upgrading of convenience offerings at fuel service stations has attracted plenty of customers. Most oil companies partnered with some of SA’s biggest retailers (such as Woolies, Pick n Pay, Freshstop, Spar and Mugg & Bean) creating a one-stop solution to customers when refuelling. And it will no doubt be the same when Burger King opens on the inside of convenience stores. Sasol is sure to benefit from increased fuel sales. When deliberating options in the franchising sector, fuel retailing may not be top of mind, but if you’re a high net worth individual (HNWI) – the capital layout is hefty – you’re set up to benefit from a cashand transactional-rich environment and profit from non-interest revenue. SO, HOW MUCH IS IT GOING TO SET YOU BACK IN CAPITAL LAYOUT? James Noble, sector specialist of the fuel industry at Absa Business Banking, says that the benchmark service station in SA pumps about 300 000 litres of fuel a month. The average convenience store turnover is about R350 000. Noble says that the selling price of a site, such as this, will be on average R4.5m excluding stock. The fuel retailer must make provision for at least another R1m working capital to stock the tanks and convenience store.
Absa currently banks a substantial share of the fuel retail industry, and Noble says it is very important to first understand the risks and get a feel for the opportunities out there. “Some of these service stations turnover in excess of R15m per month but one must keep in mind that the margins are very slim.”
But he says that over the last three years the fuel retailer’s margin increased by nearly 40%, helping them to survive through tough economic times. However, there is still a twoyear lag when it comes to the calculation of the margin (currently R99.2c per litre) meaning that the retailer must subsidise this out of their profits. The two biggest contributors to this are the high electricity prices as well as the cost of merchant services when motorists use their credit cards to pay for fuel. WHAT DOES ABSA LOOK FOR IN A FUEL FRANCHISE? “There are a number of areas that we look at when considering f inance for a f uel retailer,” explains Noble. “Most i mportant is to ensure that the business is not over- g e a r e d a nd can afford to repay its loan as well as a decent salary to the fuel SOME SERVICE STATIONS TURN OVER IN EXCESS OF