Anderson gas-station chain sues BP after 32-store deal sours

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Anderson-based Ricker Oil Co. a year ago bought all 32 of London-based BP’s Indianapolis-area locations, a blockbuster deal that gave Ricker access to the state’s largest market and made it the biggest Indiana-based gas-station chain.

But now that deal has soured, and Ricker is suing BP in federal court over poor performance of the 19 gas stations and mini marts that operate under BP’s franchised am/pm brand.

The Oct. 22 suit claims BP is charging unjustified royalty fees while delivering no boost from its national advertising, its proprietary IT system or its bulk purchase pricing.

The family-owned company claims it is now losing “thousands of dollars per month” as a result of the deal and that problems related to the am/pm stores are “crippling Ricker’s economic stability.”

“BP has continued to hold Ricker at bay from moving forward with this lawsuit by promising to remedy these issues but, to date, BP continues to fail to do so,” the lawsuit reads.

Jay Ricker, a former gasoline tank wagon driver, and his wife, Nancy, launched Ricker Oil in 1979. In addition to its Indianapolis locations, the 700-employee company operates 29 convenience stores along the Interstate 69 corridor in northeastern Indiana, and supplies 25 independent operators. Locally, Ricker Oil this year was the title sponsor of Conner Prairie’s $2.2 million “1859 Balloon Voyage” exhibit, and offered coupons for rides at its stores.

Ricker Oil didn’t disclose terms of its deal when it bought BP’s Indianapolis locations, and they aren’t listed in the lawsuit. Both Jay Ricker and his attorney declined to answer IBJ’s questions. So did a BP spokesman.

However, in court documents, Ricker Oil complains it expected to enjoy special discounted pricing, but soon found BP’s goods cost much more than it had been paying, with far longer delivery times.

Ricker Oil also grumbles about capital expenses it considers unnecessary, such as cigarette display cases it had previously obtained for free from tobacco manufacturers, or red product shelving BP demanded be replaced with white in every store.

And Ricker alleges BP requires it to order bulk quantities of items such as condiments, regardless of a store’s size or average traffic, most of which are wasted, “thereby costing thousands of dollars per month.”

BP’s “Retalix” pricing system also hasn’t worked properly for Ricker Oil, according to the suit. Under its own legacy IT system, Ricker Oil argues, it can quickly change prices across its chain for all its products. BP’s system requires a manager to make every change manually, which “costs Ricker thousands of man hours per year and provides larger error rates.”

The company alleges that system also can’t accurately track inventory. Under a buy-one-get-one-free promotion for candy bars, for example, the suit alleges Retalix counts only one bar, leaving managers to guess whether losses are legitimate or from shoplifting.

And Ricker Oil claims Retalix regularly fails to process credit card transactions, allowing customers to drive away from the pump without paying for their gas.

Businesses operating in less competitive industries might be able to ignore such problems—or at least wait longer to work them out before filing suit. But even before the recession, gasoline stations’ margins were incredibly thin, according to the Indiana Petroleum Marketers and Convenience Store Association.

Executive Director Scott Imus said that last year his members made just 3.9 cents on every gallon of gas they sold, and that’s before the cost of credit and debit card transactions is factored in.

And because drivers are highly price-sensitive, stations wait to increase their gas charges until their competition moves en masse, even if they’re squeezed when the wholesale cost of fuel rises dramatically.

“If the market is below cost, you have to be there,” Imus said. “If not, you might as well send your employees home for the day, because nobody’s going to buy fuel from you.”

Typically, card companies charge 2.5 percent to 3.5 percent off the top line, said Kelly McClure, president of Marion-based McClure Oil Corp., which operates 35 gas stations with 375 employees in northern Indiana. That makes a huge difference when you’re mainly selling magazines, soda pop and gum, all available from nearby competing groceries or drugstores.

“The credit card companies made far more off our business than we ever thought about making off our business last year,” McClure said. “And they didn’t do anything but clear the transaction.”

Even in the face of such challenges, companies with thin profit margins can prosper—a point Wal-Mart has proven—said Richard Feinberg, a consumer sciences and retailing professor at Purdue University

Feinberg expects BP to settle, allowing Ricker Oil to put aside the legal distraction. But if the case goes to trial, Ricker will need to prove BP over-promised and under-delivered under the terms of its franchise agreement, he said.

“Any franchise agreement spells out the contributions of the franchisee and franchisor. That relationship is like a marriage. Sometimes it’s tough,” Feinberg said. “There have been a lot of suits just like this. Usually, they’re settled. Usually, the franchisor says, ‘Let’s kiss and make up and go to bed together.’”•


  • Deal Breaker
    I was involved in a deal to run gas stations with another large retailer with mall locations. We walked away rather than be gouged by the BIG bully retailer. It sounds good to get bigger, but the margins were not there, after they nickeled and dimed us..
  • Reputation is everything
    Looking at the two companies - in spite of their relative size to one another -- Ricker's image is (by all accounts) pretty solid and reputable. Their locations are clean, employees are friendly and the products they offer are reasonably priced. By contrast, BP locations are all over the place and their reputation is poor, especially when you consider this is the same "company" whose disastrous oil spill and their response was nothing short of irresponsible should tell you a lot. The fact you also have people who are experienced in franchising saying their system/strategy is flawed is a good indication that another "spill" has occurred and it's the AM-PM/Ricker's customers/company that are having to deal with it.
  • Agree with article and change coach
    I agree with the article and the change coach regarding the AMPM & Retalix issues. I have provided support to the East (EOR) and West of Rockies (WOR) sites and the issues seem to be more so in the WOR, but the EOR isn't exempt from the occasional nightmares. The system was rolled out with all kinds of known bugs, that the tried to pretend werent in existence. They have lied and cheated their AMPM customers. It is highway robbery and God will see to it that justice is done. In addition to the poor treatment of their clients. They also abused employees, making us work hours and hours for free, when we did not have the job title or responsibilities of employees that should work overtime for free. Then, when an employee uprisen took place, pre- class action lawsuits, they paid everyone overtime and reclassified the job titles and positions. They are getting away with a little less than murder.
  • Retalix Issues
    everything about retalix is true in this article.

    As a change coach (one who provides post conversion support to newly inducted franchisees), I can say that this system is nightmarish.

    In a frantic attempt to release, and assimilate, not everything was thought through, and it has been a process, to learn as issues happen.

    BP continuosly costs franchisees thousands of dollars a day, because their support line for retalix, always tells them to reboot the allied server. Any franchisee knows that this routinely shuts down the pumps.

    However, some of us, in the field, have learned actual fixes to the system, and those of us who do find better ways for the franchisee, quickly get removed from the project.

    The fact of the matter is, BP is solely in this for their profit, and franchisees are expected to take all the financial risk.

    I have been all over California, Nevada, Arizona, Oregon, and Washington, and I have watched BP purposely allow stores to open within miles of each other (cutting one stores profits for another), control pricing, for them to waste a lot of money in food spoilage, control every aspect of the business (even who can work their in extreme cases) and yet they put none of their money on the line. Better yet, they have convinced franchisees they "have to pay" or they will lose their business.

    No single franchisee can compete with the juggernaut, but hopefully enough of them will. I have seen the way BP steals, strongarms, or controls money from franchisees, and my sentiments got me removed off this project.

    anyone need any insight, feel free to contact me: retalixtrainer@gmail.com

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