Return on investment for a leased service station is measured against the cash you actually put in — deposits, inventory, equipment, and working capital — not against a property value you do not own.
This article walks through the ROI calculation for a leasehold fuel business, the inputs that most often get estimated wrong, and how to stress-test the result. For lease profitability analysis, see evaluating lease profitability.
Building the Cash-In Number
Total your initial investment honestly: security deposit and first month, fuel inventory in the tanks, store inventory, any equipment or leasehold improvements you fund, licensing and permits, insurance deposits, POS and technology, franchise or dealer fees, and three to six months of working capital.
Operators routinely omit working capital and then discover that fuel loads consume cash faster than the store replenishes it. If your ROI math assumes zero cushion, the math is wrong.
Building the Annual Cash Flow
Start with fuel gross profit — gallons times realistic net cents per gallon after credit card fees and the supply differential — then add inside gross profit by department, plus car wash, lottery commission, ATM, and air and vacuum income.
Subtract rent and escalations, payroll and payroll taxes, utilities, maintenance and compliance testing, insurance, licenses, bank and processing fees not already netted, supplies, and an owner salary if you will not be behind the counter yourself. What remains is the annual cash flow that divides by your cash-in to give cash-on-cash return.
Stress-Testing and Judging the Result
Run three cases: gallons down ten percent, fuel margin down two cents, and a major equipment failure in year one. A leasehold that only works in the best case is not an investment, it is a job with downside.
Also weigh term risk. A leasehold with five years remaining and no renewal option has a shorter runway to recover capital than one with two five-year options, so it needs a higher return to compensate. Read lease versus buy and contact us via the contact page.
Frequently Asked Questions
Speak With a Florida Gas Station Specialist
Request a confidential consultation or off-market opportunities and pricing through our contact page, or call +1-305-518-1545. The Gas Station Group is headquartered at 8603 S Dixie Hwy, Miami, FL 33143. Principal: Bobby Berrido.