Awash In Profits, Exxon Extracting Every Penny From Its Franchisees
Every time Sohaila Rezazadeh rings up a sale at her Exxon station on Chain
Bridge Road in Oakton, her cash register sends the information to Exxon
Mobil's central computers. If she raises the price of gasoline a couple of
pennies, chances are that Exxon will raise the wholesale price she pays by
the same amount.
Through a password-protected Web ****tal, Exxon notifies Rezazadeh of
wholesale price changes daily. That way the oil giant, which is earning
about $3.3 billion a month, fine-tunes the pump prices at the franchise
Rezazadeh has owned for 12 years.
Now, however, Rezazadeh says she cannot stay in business. Credit-card fees
are eating her profit margins. Exxon, which owns the station land, last
week
handed Rezazadeh a new lease raising her rent about 30 percent over the
next
three years. She stuck a copy on the window of her station to show
customers
who are angry about soaring pump prices. Rezazadeh has told Exxon that she
cannot make money with the rent that high. Her territory manager's reply,
she said, was simple: When you go, leave us the keys.
Rezazadeh, who fled to the United States from Iran in 1979, is part of the
long chain that links motorists with the big oil companies. Major
integrated
U.S. oil companies -- which produce crude oil, own refineries and sell
gasoline -- have been reaping billions of dollars in profit from high oil
prices over the past two years, but they are still working to extract
every
penny they can from the marketing end of the business. Exxon Mobil doesn't
break out its earnings from marketing alone, but its 2007 profits in
worldwide refining and marketing -- known as the downstream part of the
oil
business -- reached $9.6 billion, 43 percent of that coming from the
United
States.
Although Exxon owns and operates few stations anymore -- less than 10
percent of the 12,000 Exxon outlets in the United States -- it uses
franchise agreements to maintain tight control over stations that bear its
brand. The company dictates everything from the number of pumps to hygiene
practices to the placement of food on convenience store shelves. "They
monitor everything," Rezazadeh said.
Exxon says it does all this to maintain uniform quality, while recognizing
dealer needs. "We recognize . . . that we are in a difficult time with the
run-up in crude oil prices," said Ben Soraci, director of U.S. retail
sales
for Exxon. "Retailers are under a lot of pressure, and they are on the
front
lines every day with the motorist, who is also feeling a lot of pressure."
Ultimately, Soraci said, "it's in our interest to see them succeed. It's
not
in our interest to see them hand us the keys."
But some Exxon dealers say the company is trying to squeeze too much out
of
them.
Like Rezazadeh, Scott Burnham was struggling to cope with low margins and
rising rents. On May 9, he closed his station on scenic Knickerbocker Road
in Closter, N.J., and abandoned it to Exxon. In March, Exxon had said it
would raise his rent by a third over two years. Burnham tried to line up
buyers for the franchise, which he purchased for $475,000 just two years
ago. But one backed out, saying that the station would lose money no
matter
how much gasoline it sold.
"Why is the government giving Exxon subsidies and tax breaks when they're
making billions of dollars and when they squeeze every dime they can out
of
every dealer who made that profit for them?" Burnham said.
Soraci said rent increases reflect rising real estate values. "We have
excellent real estate out there that is superior to our competition," he
said, which allows the dealers to "compete more effectively."
Even some of Exxon's successful and loyal dealers complain. Jerry Daggle
owns five Exxon stations in Northern Virginia, and even though they have
different competitive conditions and prices, "Exxon magically lets me make
about 8 cents a gallon" at each one, he said.
CONTINUED
http://www.wa****ngtonpost.com/wp-dyn/content/article/2008/05/24/AR2008052401961_2.html?nav=rss_email/components
When gas went to $1.19 a gallon ****ton released the strategic reserves
because our taxes bought it. Bush though is for a handful of CEOs making
all the money in America and has violated the law.
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