How to nail negotiations with major oil companies
After deciding to open a new gas station, you’ll need to find a fuel supplier. The major oil companies are open to speaking to gas station owners to negotiate branding and oil contracts.
But they expect you to be prepared.
What do you need to know before approaching a major oil brand?
Whether you’re new to the fuel industry, adding to your portfolio of gas stations, or rebranding an existing location, the major oil brands expect you to have done your homework.
Here are some common questions to prepare yourself for:
- What’s your business background?
You’re likely to be asked about your business acumen and experience.
Don’t be put off if you’re new to the industry. Shell’s website suggests that they focus more on your capabilities than your industry experience:
“Talk about your capabilities in terms of experience. Be prepared to share your relevant successes. Don’t discount the concept of working your way in. Many of our success stories are about easing your way into situations where you can demonstrate capabilities.”
- What’s your financial position?
When applying to become a dealer with a particular banner, there are personal financial requirements. You’ll need to be prepared to share information and answer questions on your own financial stability, not just your business finance plans.
- What’s your value proposition?
Can you demonstrate why customers will choose your services over others?
To answer this effectively, you need an understanding of demand within your trade area and how it’s currently served by your competition.
Preparing data on your trade area demographics, the amount of traffic that passes your location, and your competitors’ strengths and weaknesses will show the majors that you’ve done your research.
They need to be sure that there’s enough demand to warrant a new gas station at your chosen location, or that the service you plan to offer is competitive enough to lure customers away from existing gas stations.
- Who are your competitors?
It’s important to have an in-depth knowledge of your local competition. Find out who your closest competitors are, what brands they fly, and what volumes they’re achieving.
If your site is located in the same trade area as another branded fuel retail outlet, you may need to project the impact that your new site could have on their fuel volumes and how that could impact the major’s overall brand effectiveness.
- What fuel volumes do you expect to turnover?
To facilitate their negotiations with you and offer you the right deal, brands will want to know how much gas and diesel you expect to sell.
Traffic count data could help you to estimate these volumes, but a full gas station feasibility study can reliably project volumes for any location, based on different site attributes.
- Are you business ready?
Some of the major brands have strict criteria that sites have to meet in order to fly their flag. Phillips 66 have a number of published requirements including: free public restrooms, LED under canopy lighting and at least three gasoline grades. If you’re approaching a company with mandatory requirements, ensure that you know what they are, and that you’re able to fulfil them.
Are the number of pumps and the number of parking spaces sufficient for the demand you’ve projected? Share the plans for your site and explain why you’ve made the decisions you have. Demonstrating an understanding of how each of your site attributes affects your fuel volumes will prove that you know the industry well and can make informed decisions for your business.
- Why do you want to work with us?
You’ll need to have done some research about the brand you’re approaching.
Understand how the brand is perceived by the public and what sort of loyalty and reward schemes they offer. Then think about why this particular brand would work best within your specific trade area. Find out about the brands you’re approaching and find one who’s values align with your own. Read “Choosing the right fuel retail brand to fly” for more advice on finding the right brand for you.
Gathering the right information to help you prepare
There’s information available from different sources to help with your preparations.
- You can assess traffic data to understand the amount of traffic passing your site and which intersections would be the best for promotions and signage
- Census information is available to help you understand the characteristics of people within your local area which might help you with demand profiling
- Competitor data can be collated by visiting their sites, compiling their strengths and weaknesses, and spot-checking volume of customers on their forecourt
Gathering the right information can be complicated and time consuming and competitor information is particularly difficult to come by.
But there’s one source that can deliver all the data you need, alongside reliable fuel projections and actionable gas station insights.
A gas station feasibility study, like Kalibrate’s Single Site Analysis, can provide you with all the information you need before approaching a major oil company.
Kalibrate’s Single Site Analysis will provide you with:
- Projected fuel volumes
- Trade area analysis
- A complete competitor analysis
- Cannibalization rates for other branded sites
- Benchmarking against the 7 Elements for Fuel and Convenience Retail Success
- Actionable data that you can use to negotiate with the major oil companies
Kalibrate’s global team support fuel and convenience retailers, supermarkets, and oil companies with market intelligence, micro-local data, and precision pricing and planning tools. The reports are viewed favorably by the major oil companies.
Single Site Analysis can drive your decision making, help facilitate negotiations with major brands, and maximize your gas stations potential.
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