen or other alternative fuels if those catch on. Starting a station in 2024, one should evaluate the local EV adoption rate and possibly allocate space and electrical infrastructure for future chargers. Some states (like California) have aggressive zero-emission vehicle mandates, including banning new gasoline car sales by 2035 – a station built now in such markets should plan for a very different fueling landscape in 10-15 years.

Biofuels and new fuel formulations are another trend. Ethanol (E10) has long been standard in gasoline, but now E15 (15% ethanol) and higher blends like E85 are being promoted. Stations may need to invest in compatible equipment (pumps, seals) to offer E15 or E85, but doing so can attract consumers seeking cheaper or “greener” fuel (E15 is often a few cents cheaper due to ethanol subsidies). Renewable diesel is emerging in some markets (chemically similar to diesel but made from renewable sources) – it can often be sold through the same infrastructure but sourcing is regional. Additionally, some locales see interest in biodiesel blends for trucks or even emerging fuels like hydrogen (though hydrogen fueling requires entirely different infrastructure and is presently rare outside California). Keeping an eye on fuel mix trends is prudent; being an early mover in offering, say, E15 or fast EV charging can capture a niche market and polish a brand’s image as innovative.

Health and Product Trend Shifts

On the convenience retail side, consumer preferences are shifting towards healthier and fresher options, which poses both a challenge and an opportunity. Traditionally, c-stores are associated with cigarettes, candy, soda, and fried foods – products that modern consumers (especially younger generations) are moderating. For instance, cigarette usage continues to decline nationally, which has been slowly eroding the top-line sales of that category (cigarettes still comprised about 25% of in-store sales in 2023, but volumes are down). Meanwhile, other tobacco products like nicotine pouches or vaping have grown, partly offsetting that decline. Station owners need to pivot with these trends: carrying new nicotine products, but also anticipating potential regulations (e.g. flavor bans, higher taxes) that could hit tobacco sales. A fall in tobacco sales is a concern because, as noted, tobacco customers are frequent visitors. Some retailers are compensating by doubling down on foodservice and beverages to drive daily traffic.

There is a clear trend toward food-forward convenience stores. Chains like Sheetz, Wawa, and Buc-ee’s have built a strong reputation for quality fresh food (made-to-order sandwiches, salads, bakery items) and even proprietary restaurant concepts. The data supports this focus: foodservice (prepared food plus hot/cold dispensed drinks) now accounts for over a quarter of in-store sales industry-wide and an even larger share of profit. Importantly, it’s not just any food – consumers are seeking healthier, fresher choices even on the go. Items like fruit cups, protein bars, smoothies, and salads have made their way into c-store coolers. While indulgent snacks will never disappear (salty snacks and candy remain top sellers), offering some healthier alternatives can expand the customer base (for example, appealing to a health-conscious parent who might otherwise avoid stopping at a gas station for a meal). Functional beverages (like kombucha, energy drinks with added vitamins, etc.), plant-based snacks, and premium coffee (e.g. cold brew, espresso drinks) are growth areas to watch in product selection.

Another subtle trend is package size and grocery fill-ins. During the COVID-19 pandemic, many consumers used local convenience stores as fill-in grocery stops, which led some stores to stock more pantry staples (baking ingredients, larger sizes of certain products). Post-pandemic, there’s potential to maintain some of that business, especially in areas where the nearest supermarket is far. That said, convenience stores will likely continue focusing on immediate-consumption and single-serve products, but with a more curated, possibly upscale selection than decades past.

Evolving Retail Formats and Technology

The very format of fuel retail is evolving. We see the rise of massive highway travel centers (like the popular Buc-ee’s in Texas, which is essentially a mini-department store with fuel pumps, known for its clean restrooms and extensive food selection) – these are destinations in themselves and thrive on travelers and tourists. While not every location can be a 50,000-square-foot mega-store, the lesson is that enhanced customer experience pays off. Even a standard-size station can differentiate with cleanliness, ambiance, and service. More stations are investing in modern décor, indoor seating for eating, free Wi-Fi, and other touches to invite customers to stay and spend.

At the opposite end, some urban fuel retailers are experimenting with smaller footprint formats or integrating convenience retail without fuel (for example, 7-Eleven has opened some convenience-only stores in dense cities). There’s also the concept of mobile fueling and delivery (apps that will bring fuel to parked cars) – while not mainstream yet, such services could nibble at demand in certain contexts. Gas stations may respond by integrating more tech – e.g. app-based pay-at-pump with targeted in-app offers to draw customers inside, or drive-thru pickup for online orders of convenience items.

Technology is indeed a trend: automation and AI are coming to c-stores. “Grab-and-go” frictionless payment tech (like Amazon Go stores use) could find its way into some convenience stores, allowing customers to skip the checkout line. Digital menu boards and self-order kiosks for food can streamline operations and appeal to younger customers. Loyalty apps and personalized marketing (using purchase data to offer tailored deals) are increasingly employed by chains to increase visit frequency and basket size. New stations should plan for a robust POS system and digital engagement from the start, as this is becoming a baseline expectation.

Environmental and social trends also play a role. Communities are increasingly concerned about fuel stations’ environmental impact – beyond EVs, even things like spill prevention, local emissions, and aesthetics are under scrutiny. Stations have responded with measures like vapor recovery systems on pumps and improved forecourt design with landscaping. Some cities (like Petaluma, CA) have enacted bans on building new gas stations, citing climate goals – while not widespread, this signals a long-term challenge to expansion in certain markets. It could ironically be a boon for existing stations (less new competition) but a barrier if you planned to build new in those locales.

In the long run, a gas station in 2040 may look quite different: fewer gas pumps, more EV chargers, a larger store with groceries and fresh food, maybe a drive-thru for online order pickups, and possibly offering multiple services (from Amazon lockers to pharmacy kiosks). The key for new entrants is adaptability. By keeping an eye on these trends – and perhaps choosing a strategy like integrating an EV charging hub early, or developing a strong proprietary food or coffee brand – you can position your business to thrive even as the traditional gasoline demand gradually wanes.

Strategic Recommendations for New Entrants

Given the above analysis, what strategic moves can a new gas station and c-store operator make to achieve a defensible market position? Below are strategic recommendations focusing on differentiation and success factors:

• Prioritize an Excellent Location: It cannot be overstated – do the homework on site selection. Use professional feasibility studies to ensure adequate traffic count, growth in the area, and no fatal flaws (e.g. a new highway bypass that will divert cars away). Look for locations with underserved demand (perhaps a fast-growing suburb lacking nearby stations, or an intersection where existing competitors have poor service or limited offerings). A great location provides built-in competitive advantage that is hard for others to replicate.

• Competitive Pricing + In-Store Margin Strategy: Set a smart pricing strategy for fuel. Often the best approach is to be price-competitive (in the lowest quartile of prices locally) to rapidly gain volume and market share – motorists are highly price sensitive on gas. Use loyalty programs or tie-ins (for example, offer a few cents off per gallon with a loyalty card or a link with a grocery chain’s program if possible) to build repeat business. Then, capitalize on that traffic by optimizing your product mix and pricing inside. Focus on high-margin categories: a robust coffee and breakfast offering in the morning, combo deals for lunch, and prominently placed snacks and cold drinks in the afternoon. Many successful stores put the products with the highest impulse appeal and margins (like cold beverages and candy) front and center. Employ upselling tactics – e.g. signage at the pump: “Come inside for a $1 coffee with any fill-up,” or training cashiers to suggest an add-on (“Thirsty? Grab a soda for the road”). This converts fuel-only customers into higher-margin c-store customers.

• Differentiated Product Mix & Foodservice: In a crowded market, one of the best ways to stand out is via your product mix, especially foodservice. Consider offering something unique – whether it’s partnering with a local bakery for fresh pastries, featuring a small fast-food franchise inside (many stations host Subway, Dunkin’, etc., but perhaps there’s an opening for a popular local eatery to have an outlet in your store), or developing a signature item (famous fried chicken, gourmet tacos, whatever fits the local demographic). Healthy options can also differentiate you – if competitors are all selling the same old hot dogs, you might gain a niche by offering smoothies or fresh wraps. Invest in quality and consistency: foodservice has higher margins but only if people actually buy it; building a reputation for tasty, fresh food (and good coffee) will drive repeat visits beyond just fueling needs. In addition, ensure you stock the right everyday items for your community – if you’re near a lake and campground, that might mean fishing bait, firewood, and sunscreen; if near a highway, maybe a wide selection of travel snacks and OTC medicines; near a suburb, perhaps more grocery staples and a mix of premium and value snack brands to cater to families and teenagers alike.

• Leverage Technology and Loyalty: Launch with a modern point-of-sale system that supports loyalty programs, mobile payments, and seamless food ordering. A branded app or participation in a popular third-party loyalty network can provide a steady stream of customer data and allow targeted marketing. For example, send push notifications about fuel price specials or in-store coupons during peak drive times. Embrace contactless payments and perhaps deploy self-checkout kiosks for busy periods. Stations that use apps to let customers pay at the pump and then easily order food for pickup upon fueling create a convenient ecosystem that encourages customers not to just “pump and go.” According to industry surveys, a significant portion of consumers appreciate tech conveniences like mobile pay (e.g. 50% appreciate when a c-store takes Apple Pay). Being a tech-forward store can appeal to younger customers and streamline operations.

• Customer Service and Experience as a Differentiator: While it’s a cliché, service matters, even in a quick-stop business. Many gas stations suffer from inattentive staff or unclean facilities – turning those into strengths can set you apart. Ensure your restrooms are spotless (travelers remember this). Train employees to be friendly, greet customers, and handle problems (like a faulty pump or a messed-up order) swiftly and politely. Consider offering little perks that cost little but build goodwill, such as free air for tires (those coin-operated air pumps can actually be profit centers, but some stations offer free air and water as a draw) or a free coffee refill for truck drivers with their own mug. Creating a welcoming, safe atmosphere – well-lit forecourt, clearly marked parking, tidy aisles – will broaden your customer base (for example, making female customers feel more comfortable stopping at night, which can be a concern at sketchier locations). Over 20% of consumers rank overall experience (not just price) as the top factor in choosing a convenience store, so building a reputation for a great experience can foster loyalty even if a cheaper option opens nearby.

• Marketing and Community Engagement: Don’t rely solely on drive-by traffic. Actively market your station: grand opening fuel price blitzes, flyers or social media ads targeting the local area, participation in navigation apps that highlight your station’s prices (many drivers use apps like GasBuddy – ensure your prices are updated there). Build a social media presence for your store, especially if you introduce unique offerings (e.g. promote your new BBQ smoker Fridays on Facebook community groups). Engaging with the community – sponsoring a local little league team, offering first-responders a discount, hosting a charity car wash in your lot – can embed your station as a valued local business rather than just another corporate outpost. This goodwill can translate to a loyal customer base that prefers your location even if a big chain is down the road.

• Operational Excellence and Cost Control: Behind the scenes, run a tight ship. Optimize staffing – enough to serve customers promptly but not so much that employees stand idle. Use data (from your POS) to track sales and adjust inventory and labor schedules accordingly. Implement loss prevention measures: cameras, training to prevent employee theft, age-verification systems for alcohol/tobacco to avoid fines. Stay on top of maintenance – a fuel pump out-of-order or a fridge that’s warm can both lose sales and hurt reputation. Keep an eye on gas margins daily and purchase fuel strategically (if you have storage and cash, buying a bit extra ahead of a known price increase can boost margins, and conversely, running lean when prices might drop). These blocking-and-tackling fundamentals ensure you actually reap the profits from your revenue. Many gas station failures come from poor management rather than lack of demand – so strong operational controls can be a competitive advantage in a locality where perhaps other stations are not as well managed.

• Adaptability and Future Planning: Finally, plan for the future. When designing the site, consider installing infrastructure for EV chargers, or at least leave space and conduit for future electrical upgrades. Perhaps start with one or two chargers as a pilot if there’s EV traffic in the area – you might attract early EV adopters and gain experience in that domain. Keep informed on industry trends (join the National Association of Convenience Stores, attend trade shows, subscribe to industry publications) so you can adapt early to changes like new regulatory requirements or product trends. For example, if a law passes that allows cannabis sales at retail in your state, you’d want to know if that could be a new product line (some c-stores in certain states have added CBD or even licensed cannabis sales where legal). In short, build flexibility: maybe your layout can be adjusted later, or your brand agreements allow adding new fuel types. The goal is to not be caught flat-footed by the major shifts coming in the next decade.

By following these strategies – excelling in location choice, focusing on profitable in-store sales, differentiating through products and service, and keeping an eye on the future – a new gas station and convenience store business can carve out a defensible and profitable position. While the industry is mature and competitive, there is always room for innovative and well-run entrants who execute better on the fundamentals and respond proactively to the changing landscape of how Americans fuel up and shop on the go. With the right game plan, a modern gas station/c-store can be not just a fuel stop, but a convenient destination tightly woven into the daily routines of its community, yielding steady returns for its investors.

September 02, 2025, by a collective authors of MMCG Invest, LLC, (retail/hospitality/multi family/sba) feasibility study consultants.

Sources:

• NACS (National Association of Convenience Stores) data on store counts, sales breakdowns, and industry trends.

• IBISWorld and industry reports for financial benchmarks and cost structure (e.g. purchases ~70% of revenue, wages ~8%).

• NACS Magazine and CSP Daily News articles for 2023–2024 insights (record in-store sales, foodservice growth, fuel vs. profit mix).

• The Hustle and Toast analysis for gas station economics (fuel margins of only a few cents, 30% of revenue from store yielding 70% of profit).

• Kalibrate and other industry consultants on site selection criteria (traffic, visibility, competition).

• Vontier 2024 consumer survey for shopper behavior (frequency of visits, willingness to pay for convenience).

• Additional references as cited throughout