Pumped to own stations

The bill originally sought to provide ExxonMobil’s 246 independent gasoline franchisees in New Jersey the right to buy their stations before they are offered to other parties. ExxonMobil, which owns the stations, last June sought to bundle and sell an unspecified number of these stations to one or more large distributors, said Sal Risalvato, executive director of Springfield-based New Jersey Gasoline, C-Store and Automotive Association, which led the opposition.

The legislation’s impact would extend to all oil marketers, affecting some 3,000 gas stations in the state, said James Benton, executive director of the New Jersey Petroleum Council, a Trenton-based trade group representing the Big Oil companies.

California and Washington also give independent gasoline dealers the first right of refusal if their oil company wants to sell a station’s real estate, Benton said. And Connecticut has a law that allows the franchisees 45 days to make a matching offer to buy their stations; the New Jersey legislation provides a 60-day window, according to testimony in a Senate hearing by state Sen. Gerald Cardinale (R-Cresskill), who co-sponsored the bill. Gov. Jon S. Corzine has not indicated whether he will sign the bill.

“It sends a terrible signal to those who engage in franchise matters,” said Benton, to whom ExxonMobil deferred all questions. “It has a precedent-setting impact. Behind us will be auto dealers, food franchises — and landlords may be forced to offer a first right of refusal to their residential tenants.”

Benton told a Senate committee hearing in February that the state “should not enter into a business contractual arrangement between franchisors and franchisees.”

“As a businessman, I could understand Exxon’s situation,” said Ebbie Ashabi, a franchisee of two ExxonMobil dealerships in Ramsey and Newfoundland, who last September brought together about a hundred fellow ExxonMobil franchisees to forge a common front, called the United Dealers of New Jersey, which Risalvato’s association represented. “ExxonMobil wanted to bundle them and sell them as a package because not all the 246 locations are high-volume locations.”

However, Ashabi felt he should have the first chance at owning his stations if ExxonMobil wants to sell, since he has invested in building his business over the years. In the nine years since he bought his Ramsey station, its sales volume has grown from 125,000 gallons a month to nearly 400,000 gallons, he said.

Ashabi also felt independent franchisees made better gasoline dealers than distributors that own dozens of stations. He said several gas stations in South Jersey closed down after ExxonMobil sold a bunch of them, along with others in Pennsylvania, to a distributor.

The new legislation, however, aims to treat big and small distributors differently. An amendment inserted in the bill exempts gasoline distributors that own 40 or fewer service stations from offering their independent franchisees the first right of refusal. Benton estimated that roughly one-third of the 3,000 gas stations in the state would be exempt if the bill becomes law.

“That is a quite a big exemption … a very uneven exemption,” Benton said.

Risalvato felt small distributors ought to be treated on par with independent franchisees, adding that many of them have 15 locations apiece. “Small distributors are struggling — they are our friends,” he said.

Next battle with Big Oil

Sal Risalvato is bracing to engage Big Oil in another fight. His association wants to re-group several independent gas dealers that might eventually own their stations to negotiate better prices from their distributors.

Currently, dealers buy their supplies from ExxonMobil at rates fixed in a so-called “zone pricing” structure, allowing them margins averaging 13.5 cents a gallon, according to Ebbie Ashabi, an ExxonMobil franchisee.

The New Jersey Gasoline, C-Store and Automotive Association wants to change that to a system where the distributors “will have to compete for our business,” Risalvato said. James Benton, of the New Jersey Petroleum Council, said he wasn’t aware of such a move, but that his association’s member companies would “consider the issue” when it is presented to them.

E-mail to shankar_p@njbiz.com