This is how much it will cost you to open your own petrol station

Source: Business Insider SA, 17/06/2019

• South Africa burns a lot of petrol �` and selling it may be for you.
• Here`s how to open your own independent petrol station, or buy an
existing petrol franchise, and the advantages and pitfalls of each.
• Be warned, it is not for everyone, and it isn`t cheap.
If such figures, and South Africa’s climbing petrol price, tempt you
into buying a petrol station of your own, keep in mind that the
profits from these billions of litres pumped don’t all end up in the
pockets of petrol station owners.
Petrol stations in South Africa are tightly regulated, with almost 60%
of the petrol price now going towards various taxes, levies, and
margins. And factors like labour costs, fluctuating oil prices, port
delays, the power of large oil companies, and the strength of the
rand, can all impact on profit margins and unpredictability. It’s also
a business that has no downtime - most filling station franchises must
remain open 24 hours a day, every day of the year.
Couple that with the need for huge capital outlay and large amounts of
working capital, and you might actually be happier to continue paying
someone else to handle the hassle of filling up your vehicle.
Still, given our dependence on petrol and diesel, the fuel retail
industry is surprisingly resilient. There are close to 5,000 service
stations in South Africa, and according to the Department of Energy,
and these have an annual turnover of approximately R220 billion.
Although fuel sales still make up the majority of the profits at
filling stations in South Africa (according to Absa, between 80% and
90% of profits), the additional income from forecourt businesses like
convenience stores, coffee shops and restaurants, can be a nice backup.
In South Africa you can either start an independent filling station,
or buy an existing franchise.
Opening an independent fuel station
The independent route allows for greater freedom, and potentially
greater profit, without the restrictions of a parent company. In
theory, if you know what you’re doing and have enough cash, you can
establish a filling station with your own brand.
New sites for petrol stations require approval from government, and
you’ll need to jump through several legislative hoops as stipulated in
the rather daunting Petroleum Products Act regarding petroleum
products site and retail licences.
Before you can even think about pumping petrol, you’ll need to obtain
environmental authorisation and land use rights. Once you have these
approved you apply for your operating licenses. Not getting the
approval right could be a real problem.
If you’re familiar with the petrol industry and you want to go
independent, your best bet is to purchase an existing filling station.
This may enable you to bypass some aspects of the Petroleum Products
Act that governs locations of new stations.
Opening a petrol franchise via Engen, Shell, or other oil companies
A far safer option for first-time owners is to buy an existing
franchise from one of the major oil companies, even if it comes with
some restrictions. You’ll be tapping into the expertise, workflow and
brand of established players.
Most major oil companies operate their customer-facing operations as
franchises in South Africa.
The likes of Engen, Shell, Caltex, BP, or Sasol are open to new
franchise locations, but with licensing and locations hard to come by,
your best option may be to purchase an existing franchise operation.
The cost of these franchises vary according to the location, fuel
pumped, and other add-ons like convenience stores.
Engen is currently selling a relatively small franchise in Gauteng for
R2.6 million, excluding stock and assets. It has no convenience store,
and pumps an average of 267,000 litres of fuel per month.
Engen requires 20% of this selling price in unencumbered cash and a
working capital stash of R1.2 million.
A larger Engen petrol station in Johannesburg pumping close to 200,000
litres of fuel per month, with a forecourt Quickshop, is currently
selling for just over R4 million.
The working capital required for this location is R1.3 million.
The convenience store adds to the cost of the station, but according
to Engen in this case it generates R309,000 in average monthly turnover.
At the top end of the scale you can expect to pay closer to R7 million
for an Engen. This is for a filling station with a Quickshop and
Corner Bakery franchise that pumps an average of 300,000 litres of
fuel per month.
Engen also requires that applicants will complete a psychometric
assessment at their own cost to ensure a good fit with the business.
Similarly, a large Sasol filling station can easily cost tens of
millions. The company is currently selling a franchise in Gauteng,
with convenience store a monthly fuel average of 315,000 litres, for
R10 million.
A smaller Sasol franchise in Port Elizabeth, that sees an average of
203,300 litres per month, is currently on the market for just under R6
million.
Most major petrol station franchisors require new owners to undergo an
extensive vetting process and pass exams before they can proceed to
the actual building or handover phase.
After passing the exams and psychometric assessment, and handing over
the required percentage of unencumbered cash, you can then begin the
thankless task of pumping fuel to a constant stream of grumbling
motorists.