Small Gas Stations Are Running on Empty
The small corner service station died decades ago. The truism that every commercial thoroughfare would have a gas station every mile or so came to an end in the 1990s. But now, even iconic gas stations that served major intersections (27th and Hennepin in Minneapolis, Blake Road and Highway 7 in Hopkins) are shuttered, and ever fewer offer actual repairs and oil changes.
Where are all the service stations going?
In Minnesota, 2,120 convenience stores sell gas, down about 4 percent from 2008, according to the National Association of Convenience Stores (NACS). The state’s total number of fueling outlets is down about 12 percent from 1998.
Lower-volume stations have exited the market as fuel margins have become razor-thin, says Jeff Lenard, vice president of industry advocacy at NACS. Typical markup on a gallon is 16 to 18 cents; after costs, stations make about 3 cents per gallon, he notes. Soaring fuel prices have exacerbated the issue, as small stations’ cash flows are diminished by higher inventory costs. And Costco and Walmart, which rake in revenues selling cartloads of goods, sell gas nearly at cost.
“And you’re not going to see new [stations] popping up,” says Rick Bohnen, who started working at his father’s ExxonMobil station in South Minneapolis at age 15 and took it over in 2004, subsequently acquiring a second station across the street. “It costs a ridiculous amount of money to get into this business.”
Bohnen rattles off a barrage of headwinds facing his industry, citing credit card fees as the strongest gale. After climbing 21.6 percent in 2010, credit and debit card fees paid by U.S. convenience stores jumped 23 percent to a record $11.1 billion in 2011, according to NACS.
Rising property taxes and regulations mandating equipment upgrades are among other changes eating into earnings, says Bohnen. For the small shops that remain, many owner-operators “can’t afford the help and end up behind the counter.”