Top 5 Reasons Why Not to Buy Arco Franchise

ARCO is a well-recognized brand having more than 925 Gas stations and AmPm stores across five western states. The Tesoro Corporation and Marathon Petroleum currently own ARCO (Atlantic Richfield Company) after BP sold its rights in 2012 and 2018.

With over 25 years of training solutions, advanced systems, and operational experiences, it sets the standard for leadership, brand recognition, and quality within many ancillary services apart from energy business-like convenience stores, E-payment system, cogeneration of steam and electricity.

Over 100,000 fuel station/convenience stores in the US, which cumulatively have $400 billion sales each year. Moreover, many find gas stations and their AMPM stores franchise as the most lucrative business to start with, but this is a half-truth.

Running a gas station franchise is not easy; they have extended operational hours, Often a target of criminal elements, the threat of unexpected losses, changes in govt policy, and fluctuating fuel prices.

ACRO franchise has four variants to offer to look out for, whether you are new to this industry or just a beginner.

Source: Official website

But The convenience store industry isn’t what it used to be, profitable or not; Arco franchisees are struggling with heavy investment costs, internal challenges, an allegation for breaching franchise agreements, and a few more. This franchise will take considerable time to yield profit, but that is one more reason to consider it before buying the Arco franchise.

Reasons Why Not To Buy The Arco Franchise

With many advantages of buying the Arco franchise, it has certain drawbacks that you must consider before dealing. We have researched ARCO, its franchises, its market trends, and company policies to determine how profitable it could be for you. So, let’s look at how worth it is to buy the Arco franchise.

#1 Initial Franchise Investment Cost is too heavy As Compare to Profits

The cost of starting up a franchise is often underestimated. Many new franchisees face significant difficulties raising capital, making a profit, paying taxes, or dealing with other administrative tasks.

Arco’s initial franchise investment cost is as follows:

• Franchise Fee- $ 40,000
• Initial Investment- $500,000
• Minimum Cash required- $750,000
• Net Worth- $3,000,000

For the Ampm franchise, you have to pay a fee of up to $70,000. The total initial investment would range from $430,698 – $10,073,895.

But the profit you earn while running a fuel station and convenience store is not leveraging in the first few years. For instance, if you set up the unit in the West, you will earn around $60,000 annually. For Midwest owners, annual profit is somewhere $61,000. A gas station in the South enjoys a bit and could reach $66,000 on average per year. With such ROI making huge profits would be burdensome for franchisees.

#2 Lawsuit Charges Against Arco is Bad for its Reputation

ARCO is facing many allegations and charges from its franchisees, who complain that ARCO FDD has misled them and caused enormous losses for them. However, claims like unfair enrichment, deceit, Fraud in the agreement are alarming and certainly deteriorating Arco’s repute.

#3 Loopholes in the Selection of Product Lines

Arco experienced a significant flaw in the safety equipment’s CE marking prototype, enabling un-secure goods to enter the market. Testing results of their merchandise revealed that the quality of products was compromised. Hence Arco experienced a lack of proper research by other suppliers and distributors in the global production networks endangering the lives of workers in the UK and creating a situation that could put the entire security sector into disrepute.

#4 Retails Store Have to Face Pandemic Effects

The majority of Arco’s AMPM business comes from serving retail consumers. The pandemic period has been a particularly challenging period for the business. A significant portion of its customer base has been lost to online stores by dealing with large orders. Also, many now avoid getting out of their car while filling fuel as a concern to safety from infection. While the AMPM stores at gas stations were not performing well in the last two years, it was challenging to get the business again. As a new franchisee bringing the customer back is going to be arduous.

#5 Training Session –Is Long Learning Curve

Arco claims to provide the most comprehensive training in the franchise industry. It trains franchises in every business category required to assist them in becoming developed and successful franchise owners. Everything from inventory control and food safety to customer service and gasoline marketing is covered in the program. But this training session at the same time is also time exhaustive. Training session prolongs the starting up of the new location, which also frustrates the franchise owner.

To become an Arco franchisee is a significant commitment, but you also enjoy the benefits that include:

• You get instant business recognition when you buy the Arco franchise.
• You are associated with a stable and robust world corporate leader.
• Arco has over 25 years of industry recognition and achievement.
• You get a performance-driven and customer-focused business model.

Conclusion

The leading gas and convenience store franchise Arco is growing successfully in several aspects.

Still, the brand has suffered the major drawback that declined its brand image. Hence, consider a few significant disadvantages, legal issues, and loopholes in safety equipment before buying the Arco franchise. As a franchise, Arco requires an initial investment of $0.5M – $1.5M, so, understandably, not everyone can afford it. But despite these costs, arco fees are one of the lowest in the industry at 5% of gross sales. You also have to consider other costs that affect your bottom-line: rent, utilities, IT, inventory, payroll, and other expenses.

Like all investments, buying a franchise also has many risks involved. With the help of the above points, we now know a complete truth, to make the right decision as success is an outcome of making the right business decisions, including choosing the right franchise. There has been a paradigm shift recently with the ways businesses are done. The established name of the past may not have a great future in the industry.

Sources

https://casetext.com/case/aurigemma-v-arco-petroleum-products-co-2?__cf_chl_jschl_tk__=pmd_VxCKdMwE56Erg5JiGDTMynRM7vBDqk0ZW6mieI0DDFI-1633794596-0-gqNtZGzNAmWjcnBszQd9

https://web.archive.org/web/19990418053427/http://www.arco.com/

https://www.eposnow.com/us/resources/how-much-do-gas-station-owners-make/