How to buy a petrol station?

| 2 min read

Click here to download a business sale agreement to purchase a petrol station.

Petrol stations owners have slowly reinvented their business to be profitable in the long term, with the use of electric cars rising.

Some challenges in this industry include volatile oil prices, excessive fuel duties, tight profit margins and aggressive competition.

The growing use of cars

Oddly, despite the growing number of car use in the UK over and road traffic, this sector has been facing a decline. Further, increasing numbers of people are switching to electric or hybrid vehicles, and with the increasing fuel-efficient engines, people can now drive further on less fuel.

Petrol prices war

The big supermarket chains have taken up a growing share on the market, subsidising fuel with store profits and offer loyalty incentives. This has led to independent petrol stations struggling to keep up with the competitive petrol prices.

Covid-19 effect 

The Petrol Retailer Association warned in April 2020 that due to competitive oil prices and an almost 73 per cent drop in the road traffic due to lockdown, around 1000 independent petrol station could shutdown.

As has been stated, this is a very competitive sector and unique due to the fact that almost 70 per cent of the income ends up being taken up by the government through fuel duty and VAT.

The future of petrol stations

It is expected that by 2035, petrol and diesel-based vehicles will be completely phased out in the UK. Petrol station will have to adapt by slowly replacing fuel pumps with electric vehicle charging stations.

This will free petrol station owners from having to compete with volatile crude oil prices and the fuel price wars.

Further, petrol stations can increase their revenue by offering supplementary services such as tyre pressure checks, car wash and valeting services, and selling auto consumables.

Location

When looking for a petrol station to buy, location is the most crucial factor you need to keep in mind. It will be best if the petrol station is located on a busy road. It would help if you also spent some time watching the traffic go by to assess how many customers the business gets.

Franchise

There are no petrol station franchises operating in the UK. However, there are other retail franchises with the reassurance of a proven brand, training and support, and bulk buying power of the larger retail chains. Further, these chains specialise in market niches by offering groceries, auto parts, and pet food.

Due diligence

The process of due diligence is one that provides a thorough investigation into a proposed investment transaction. It means you check the investment worthiness, and assess the full claims made by the owner. This check is usually performed by a solicitor and accountant who act on behalf of the buyer. A large portion of due diligence will involve checking financial statements and accounts.

Click here to find more about due diligence.

If you buy wisely and do a thorough research of the background and potential of the business which attracts your interest, you will get immediate access to the existing base of customers and suppliers. This will ensure that you know what you are getting into.

You need a solid contract

You, as the buyer, will have to produce the sale document. This agreement will have to cover the mechanics of the deal – what is being sold, where it is, how it is to be transferred, and so on. This is where warranties come in. Click here to download a business sale agreement if you are purchasing a petrol station.

Warranties which are legally binding promise as facts about the business, which provide information relating to the business. Click here to know about how warranties work and why they are important.

Other documents you need

The starting point for documents are those relating to the sale and purchase – of company shares, or of business assets.

Additionally, you may need assignment and novation agreements to transfer contracts the seller is a party to.

If company shares are being sold, then you will need directors service agreements, board minutes to document approvals to changes, and possibly, a new shareholders agreement and new articles of association.

We can help you find exactly what you need for your circumstances if you contact us and ask

Please note that the information provided on this page:

  • Does not provide a complete or authoritative statement of the law;
  • Does not constitute legal advice by Net Lawman;
  • Does not create a contractual relationship;
  • Does not form part of any other advice, whether paid or free.
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