How commercial development and traffic data impacted the profitability of one site in California
Often when a fuel site owner is looking to build or upgrade their site, they need to demonstrate the feasibility by submitting a proposal to the bank to receive the correct funding.
Our Single Site Analysis team recently completed a report on a new to industry fuel site with surprising results. In this case, the client was interested in using our Single Site Analysis to create simulations based upon various fuel pricing tactics, and one change of fuel brand, to understand what fuel brand would be the most beneficial for their site. They have also used it to understand how the construction around their proposed site could affect the overall c-store sales and gas volumes.
This proposal was used to approach the bank with their base case and to show the potential for significantly higher overall fuel site sales once the construction around their site had been completed.
So, what did the analysis reveal?
In the base case, we know that the fuel price had been proposed to be set to match the price strategy in the trade area. This modelling is included in our Single Site Analysis report – working with a client, our report looks at all the competitors in the area and requested simulations to investigate the impact of different pricing strategies.
In this case, the base strategy matched the brand pricing strategy for the area and included an offer of a 16c discount on fuel purchases made in cash. As we can see, the base case would be projected to achieve an estimation of 199,000 gallons per month in gas sales and $187,000 a month in c-store sales.
Case 2 is slightly more tactical. The simulation was set to project the result of setting the site’s fuel prices 4c below the trade area pricing strategy and retained the discount for cash-purchases from the base case. This tactic projected that monthly gas volumes would increase by 3% compared with the base case and an additional $1000 per month in c-store sales could also be achieved.
Case 3 looked at a change of fuel brand for the site. This strategy set higher fuel prices — 10c more than the base case. It is likely that a well-known fuel brand would have a positive impact on gas volumes, but in this case the increase in price has negatively affected the gas volumes overall, with a decrease of 16,000 gallons per month from the base case.
In case 4, the simulation was asked to factor in projected growth and area development. The site of the proposed fuel site has projected growth in the area, due to a 5,600sq ft commercial area to be built at the site location. 2,400 new homes were also scheduled to be built inside a 5-mile radius of the location and 700 additional new homes were to be built inside a 9-mile radius. Our forecasting models can understand the increase to the projected traffic count for the surrounding area – to understand more about traffic count look at TrafficMetrix.
The rise in traffic and increase in commercial and residential sites allowed this fuel site owner to project significantly higher c-store sales and gas volumes per month. With a 3% rise in c-store sales and a 10% rise in fuel volumes ,compared to the base case — increasing fuel volumes by 21,000 gallons per month.
Choosing the right location for your fuel site is essential to it’s success. In this case, a Kalibrate Single Site Analysis provided the projected results of the proposed site changes that helped the site owner secure funding from their bank.. To understand more about buying a gas station and approaching your bank for funding — download our ‘how to buy a gas station eBook’.
Whether you are updating your site, building a new one, or approaching the bank to ask for funding, a Single Site Analysis will assist you with all your c-store and fuel site projections. The flexibility of the Single Site Analysis can help you achieve overall fuel site profitability and remove the guesswork from your decision making. Understand more about our fuel site analysis and what else it has to offer here.
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