The gas station industry is a vital part of the U.S. economy, serving not only as a source of fuel but also as a convenience hub for millions of Americans. MMCG, a leader in gas station feasibility studies, has compiled detailed data from 2023 across its database of profit and loss (P&L) statements and actively monitors the performance of commercial mortgage-backed securities (CMBS) loans within this sector. This analysis sheds light on the typical revenue streams and expenses that define the gas station business today.
Revenue Streams: Fuel Sales as the Core
In 2023, fuel sales remained the cornerstone of gas station revenue. Data from MMCG's database shows that a typical gas station sold approximately 1,404,890 gallons of fuel, generating around $4,774,726 in revenue. This translates to an average of about 117,074 gallons sold per month, with monthly revenues averaging close to $398,000. The reliance on fuel sales is evident, as it not only drives the bulk of the revenue but also attracts customers who may then make additional purchases in the convenience store.
Fuel sales are heavily influenced by factors such as global oil prices, regional competition, and consumer driving habits. Gas stations that strategically price their fuel and manage their supply chains efficiently tend to see better profit margins despite these external pressures.
Convenience Store Sales: A Significant Contributor
While fuel sales dominate the revenue landscape, convenience store sales are a crucial secondary revenue stream for gas stations. According to MMCG's 2023 data, a typical gas station generated approximately $1,081,203 from convenience store sales. This revenue was spread across various product categories, with tobacco products alone contributing about $286,677. Lottery sales were another significant contributor, bringing in $135,073.
The convenience store inside the gas station is more than just a supplementary service; it is a critical profit center. In 2023, the average monthly sales from the convenience store reached around $90,100, with transactions averaging approximately $8.87. The variety of products offered—from snacks and beverages to tobacco and lottery tickets—catered to a diverse customer base, enhancing the overall profitability of the station.
Expenses: Managing Operational Costs
Operating a gas station involves managing a complex array of expenses. In 2023, MMCG’s data indicates that labor, inventory for the convenience store, utilities, and maintenance were among the most significant costs. The ability to control these expenses directly impacts the station's profitability.
Fuel costs themselves represent a significant expense, as gas stations need to purchase fuel in bulk. The price at which this fuel is purchased can fluctuate based on market conditions, and stations must balance the cost of fuel with competitive pricing strategies. Additionally, the operating costs of the convenience store—such as stocking products, employee wages, and utilities—add another layer of financial management.
Financial Performance
In 2023, gas stations that managed to maintain or grow their revenue streams—particularly through strong fuel sales and thriving convenience store operations—demonstrated better financial health and stability. This, in turn, allowed them to meet their debt obligations more reliably, reducing the risk of default.
One significant trend observed by MMCG in 2023 was the increasing importance of non-fuel revenue streams, such as tobacco, lottery sales, and convenience store items. Stations that diversified their offerings and optimized their product mix tended to perform better financially. For instance, stations with high tobacco sales, which contributed around $286,677 in annual revenue, or those with robust lottery ticket sales, which added $135,073, were able to mitigate the impact of volatile fuel prices.
Moreover, the data showed that stations with higher average transaction sizes in their convenience stores—reaching approximately $8.87 per transaction—were better positioned to absorb rising costs. These stations often leveraged customer traffic generated by fuel sales to boost convenience store profitability, thus stabilizing their overall financial performance.
The Role of Operational Efficiency
Operational efficiency emerged as a key determinant of success for gas stations in 2023. Stations that effectively managed their expenses—ranging from labor and utilities to inventory costs—were able to maintain healthier profit margins. This efficiency was particularly important in a year marked by economic challenges, including fluctuating fuel prices and increasing operational costs.
MMCG’s data highlights that gas stations with well-optimized operations were not only able to meet their financial obligations but also invest in improvements and expansions. These investments could include upgrading facilities, expanding product offerings, or implementing new technologies to enhance customer experience and streamline operations.
Conclusion
The gas station business in 2023, as analyzed through MMCG's comprehensive database and CMBS loan monitoring, presented a picture of resilience and adaptability. Fuel sales remained the cornerstone of revenue, but the growing significance of convenience store sales and other non-fuel income streams played a critical role in sustaining profitability.
Gas stations that excelled in operational efficiency and diversified their revenue streams were better positioned to weather the economic fluctuations of the year. These stations not only maintained strong financial performance but also ensured the stability of their CMBS loans, reflecting their overall business health.
As an expert in gas station feasibility studies, MMCG continues to provide valuable insights and guidance to industry stakeholders across the United States. With a deep understanding of the financial dynamics and operational challenges facing gas stations, MMCG remains a trusted partner for those looking to navigate the complexities of this essential industry.
August 14, 2024 - Michal Mohelsky, JD, principal of MMCG Invest, LLC
Source: Fannie Mae, CoStar, CMBS, IBISWorld, MMCG Database
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