BP franchisees say BP pricing policy allows little room for profit at discount fuel stations.
Four BP West Coast Products LLC franchisees, including owners of BP and Arco gas stations and Ampm mini-marts, have filed a suit against BP for its pricing policy.
BP provides fuel for a number of discount branded stations, but these brand owners are finding it difficult to make a profit selling BP fuel at a price lower than the industry giants.
According to a report by Law 360 Online, BP franchisees testified that BP’s pricing policy leads to the inability to make substantial profits when selling gasoline at a discounted price. One franchisee owner, Thomas Kim who owns an Arco station in Pomona, Calif., testified that while attempting to be price-competitive with other discount stations, he was pushed to profit margins that were nearly “flat or negative.”
The plaintiffs involved in the suit were four current and former owners of Atlantic-Richfield Co.-branded stations. They claim BP is sabotaging them by requiring them to purchase more expensive fuel than that which is sold to the industry giants. Franchisee owners allege that they are faced with an impossible situation due to BP’s fuel prices. Owners must decide between raising prices and being unable to compete with other discount brands, or to maintain lower prices, risking negative profits.
BP representatives have stated that franchisees should maintain competitive prices, thereby bringing in more business, and thereby making up for the small profit margin. BP has explained that the company provides gasoline at a price at which dealers can effectively sell gasoline, and it would not benefit BP to overcharge for fuel.
The discount station owners have claimed that customers have opted to purchase the less expensive unbranded gasoline that BP is allegedly selling to their competitors, rather than purchasing from the discount stations. However, BP has provided evidence that the franchisees have sold above average volumes of gas each year and that they earn a higher-than-average gross profit as well.
A claim has also been made that BP has defrauded the franchisee owners by not disclosing known defects in point-of-sale and inventory control software before they signed contracts requiring them to use the faulty software, reported Law 360 Online.
