Finweek English Edition - - COVER STORY -

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


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