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South Africans consume more fuel than any other country in Africa, making owning a petrol station in this country a lucrative option. Despite this, entering this regulated industry comes with some red tape and can become tricky without proper guidance or an idea of where to go and how to start. Read this article for some insights and tips that will help get you on the right track.
First things first: to purchase a CORO (Company Owned Retailer Operated) petrol station, you need to have South African citizenship, a clear criminal record and a good credit score. These three things are some important prerequisites that can open the door to a petroleum company trusting you to generate revenue in your new venture under their brand.
With that out of the way, it’s important to understand the options you have when it comes to owning your own petrol station. You may choose to privately own your own petrol station, what’s often referred to as DODO (Dealer Owned Dealer Operated) or own a franchise often referred to as CORO. These two petrol station ownership types come with different levels of risk and other factors that you will need to understand before making your decision.
The upfront cost of purchasing a petrol station varies depending on a number of things, such as whether you are looking to go the DODO route, CORO route or NTI (New To Industry). That being said, in order to even be considered by the oil company, you would generally need to show some level of commitment to prove to the oil company that you will put some skin in the game. While there is no prescriptive amount, most oil companies prefer for applicants to have at least 20% own unencumbered contribution. This does come in handy as you will likely need a loan from the bank to help you cover the balance of the selling price as well as working capital.
It goes without saying, it is risky for someone to own a business but not understand every operation that takes place within it; such negligence can lead to a number of things going wrong.
Owning a petrol station and entering the highly-regulated energy industry means that you will be dealing with a lot of legislations and numbers. It’s important, then, that potential dealers have a basic understanding of numbers to assess business viability, financial performance, cashflows, margins, shrinkages etc. When capturing the information you will most likely be using Excel spreadsheets or accounting systems to log these numbers so it is also important that you are computer literate in order to mitigate risk.
If you want to be a dealer but the numbers, accounting and stock auditing are not your strong suit, partner with PetroCONNECT. We have a wide range of Back Office Services designed to make your day-to-day business operations that much easier.
There are a number of things a new entrant will need to consider before owning a petrol station. Some of the factors to consider may include; historical and current business performance of this business over a period of time, potential changes to roads in the area, a scan of the trading area and potential entry of new competitor sites.
In addition to these considerations, if you are considering purchasing a CORO site – Company Owned Retailer Operated, you will need to factor in the terms and conditions as well as the operational model and agreements of the oil company. Read more about important factors to look out for when choosing a site.
PetroCONNECT has strong partnerships with petroleum companies, and are uniquely placed as both fuel retail experts as well as holding a certificate of professional designation and accreditation from the EAAB (Estate Agency Affairs Board). PetroCONNECT gets the inside track on sites for sale, and can help facilitate the purchase. Keep an eye on our website to view current sites that are up for public sale so that you can start your journey toward owning a petrol station. Or better yet, complete our Readiness Programme to get exclusive access to sites for sale, before they are publicly advertised. Our Programme Alumni get first pick of sites for sale, and some fuel retail brands will only advertise their available sites via this closed group.
