Fuel franchising continues to be resilient

In the current economy, only a small number of industries can claim to be recession proof. The fuel retail sector has proven to be just that; showing healthy profits in times of slow growth cycles.

Fuel retail is a highly specialised sector, with operating margins that are affected by a multitude of factors such as oil prices, labour costs, exchange rates and regulations, to mention a few.

Service stations in South Africa have a combined annual turnover in excess of R200 billion. The country remains the biggest consumer of fuel on the continent, claiming more than 20% of the market share.

Satellite sectors create multi-channels of employment that generate economic opportunities for approximately 90 000 people locally.

There are roughly 4 600 service stations in the country, averaging 300 000 litres on a monthly basis.

Setup costs for a service station property can range from between R10 million for an average site to R100 million for a doubled-sided highway site.

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The funds for a new service station operation payable to the oil company can range from R2,5 to R15 million depending on the projected volumes.

The purchase price of an existing service station is based on profitability and normally ranges from R2,5 to R35 million.

The average working capital required for stock and operational expenses can vary between R1,2 to R1,5 million.

As oil prices hover around $50 per barrel, fuel demand in South Africa will remain stable. With the industry contributing more than 6% to South Africa’s gross domestic product (GDP), selling approximately 27 billion litres of petroleum products through retail and commercial activities and spending more than R70 million on corporate social investment (CSI) initiatives annually, one can see the significant role petroleum still plays in South Africa’s emerging economy.

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