Petrol Station Questions

[manarak]

Does anybody know about petrol station biz in Thailand?

Is it possible to open an independent station owned by a company partially held (49%) by farang?

I discovered a nice spot to place it - are there zoning restrictions?

[tonytidbury]

Yes, there are. It is no longer legal to build a gas station in residential areas.

A local businessman started to build one on the land behind our Moo Ban. It was designated residential land, and he didn't have a building permit. We and a neighbour, along with the owner of the Moo Ban project went to complain to the municpality. The director was not available, but we talked a staff member, who showed us the land designation map.

Within two days the land was designated as commercial and a building permit was issued. Problem solved.

Turns out the Moo Ban project owner is related to the businessman. She now has a plot right next to the stinking washroom put in, which she cannot sell. But never mind, no doubt she has been compensated. Other people very close to the washroom had already bought before it was put up. Just bad luck, I suppose. Thais don't bother to get a lawyer to oversee the biggest purchase they will ever make. Probably wouldn't help anyway. The lawyer would most likely turn out to be related to (or in cahoots with) anyone they wanted to complain about.

[manarak]

Within two days the land was designated as commercial and a building permit was issued. Problem solved.

ah, that's a rather positive business climate then.

thanks for the good news

I write that tongue in cheek - but I am the one wanting to setup a petrol station

[soundman]

Yes, it is possible for a foreigner to own shares in a business that operates a service station.

There are many permits required, and zoning restrictions on service stations. One that may interest the OP is that new permits will not be granted to a site that is closer than 100m (or 500m - I can't remember ) to an intersection of another road/soi.

Another hurdle will be getting approval from the parent company (PTT, Caltex, BangJak etc) for a foreigner to hold shares in the company.

Every year i go to the PTT end of year dealer's seminar, & i am the only foreign face in a sea of 5000 others.

Good luck with your endeavour.

[manarak]

Yes, it is possible for a foreigner to own shares in a business that operates a service station.

There are many permits required, and zoning restrictions on service stations. One that may interest the OP is that new permits will not be granted to a site that is closer than 100m (or 500m - I can't remember ) to an intersection of another road/soi.

Another hurdle will be getting approval from the parent company (PTT, Caltex, BangJak etc) for a foreigner to hold shares in the company.

Every year i go to the PTT end of year dealer's seminar, & i am the only foreign face in a sea of 5000 others.

Good luck with your endeavour.

Thank you - interesting post regarding the 100m and the parent company.

Does this mean it is impossible to operate an independent station?

And since you seem to be "in the biz" could you give details as to what's the station's avergae cut in % of the selling price (all taxes included)?

Edited April 27, 2011 by manarak

[soundman]

Thank you - interesting post regarding the 100m and the parent company.

Does this mean it is impossible to operate an independent station?

And since you seem to be "in the biz" could you give details as to what's the station's avergae cut in % of the selling price (all taxes included)?

Not at all.

Operating as an independant means that you aren't tied into a parent company. You can run your service station how you want to (within the law obviously). You can buy your fuel from any supplier. (You may actually get a better price per litre from "jobbers" - buying co-operatives, individual wholesalers, being an independant station).

Problems with independants are brand recognition/customer trust issues. You may find that you have to allow credit to achieve sales. (very dangerous as the margins only support current interest rates for about 4 - 6 weeks.)

Some figures for a branded service station (your buy and sell prices are set by the petroleum company):

Gross margin is about 0.80B per litre after delivery cost.

You have to pay your bills and cover any slippage from the remainder.

From experience Net margin is around 0.47B per litre. You have to pay VAT and company tax on this figure.

If you have no experience in petroleum business - keep your eyes open. Everybody will (try to) steal from you. This is inclusive of the people that load the truck, the truck driver (biggest risk), your cashier, your filling staff, your customers, fake bills. Everybody. The moment you close your eyes you will lose more than your profit everyday.

- Where's the missing fuel?

- It evaporated.

- It shrunk.

- Its not missing, you didn't measur

it properly.

- The loading centre (klang num-mun) didn't load

enough.

- I didn't have enough fuel to get back to the klang.

- Why is there ethanol in my standard benzene?

- Don't know. I didn't open the tank, remove 300 litres of benzene, which I

can sell for 40B per litre, and replace it with 300 litres of ethanol,

which I bought at 17B per litre.

Note: Re: ethanol in benzene (not gasohol) - if you get caught selling it - you will go to court and get fined with possible jail terms.

[manarak]

wow, excellent advice - thank you very much

there are similarities to doing buisness in eastern Europe then: get security staff to check the normal staff, and staff to check security staff and someone you trust to check everyone! LOL

Edited April 28, 2011 by manarak

[jcon]

There is a picture of a western guy and staff at a Caltex on Ratchada.

When they changed ownership and re-opened a few years ago, that guy was out on the side of the road flagging down new customers for the Grand Opening.... never saw him again but his picture is still up there behind the cashier on the wall in a frame!

manarak you can consider a CNG station - a relative (who works for PTT) has an ESSO station and he just worked out a deal with PTT to sell their CNG on the same property as his ESSO station (his property). The new stations IIRC don't require (or you can choose this option) you do dig and bury the large tanks, they have them in large caged containers - so the truck just comes up and delivers a new load. Look around, maybe you'll see this system around some newer stations. Much more cost-effective than burying the darn things..... safety? Who knows. He pulls down 200k THB/month from the CNG business alone and this is in the Putthamonthon Sai 4 (aka way out there) part of Bangkok.

I don't remember the numbers but I think he said it was 30 million if you had the land.... I don't remember, I could have my numbers all jumbled up because I wasn't really listening too intently when he was telling me about it. I know the numbers he said were 6 Baht per (some measurement of CNG) sold, with revenues of over 200K/month.

Best of luck.

[manarak]

There is a picture of a western guy and staff at a Caltex on Ratchada.

When they changed ownership and re-opened a few years ago, that guy was out on the side of the road flagging down new customers for the Grand Opening.... never saw him again but his picture is still up there behind the cashier on the wall in a frame!

manarak you can consider a CNG station - a relative (who works for PTT) has an ESSO station and he just worked out a deal with PTT to sell their CNG on the same property as his ESSO station (his property). The new stations IIRC don't require (or you can choose this option) you do dig and bury the large tanks, they have them in large caged containers - so the truck just comes up and delivers a new load. Look around, maybe you'll see this system around some newer stations. Much more cost-effective than burying the darn things..... safety? Who knows. He pulls down 200k THB/month from the CNG business alone and this is in the Putthamonthon Sai 4 (aka way out there) part of Bangkok.

I don't remember the numbers but I think he said it was 30 million if you had the land.... I don't remember, I could have my numbers all jumbled up because I wasn't really listening too intently when he was telling me about it. I know the numbers he said were 6 Baht per (some measurement of CNG) sold, with revenues of over 200K/month.

Best of luck.

Again a very helpful and informative post, thank you!

Do the 30 million refer to the investment to set it up, i.e. not including the land?

[jcon]

manarak, if I recall correctly, it was 30 million NOT including the land - most of the petrol stations in the outer parts of Bangkok are owned by families with land in the surrounding areas, so they just plop a petrol station on top....

I'm not sure if it was 30 million for a full petrol station or just the CNG setup, however. The new PTT above-ground system is quite nice, though, so definitely consider that. Very easy for maintenance, etc.

Just a note - a good car wash at those petrol stations makes quite a lot of money - and a lot less hassle. But then again you kind of need the petrol station to bring the car wash customers. If you have a large property, then B-Quik can rent out that space and you're pretty much golden. Of all those 3 options (petrol station, B-Quik, and a good car wash), the car wash in my opinion produces the best return on investment - but like I said, you need the petrol station there anyway!

[soundman]

Some ballpark figures (not including the land).

Basic independant LPG - 8,000,000

Basic independent petroleum only. (4 bowzer - 8 - 12 heads) - minimal facilities, some second hand stuff. 5,000,000 - 10,000,000.

Franchised stations.

Communitysize petroleum only (4 bowzer - 24 head) - 15,000,000 to 20,000,000 not including convenience store, coffee shop &/or car servicing franchises, delivery truck.

Large highway service centre (6 - 8 bowzer - >32 heads) 30,000,000 - 45,000,000 not including convenience store, coffee shop &/or car servicing franchises, delivery truck.

Basic NGV, drive in trailer storage. 25,000,000 up.

Note:

The 7/11's in PTT stations generate roughly the same amount of profit as selling the fuel. In the countryside car washes are hard to staff and generate poor profits because of this factor. Service centres actually dpend on your mechanics, much like a restaurant depends on its chefs.

If you go the franchise route, and you have experience (a successful track record), and a location to die for, the parent company may offer (interest free, sales quota) finance. We are in the process of applying to upgrade our station to the latest package & PTT are going to finance that 60/40 interest free on an achievable monthly sales quota.

Cheers.

[manarak]

Thank you too much Soundman and Jcon

I have an idea of a location to die for, located on a main road with much traffic, linking two nearby cities, and the area has no choice than to develop further.

Nearest other stations are at 2 Km and 2 others next to each other (??) 2.5 Km away (but located on other roads).

I still need to secure the land though.

2 rai should be enough?

Plots are for sale there, need to check for how much.

Maybe I should also sit down to count vehicles.

Are there ballpark figures for vehicles statistics, i.e. an average of x% of cars stop and they spend an average of y baht on fuel?

Are 2% and 500 baht realistic?

Edited April 29, 2011 by manarak

[manarak]

...The road has traffic round the clock and the area is also missing a Mc Donald's.

Edited April 29, 2011 by manarak

[manarak]

Just used my 2% and 500 baht with the estimated net margin of 0.47 per litre in calculations, the result can't be right.

The road probably has between 20k and 30k vehicles a day and the same amount of motorcycles.

My calculations using 30k vehicles and 700 baht average spending per vehicle led to a net profit of about 200k a month from fuel, and 130k if 20k vehicles, which is rather sobering considering the investment.

Maybe I need to adjust my estimates of average sale and % of vehicles stopping for fuel.

Unless... the 0.47 baht per litre include the cost of finance.

Or do the 0.47 baht net margin already include a generous salary for the general manager?

There aren't many trucks on that road, so I'd probably only need gasoline (91, 95, super) and diesel.

Car wash, 7-11, Mc Donald's would be good at that location too.

Edited April 29, 2011 by manarak

[jcon]

My advice would be to buy more land than you think you need.

There are a couple of reasons:

1) Customers like big petrol stations with plenty of parking, etc. Once it becomes something like a spot for the local ambulance crews to hang out or taxis to wash the cars, then you generate much more profit from the convenience store part. I only go to the large stations, it's just nice to kind of get away from the traffic and have some space.

2) Expansion. Once you have the station up and running, you can easily add shops that will fit your customer base. It could be a car wash, oil-change/tyre place, convenience store, coffee shop, etc. etc. etc. You can really scale profits once you have the larger plot. You have to think in the longer term, as you will definitely regret it if you have a successful station and can't expand. At that point, the surrounding land could be much more expensive also as the owners would know you need it to expand.

Of course there could be more reasons but those are the ones that stuck out off the top of my head.

Re: McDonalds: PTT seems to have some deal with A&W (at least from what I see in Bangkok). McDonalds seems to have a deal with Siam Future Development (developers who run the "Avenue"-projects - J-Avenue, the Avenue Chaengwattana, the one at Ratchayothin, the one on Kaset-Namawin, etc.). If you can get a PTT with 7-11 (they already make nice partners) and McDonalds instead of those A&Ws (which never seem to have many customers) then that would be the way to go, in my opinion.

Off the top of my head I can think of one ESSO station that shares property with a McDonalds (on Sukhumvit 24 at Rama 4). There is one very nice PTT about 10-20 or so kms out of Bangkok on the way to Hua Hin (Samut Sakorn?) that has a nice new McDonalds. From what I heard about that deal, it was hard to deal with McThai (McDonalds) as they pretty much want to call all of the shots. That PTT is very successful, though. It's like a proper ''rest stop'' and that McDonalds seems to always be packed. I'm sure there are more, but again, these 2 are just the ones I can think of off the top of my head.

I don't have any advice about the numbers, but soundman seems to be able to more properly advise there.

Remember competition. As you know, if somebody sees that your place is doing well, they will literally put up something right next to you (7-11, for example, within 50 meters of each other). So when it comes to petrol stations, go big and win. If you are on a main road, chances are somebody else will put up a station across the street - which is not necessarily a bad thing (if it's a divided highway, for example), as petrol stations that cluster like that tend to become nice rest stops.

PTT has been putting up some really nice stations. The one just north of the Army property on Vipawadee before Suttisarn, for example. Excellent layout, nice lighting. I use mostly Caltex as I use benzene 95, but I will fill benzene 91 at the nicer PTT stations sometimes.

There is also the no-name small-station LPG-only option. I don't know what the turnover is like, but I have seen them able to run of quite small properties and there appear to be a pretty constant flow of taxis. Most of those places don't even have a convenience store. They can get away with something as small as a 1/2 rai from what I've seen. Totally different customer base, though. Something else to consider.

Good luck.

[manarak]

Thank you Jcon for the food for thought!

I've analyzed the traffic and there are almost no taxis, only cars, motorcycles, and small trucks.

Land is still available, but it won't be cheap and the place gets bought and built on progressively, as both towns are growing towards each other, and almost the whole roadside has been built on already.

There are just a handful plots where a station can be built.

There are chances that it will be only station in that spot.

It is a 4 or 6 lane main road (difficult to tell the lanes, since there is no marking on the ground).

Yes, McDonald's is annoying in all countries because they want to control everything, and usually they also want to own the real estate (not only in Thailand - they are a pain in the ass for that matter).

But right now I would first like to get the figures right.

The traffic on that road is going to increase constantly, no doubt about that, but pulling 1.5 million a year from an investment of 15-20m doesn't seem right, especially if my work as a manager is not already paid from profits.

Edited April 29, 2011 by manarak

[jcon]

Hmm, in that case I'd have to reconsider the above-ground CNG tanks that I mentioned. If you don't have many taxis or CNG vehicles around, it wouldn't be very cost-effective.

Consider that your income is going to vary immensely depending on how long your average customer spends there, not just how many you get. If you can get them in and keep them there for awhile (if outside of BKK then food-courts, or small shophouses for rent, coffee shops, etc) then you can increase your revenue. The petrol component, while important, doesn't even really have to be the main driver of profit at the petrol station (soundman can probably speak toward this).

When you mention that a 10%-ish return isn't right, are you saying that it's too low or too high? There are of course many factors to consider, but if you've run the numbers and the station can stand on its own without all of the accessories, then you have something good. The rest is gravy (assuming you have good management skills).

[manarak]

When you mention that a 10%-ish return isn't right, are you saying that it's too low or too high?

The return would be way too low if I don't already get a good salary from the station.

[soundman]

The road probably has between 20k and 30k vehicles a day and the same amount of motorcycles.

My calculations using 30k vehicles and 700 baht average spending per vehicle led to a net profit of about 200k a month from fuel, and 130k if 20k vehicles, which is rather sobering considering the investment.

My station is next to a factory zone which distorts the avarages a little (to the low side because of the motorbikes).

About 1600 sales per day at about 9.5 litres average sale.

I'm pushed for time at the moment, but will write some more, however, suffice to say, that without other co-branded business's on the property, the profit is equatable to a glorified salary.

Also 2 rai of land doesn't get nearly enough room to very much. About a 3 bowzer in a row, toilet, coffee shop, and convenience store. Hard to pack a car wash and service centre in, let alone A/W, Maccas or KFC.

[manarak]

The road probably has between 20k and 30k vehicles a day and the same amount of motorcycles.

My calculations using 30k vehicles and 700 baht average spending per vehicle led to a net profit of about 200k a month from fuel, and 130k if 20k vehicles, which is rather sobering considering the investment.

My station is next to a factory zone which distorts the avarages a little (to the low side because of the motorbikes).

About 1600 sales per day at about 9.5 litres average sale.

I'm pushed for time at the moment, but will write some more, however, suffice to say, that without other co-branded business's on the property, the profit is equatable to a glorified salary.

Also 2 rai of land doesn't get nearly enough room to very much. About a 3 bowzer in a row, toilet, coffee shop, and convenience store. Hard to pack a car wash and service centre in, let alone A/W, Maccas or KFC.

Yep, for my 30k vehicles a day, I estimated 700 cars and 700 MC, average sale 10 liters - so I'm not far off.

For the surface I may have been a bit conservative, I estimated the surface of other stations from satellite pix.

They had more bowzers than you say, but indeed not much more than toilet, convenience store and mech shop. So if I want to put a car wash and a McD there, I'll need more space indeed.

The car wash would probably do well, since the area is residential with condos.

[manarak]

I'd like to revive this subject a bit a do some number crunching.

The traffric on the road is definitely up.

There is still no station around, and more lots get built on.

I can revise the sales estimate up to 2500-3000 sales a day @ 10 liter average.

But the land is extremely expensive, I'd guess it can only be leased for 250.000 baht a rai per month...

[manarak]

I think upping the price by one baht will be accepted by most customers there.

So... using a margin of 1.5 baht (instead of 0.47 baht) per litre/unit gives at most 45000 baht a day, or 1.350k baht, just enough to pay for the land (5 rai).

If we can make another 100k a month by renting out to businesses, the thing could fly?