You’re an entrepreneur, you’ve done your preliminary research, you know that gas stations are a good investment and you’re now working with Cormode & Dickson on your business plan. In order to make that business plan for gas station construction work best for you, and for your financiers, you’ll need to include whether or not you are opening an independent gas station or becoming a franchisee.
Opening a franchise gas station has many benefits: you don’t need to worry about branding because you’re already operating under a recognized brand; you’re protected from environmental problems like gas tank leaks; if laws and regulations change requirements, your parent company is responsible to cover the costs of the changes; and the potential for success is significantly increased. In general, going the franchise route is a safer bet with lowered financial risk because “95% of franchised businesses overall are still in business 5 years after they are started versus independently owned businesses that only experience a 5 percent survival rate after five years.” Because franchisees must run their businesses according to the system’s operational guidelines, you don’t need to create policies or procedures or marketing strategies – it’s already in place, providing support, expertise, and experience.
While a franchise is a safe, turnkey investment, there are some disadvantages. For example, major oil companies rarely provide financial assistance to potential franchisees, big corporations can raise rents, and you are restricted to buying gasoline only from your franchisor (you don’t get to choose who you buy from), and you are responsible to pay royalties to your parent company (sometimes up to 52%!). Additional costs may include insurance for the entire station from pumps to the building, and the franchisor may veto your attempts to sell the station at a later date or they may allow another franchisee to build a station close to yours, creating unforeseen competition.
Cormode & Dickson has a wealth of experience in Alberta construction, particularly in guiding entrepreneurs through franchise gas station construction. We’ve worked with clients to construct gas stations with big franchises like Husky, Esso, Shell, Petro Canada, Co-op, 7/11, Fas Gas, and Safeway. We have the experience and expertise to assist you in developing your gas station project from inception to completion, including providing valuable insight into your franchise options. Plus, many of our gas station projects also include restaurant partnerships with Tim Hortons and A&W, so we can advise on those decisions as well.
As a franchisee, however, you aren’t a business owner in the same sense as you are when you own an independent gas station, because you are beholden to the parent company. As an independent gas station owner, you can buy gas from the companies of your choosing, negotiating for good prices; you can sell the business to whomever you like, whenever you want; you can market, promote, and run your business however you prefer without interference from a parent company; and your profits are your profits, you don’t owe royalties to anyone.
But, running an independent business is a lot more work and “ownership can be complex!” You have to develop your policies and procedures, marketing campaigns, and brand recognition – and you have to learn and research what does and doesn’t work the hard way. You’re on the hook for everything: land purchase or lease, environmental problems, legal regulations and changes, and insurance. Competing with big corporations can be challenging, and you’re doing it all on your own without the support and expertise of a successful oil company. However, Cormode & Dickson also has experience building independent gas stations like the Squamish First Nations gas station and can offer you the support and guidance you need to make this selection profitable and successful.
Choosing between a franchise and an independent gas station is largely dependent on the amount of involvement you, as the owner, want to have in the business and how much work you want to do. Each choice has its benefits and its disadvantages, but Cormode & Dickson is here to help you find the best possible route for your future business.