ARCO AMPM Franchise Opportunity: Resale or New Location? (2024)
ARCO is a gas station chain located in the western United States, founded in 1966 in Southern California. ARCO is known for its low prices and accepts major credit cards. Some locations also sell propane and some have ATMs. Customers can also sign up for an ARCO Gas Card to save even more money. The gas station offers many services such as pump services, oil changes, and air for your tires.
ARCO is a great place to stop for all customer gas needs. ARCO is proud to be one of the largest independent gas station chains in the United States. They have over 1,000 locations across the country, so clients are never far from an ARCO station when they need gasoline. If clients sign up for an ARCO Gas Card, they will save even money on every purchase. ARCO is constantly expanding their services and offerings to make sure that they are meeting the needs of their clients.
AM/PM Mini-Mart Agreement – ARCO Fuel – Contract Dealer Gasoline Agreement (Tesoro) is a franchise concept in the Automotive industry. It is also considered a Gas Station franchise. They were founded in 1968. You can also visit their franchise website to learn more about the business.
In this article, we will dive into the AMPM brand and explore if it is better to start a new one or buy an existing AMPM franchise (resale).
How Is the AMPM Franchise Positioned in the Automotive Industry?
The U.S. has one of the largest car industries in the world. Auto manufacturing deeply depends on thousands of suppliers, materials, retail, and vehicle maintenance. Thus, it is an industry that delivers economic benefits and creates jobs in many different sectors in all 50 states. The Automotive industry supports a total of 9.9 million American jobs, about 5.1% of private-sector employment. In addition, it is an industry that provides great global trade benefits: $99 billion in exports of cars and parts were shipped from U.S. ports in 2017.
The U.S. Automotive industry accounts for 2.7% of the gross domestic product (GDP), or $545.4 billion. Of that, $327 billion was auto manufacturing and $218 billion was vehicle retail sales.
The Automotive industry is at the forefront of innovation. In 2018, automakers spent more than $125 billion on research and development (R&D). New R&D initiatives are being created to adapt and transform the industry to better respond to the new opportunities of the 21st century. In addition, the rise of the Internet of Things (IoT) and machine learning are opening the way for new designs and technologies in the Auto industry. The industry also needs to listen and adapt to consumers’ expectations. For example, the interest in electrified vehicles continues to grow while connectivity, privacy, data security, and automation remain a concern.
How Much is an AMPM Franchise?
The initial ARCO Franchise Fee is $35,000 to $70,000, depending on whether the premises are leased from BPWCP. You have to pay this upfront fee when opening an AMPM franchise.
AMPM Franchise Cost
The estimated total investment necessary to begin the operation of the AMPM ranges from $1,786,065 – $7,602,242 if you do not choose to lease premises from BPWCP. The following costs are part of the upfront costs included in the initial investment for an AMPM.
Many of these are one-time fees that are needed to launch the franchise.
Review the chart below to see how much it costs to buy an AMPM franchise in 2022.
Estimated Initial Investment
| Type of Expenditure | If Premises are Leased from BPWCP | If Premises are NOT Leased from BPWCP | ||
|---|---|---|---|---|
| Low | High | Low | High | |
| Initial Franchise Fee | $35,000 | $35,000 | $70,000 | $70,000 |
| Travel and Living Expenses while Training | $0 | $9,000 | $0 | $9,000 |
| AMPM Equipment | $64,461 | $77,176 | $273,565 | $371,242 |
| Merchandising Accesory Items | $35,000 | $150,000 | $35,000 | $150,000 |
| Miscellaneous Opening Costs | $40,000 | $40,000 | $40,000 | $40,000 |
| Opening Inventory | $30,000 | $135,000 | $30,000 | $135,000 |
| Working Capital | $50,000 | $50,000 | $50,000 | $50,000 |
| Business Licenses and Permits | $8,500 | $12,000 | $8,500 | $12,000 |
| Sales Tax Deposits | $10,000 | $10,000 | $10,000 | $10,000 |
| POS Equipment and Back Office Computer System | 1 POS | N/A | $0 | $55,000 |
| 2 POS | $35,000 | $45,000 | ||
| 3 POS | $37,500 | $47,500 | ||
| 4 POS | $40,000 | $50,000 | ||
| 5 POS | $42,500 | $52,500 | ||
| 6 POS | $45,000 | $55,000 | ||
| Security Deposit | $1,400 | $6,000 | N/A | N/A |
| Additional Funds – 3 months | $169,500 | $131,500 | $59,000 | $100,000 |
| TOTAL INITIAL INVESTMENT (ALL FRANCHISEES) | $343,861 | $655,676 | $36,065 | $1,002,242 |
| Real Estate (35,000-60,000 sq/ft) | N/A | N/A | $300,000 | $2,800,000 |
| Real Estate Improvements | N/A | N/A | $0 | $1,000,000 |
| TOTAL INITIAL INVESTMENT (FOR PURCHASE OF EXISTING AMPM MINI MARKET) | N/A | N/A | 836,065 | $4,802,242 |
| Real Estate (35,000-60,000 sq/ft) | N/A | N/A | $0 | $2,800,000 |
| Raze & Rebuild/New Construction | N/A | N/A | $1,250,000 | $3,000,000 |
| Plan Costs | N/A | N/A | $0 | $300,000 |
| Government Required Off Site Improvements | N/A | N/A | $0 | $350,000 |
| TOTAL INITIAL INVESTMENT (WITH ADDED COSTS FOR NEW CONSTRUCTION, A NEW CONSTRUCTION REBRAND OR A RAZE AND REBUILD) | N/A | N/A | $1,786,065 | $7,602,242 |
Requirements
- Liquid Cash Requirement: $800,000 – $1,200,000
Ongoing Fees
Royalty: 2% – 14% of Gross Sales
Marketing Fee: 5.5% of Gross Sales
The royalty fee for AMPM is a little higher in average compared with the 6.8% Automotive industry as a whole, and the marketing fee for AMPM is also comparably higher compared to the 3% of gross sales in the whole industry.
2021 AMPM Median Franchise Sales: $1,510,457
| Initial investment (midpoint) | %Profit margin of median franchise sales | Estimated Profits | Time to recoup investments |
|---|---|---|---|
| $4,694,153 | 10% | $151,046 | 32.5 years |
| 15% | $226,569 | 21.5 years | |
| 20% | $302,091 | 16.5 years |
Based on the median sales provided by ampm’s franchise locations, at an average of a 13.94% profit margin for the whole Automobile industry, it will take around 25 years to recoup your investment. This is longer than other franchise opportunities.
This is just an estimated sale based on the franchisor’s income statement and can vary greatly depending on the length that the particular franchise location has been open and how well the business is run.
Is the AMPM Franchise Profit Worth the Franchise Cost?
As seen in the sales figures above, it takes an extremely long time to recoup your investment if you own one singular ampm. The best-case scenario would be based on 2021 sales figures, and a 20% profit margin would recoup your investment in 16.5 years.
This exemplifies the opportunity cost of investing your money in this franchise. The median profit margin of ampm is 13.94%, so based on 2021 ampm sales it would take 25 years to recoup your investment. Hence, it seems that if you do not have the confidence to keep the single ampm open for at least 20 years without selling it, it might be risky to open one, for its inability to recover the initial investment.
Furthermore, based on the estimation above, with the 14.94% profit margin, and the profit estimation in 2021, if you could open the single ampm for at least 25 years and plan to sell it, the initial investment might be able to recover.
AMPM Resale Opportunities:
From the existing markets data based on the Bizbuysell, the resale price of an existing ampm ARCO business is around $4,500,000, which is very close to the midpoint initial investments. Hence, after owning an ampm, if you decided to sell it, in some cases, it is possible for you to recover your initial investments without holding the APMP for around 20 years in our estimation above.
How Many AMPM Units Have Opened and Closed?
The graph below, from FranchiseTimes, shows the total sales and units of ampm.
Over the last 4 years, the number of units has increased except in the year 2019, which may have been impacted by COVID-19. Additionally, sales are also steadily increasing. The relatively steady increase in both the sales and the units shows the relatively profitable nature of the ampm franchises.
Conclusion
From the discussion above, it seems it is better to buy an existing gas station instead of building a new one if you want to find an opportunity in the Automobile industry. The prospects for growth and success within the industry and the ampm brand itself are extensive, and some markets continue to be available as they move forward in growing their presence across the country.
However, investing in a new AMPM and ARCO would cost a great deal of money and it could take an extremely long time to recover it. But there are some opportunities when you could spend around $1,000,000 to invest in an existing ampm, so, in some cases, it is better to buy an existing one. The investments are far less than building a new one.
We strongly recommend you speak to at least 5 AMPM franchisees to understand the financials better (see questions to ask).
If you want to discover more franchise opportunities, visit our Vetted Biz website and contact us!
