Johannesburg - The feud between the Fuel Retailers Association (FRA) and the Chevron Branded Marketers over the payment of goodwill and “exorbitant” initial or renewal fees charged for service stations has taken another turn, with FRA threatening legal action if its members are evicted from retail sites.
According to FRA, retailers who could be affected are those contracted with two Branded Marketers in KwaZulu-Natal and one in the Eastern Cape.
“There are other Branded Marketers across the country and the likelihood is that if these three are allowed to do this, the rest will follow suit,” FRA said.
Bought right
A Caltex Branded Marketer is an independent investment partner with Chevron and has bought the right to act as wholesalers of fuel on Chevron’s behalf. It is responsible for all Caltex petrol stations in its territory and owns the sites and leases them to retailer operators.
The dispute between the two burst into the open earlier this year when a number of retailers accused Branded Marketers of forcing them to pay exorbitant “renewal fees”, or face the prospect of leaving their businesses empty-handed when their current contracts come to an end.
FRA has insisted that the retailers were entitled to the payment of goodwill, which is the business value for which the retailers pay millions of rands as a purchase price excluding assets.
The association, Chevron South Africa and the Branded Marketers have been engaged in negotiations to end the stand-off. But FRA chief executive Reggie Sibiya said the talks had yielded little.
He said the association would approach courts or the National Consumer Commission if any of its members received a termination and/or eviction letter without the concerns at hand having been properly addressed.
He said the body, which represents about 2 500 retailers nationally, would use the Consumer Protection Act (CPA) and any other available avenue to fight evictions.
‘Double dipping’
He accused the Branded Marketers of “double dipping” as they are set to charge exorbitant figures when signing new contracts with retailers and stood the chance of realising goodwill when they “one day” decide to sell these businesses to another player in the market.
“It is common cause that the value of the business accrues to the retailer, while intellectual property accrues to the Chevron Branded Marketer.
“It is also common cause that the CPA provides for initial fees when entering a new agreement and these fees currently range from R20 000 to R75 000 and they are justified as the administrative cost of entering into a new agreement. Chevron charges R50 000 for the initial franchise fee and there are no renewal fees after that,” Sibiya said.
“Meanwhile Branded Marketers are asking millions of rands for initial fees. With regards to getting returns on their investment on assets, the current margin model provides for such returns, which the Branded Marketers fully recover from the fuel retail margin,” he said.
Sibiya said, despite the discussions between the parties, FRA’s questions remained unanswered.
He said it was unclear whether the Branded Marketers wanted a monthly fee structure, an initial fee for new agreements or the renewal of existing agreements or an amount for goodwill. “What are you trying to fix? Be open and transparent,” he said.
Chevron has previously argued that performance and the advancement of transformation will be important in the negotiation of contracts with fuel retailers.
But Sibiya said the transformation argument was a smokescreen. “There are other underlying drivers, which with time will come to the fore. Transformation is an imperative and should be addressed and dealt with. It should, however, not be misused as leverage in a financial negotiation as it seems to be the case right now.”
Contacted for comment, Caltex Eastern Cape Marketer, which is the largest Chevron-Caltex franchiser in Africa with almost 100 sites, on Friday referred questions to Chevron South Africa.
A representative of Chevron South Africa said the negotiations between FRA and the Branded Marketers were ongoing and said the company would not comment further.
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