Fuel chain Caltex has revealed plans to end all franchising operations by 2020, announcing it will transition franchises back to company-owned stores after completing a review of its franchising model.
In its 2017 full year results presentation, Caltex said it intends to spend up to $120 million over the next three years on purchasing all franchises and closing its franchising model. The funds will go towards staff training, labour costs and working with franchisees to end the franchise tenure.
After a two-year review of its operating model, the fuel business says transitioning all franchises to company management will be the best course to meet the company’s retail growth objectives. The company also hopes after ending its franchising program, it will roll out new platforms more efficiently, standardise services and simplify supply arrangements.
There are currently 433 Caltex franchises in operation nationwide. Caltex has said it will be offering employment to all affected franchisee workers and offering support in transitioning the franchises.
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“Franchising has been an integral part of growing the retail business. Caltex appreciates that this is a significant decision and it will affect many of our franchisees,” Caltex said in the financial results.
The decision to move all franchises to company operations comes 15 months after a Fairfax investigation raised concerns about possible underpayment of workers across many of its franchise sites.
During 2017, Caltex made a profit of $619 million, a 1.5% increase from $610 million the previous year.
The company is also reviewing its ownership of real estate and other assets, with 417 retail service station sites currently under ownership, 288 of which are metropolitan. Caltex also owns or partly owns 18 terminals, 65 fuel depots and five major pipelines. The result of the review is expected to be handed down in second quarter of 2018.