A Glossary: Gas Station Industry Terms

Welcome to our glossary

Amortization

Amortization is when an oil company offers up front cash to induce an independent dealer to brand with that oil company.

Normally, as long as the dealer continues to purchase product from that company, the money does not have to be paid back. It is amortized over the term of the contract, which is typically a ten-year agreement.

AUTO

AUTO = Automotive United Trades Publication

Backroom

Backroom is a term used for the service bays where cars are repaired.

Branded Fuel

Retail fuel sold under a major brand name (i.e. BP, Chevron, Shell)

C-Store - Convenience Store

According to the National Association of Convenience Stores (NACS), the definition of a convenience store is as follows:

1. While building size may vary significantly, typically the size will be less than 5,000 ft
   
   
2. Have off-street parking and/or convenient pedestrian access
   
   
3. Extended hours of operation with many open 24 hours, seven days a week
   
   
4. Stock at least 500 "Stock Keeping Units" (SKU s)
   
   
5. Product mix includes grocery type items and also includes items from the following groups: beverages, snacks (including confectionery) and tobacco.

Canopy

The structure covering the pump islands.

Company Controlled

The dealer owns the business. A major or regional oil company or a distributor owns the land and building (i.e. gas station) and leases it to a dealer. The dealer operates the location and pays rent to the owner; as opposed to an open dealer that owns the property.

This arrangement gives the oil company or distributor a guaranteed supply outlet for their petroleum products, pursuant to a supply contract. A typical lessee dealer operates 1-2 stores and does not wholesale gasoline. Also known as "Company Controlled", "Contractor-Operated" and "Direct Serve" dealers.

Company-Operated

A "Salary Operation", where a major or regional oil company owns the building/facility and business. The company pays a salary to the managers/proprietors and usually produces and supplies petroleum products to the location. Also known as company-operated and direct operating retail.

Contractor Operated

 The dealer owns the business. A major or regional oil company or a distributor owns the land and building (i.e. gas station) and leases it to a dealer. The dealer operates the location and pays rent to the owner (as opposed to an open dealer that owns the property).

This arrangement gives the oil company or distributor a guaranteed supply outlet for their petroleum products, pursuant to a supply contract. A typical lessee dealer operates 1-2 stores and does not wholesale gasoline. Also known as company controlled, contractor-operated, and direct serve dealer.

CRIND (C.R.I.N.D.)

CRIND = Card Readers in Dispenser. Originally a Gilbaco (manufacturer) term, now used generically.

DTW

"DTW" = Dealer Tank Wagon, or the wholesale price of gasoline delivered to a retail outlet (transportation costs are included)

Direct Operating Retail

"Direct Operating Retail" is where a major or regional oil company owns the building/facility and business. The company pays a salary to the managers/proprietors and usually produces and supplies petroleum products to the location. Also known as company-operated and direct operating retail

Direct Serve Dealer

In a "Direct Serve Dealer" operation the dealer owns the business. A major or regional oil company or a distributor owns the land and building (i.e. gas station) and leases it to a dealer. The dealer operates the location and pays rent to the owner, as opposed to an open dealer that owns the property.

This arrangement gives the oil company or distributor a guaranteed supply outlet for their petroleum products, pursuant to a supply contract. A typical lessee dealer operates 1-2 stores and does not wholesale gasoline. Also known as "Company Controlled", "Contractor-Operated" and "Direct Serve" dealers.

Distributor

A distributor is a local company that owns or supplies properties with petroleum products obtained from local supply points (wholesaler); or by a third party, non oil company(i.e. convenience store chain such as Southland or Quik Trip) that sells gasoline, does not produce product, and usually buys at the branded or unbranded rack or or is supplied indirectly.  May or may not own and operate retail outlets.  Also known as a distributor or marketer.

Downstream Operations

Downstream Operations are concerned with oil refining, transportation and gasoline marketing.

EPOS

Electronic Point Of Sale. The point of sale often refers to the hardware and software used for checkouts - the equivalent of an electronic cash register.

Hypermart

A "Hypermart" is a large retail or wholesale outlet selling durable goods (e.g. appliances, hardware and electronics), soft goods (i.e. clothing) and groceries. Retail examples include Fred Meyer and Wal-Mart Supercenters, while Costco is an example of a wholesale hypermart.

Independent Marketer

An Independent Marketer is a petroleum retailer not affiliated with a major brand.

Independent Refiner

An independent petroleum refining company is one that is not a major brand.

Islands

"Islands" or "Pump Islands" refer to the raised concrete platforms the gas pumps sit atop, typically having one or two "MPDs".

"MPDs" are "Multiple (petroleum) Product Dispensers", most having six hoses and dispensing all three grades of fuel

Jobber/Wholesaler

A "Jobber/Wholesaler" is a local company that:

• Owns or supplies properties with petroleum products obtained from local supply points (wholesalers) or by a third party, non oil company (i.e. a convenience store chain such as Southland or Quik Trip).
• Sells gasoline.
• Does not produce a product.
• Usually buys at the branded or unbranded "rack" price (see "rack price" above) or is supplied indirectly.
• May or may not own and operate retail outlets.
• Also known as a distributor or marketer.

Lessee/Lease Dealer

Company Controlled: The dealer owns the business. A major or regional oil company or a distributor owns the land and building (i.e. gas station) and leases it to a dealer. The dealer operates the location and pays rent to the owner (as opposed to an open dealer that owns the property).

This arrangement gives the oil company or distributor a guaranteed supply outlet for their petroleum products, pursuant to a supply contract. A typical lessee dealer operates 1-2 stores and does not wholesale gasoline. Also known as company controlled, contractor-operated, and direct serve dealer.

Marketer

A marketer is any company or person that retails (sells) motor fuels. May or may not sell branded gasoline.

Majors

The "Majors" are large multinational oil companies involved in all aspects of oil production, including both "upstream" and "downstream" activities.

The definitations for "Upstream" and "downstream" are included here as "Upstream Operations" and "Downstrean Operations" - please refer to these for clarification.

"MPDs" or Multiple Product Dispensers

Many people believe MPDs to be individual pumps. In reality, most MPDs have six hoses and dispense all three grades of fuel.

O P E C

OPEC is the "Organization of Petroleum Exporting Countries", oil producing and exporting countries that have organized for the purpose of negotiating with oil companies on matters of oil production, prices, and future concession rights. Current members are Algeria, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela.

Open Dealer

An "Open Dealer" is an individual:

• who may own several properties that retail gasoline products
• owns and operates the building/facility/property - as opposed to a lessee dealer who does not own the property.
• The typical open dealer operates between 1 and 10 locations.
• A major or regional oil company, or a large local wholesaler supplies the facility directly.

Open dealers can evolve into distributors if they achieve a large enough volume.

POS System

"POS" = Point Of Sale, and Point of sale computer systems typically include bar code scanners, automated price look-up, and inventory tracking components

Phase I Environmental Review

A Phase I Environmental Review typically involves the review of previous uses of the subject property and of other properties in the immediate vicinity, a site inspection and report on findings by a qualified engineering/environmental firm. This report includes recommendations for further testing, if deemed necessary.

Phase II Environmental Review

A Phase II Environmental Review is required if the Phase I review uncovers potential environmental problems. Among others, procedures typically included at this stage are subsurface soil and water sample tests.

PMPA

"PMPA" is the Petroleum Marketing Practices Act . Federal law offers certain protections, somewhat similar to franchise protection laws. Keep in mind that some oil companies are technically franchisers, for example, Arco AM/PM, Texaco Star mart and Jackpot Convenience Stores. Franchisers must comply with state and federal franchise laws as well.

Pooled Margin

A "Pooled Margin" is a Weighted average cents-per-gallon from all fuel grades, usually with the exception of diesel.

Rack Price

"Rack Price" is the price at which the majors and independent refineries sell branded or unbranded gasoline to jobber/wholesalers. It is related to the commodity spot price, but adjusted for transportation, overhead, and profit.

Retail Price

Retail price is the petroleum price set by a marketer selling to the general public.

Salary Operation

A Salary Operation is where a major or regional oil company owns the building/facility and business. The company pays a salary to the managers/proprietors and usually produces and supplies petroleum products to the location. Also known as "company-operated" and "direct operating" retail.

Service Bays

A "Service Bay" is where auto repair is done at a service station.

Shrink

"Shrink" refers to inventory/merchandise loss resulting from theft, spoilage, short deliveries, etc.

Spot Price

A "Spot Price" is a petroleum price on the commodity market. "Rack Price" is based on the spot price.

Starting Gate

"Starting Gate" is a modern design of positioning pump islands so that cars are facing the c-store while refueling.

Stock Keeping Unit or "SKU"

SKUs are numbers given to each item (by category and brand) stocked in a retail outlet for inventory and tracking purposes.

Store Margin

"Store Margin" is the profit margin in convenience stores, typically ranging from 30% - 35%.

Supply Contract

The Supply Contract is the agreement a dealer makes with a supplier to secure fuel.

TBA

"TBA" = Tires, Batteries and Accessories.

Terminal

A "Terminal" is a physical storage facility for petroleum products, typically supplied through a pipeline from a refinery, where jobbers/wholesalers purchase and obtain gasoline at the "Rack Price".

"Rack Price" is the rate at which the majors and independent refineries sell branded or unbranded gasoline to jobber/wholesalers.

ThroughPut

This term refers to the sale of gasoline or other petroleum products, and is usually measured in gallons.

Traditional Operator

A "Traditional Operator" has roots in convenience retailing rather than petroleum products. Gasoline operations were either de-emphasized or non-existent when the company was founded.

Unbranded Fuel

"Unbranded Fuel" is retail fuel not sold under a major brand name. Typically sold by an independent marketer under the marketers private label or with no name attached.

Underlying Ground Lease

While the 3 year oil company is typically treated as a long term lease, because of the provisions in the PMPA, if the oil company does not own the land, a buyer must look to who owns the land and what the terms of the underlying ground lease are.

The oil company may have only 5 years left on their land and therefore, have no obligation to the dealer beyond that 5 years.

Upstream Operations

"Upstream" operations are concerned with oil exploration and production.

UST

"UST" = Underground Storage Tanks. The term is frequently used in environmental protection issues.

Wholesale Sales

"Wholesale Sales" refers to sales of refined products to purchasers who are other than ultimate consumers, i.e. sales for resale. The Energy Information Administration blends rack, bulk, and DTW price to create wholesale price.