Gasoline franchise owner says lower prices still bring big money

Gasoline is a dollar a gallon cheaper than last year, but there's still plenty of money to be made selling it. Just ask Harry Singh, president and chief executive of the Bolla Oil Corp., owner/operator or franchiser of 100 stations in the New York metro area, including 45 on Long Island.

A self-made, 54-year-old millionaire who immigrated from India in 1983, drove a cab for a while, then bought his first gas station in Manhattan, Singh grew himself an empire that today includes six affiliate companies and 50 upscale convenience stores at his gas stations, 30 of them branded Bolla Markets.

Singh, who lives in a $23 million mansion in Old Westbury, is a mechanic by trade, a technical school graduate and a true "Blue Collar Millionaire," whose business and home were featured recently on the CNBC TV show of the same name.

Some of the Bolla Markets feature prepared foods and fresh-baked items, as well as the standard convenience store fare.

The business also includes four car washes, including one in Garden City, and nine auto repair shops, all in Brooklyn. Singh's office is in Garden City, and he employs about 500. His companies are closely held, but his marketing director says annual revenue is $750 million.

His businesses include a fleet of 17 tankers to supply the stations and a construction company to build new stations, including installing the tanks, giving him a vertical business integration. He says his gas stations pump high volumes -- five times the national average of 1 million to 1.2 million gallons per year per station.

How do you see the business of gasoline retailing changing?

If you mean the amount of gasoline retailed, I don't foresee any changes happening in a very short period of time. If you're talking about alternative energy -- electric cars, liquid-natural-gas cars, other forms of energy -- I believe gasoline is here to stay for a long period of time. In the next five to 10 years I do not see major changes, but I do see change whereby the number of service stations will continue to decline.

Why?

Because the cost of operation has continued to rise, the cost of real estate is continuing to grow and the cost of real estate taxes. Now we're talking about government forcing a $15-an-hour minimum wage, which could also apply to convenience stores. When you see an older site with two pumps, three pumps, no canopy, full service unbranded -- all of those will be a challenge to sustain for years to come if they are legitimate operations, paying taxes properly, not hiring undocumented workers.

You have a heavy presence in Brooklyn and Nassau County. Can we assume Suffolk is an area of future growth for you?

Yes. Suffolk County is still a large unbranded market -- there's a lot of small operators, not like the operations we have.

How long before you have as many stations as say, a Speedway, with 183 former Hess stores in this region?

I don't have a strict plan that I want to have 200 sites in the next five years. But we continue to look for value sites. We now have real estate companies, landlords, reaching out to us when there's property available that could be a gasoline station. We've grown big enough now that our name is out there all the time -- people see our tankers on the road. We are geared now toward building four or five, six stations at a time instead of one or two at a time. We'll probably add from 15 to 20 sites each year starting next year and for the next five years.

Do you see room for more growth in Nassau County?

I think there still are many opportunities in Nassau County -- for example on the South Shore along Sunrise Highway and Merrick Road. Anywhere south of the Southern State Parkway I think there's a lot of opportunity.

Gasoline costs consumers about a dollar less now than a year ago. How has that affected the retail gasoline business? Your profit is usually a certain number of cents per gallon, right? So that shouldn't have changed.

Right. That has not gone down. In fact, the decline in the price not only is beneficial to consumers, but it's beneficial to retailers, too.

How so?

We pay credit card fees based on a percentage of the sale -- an average of 2 percent. So the less the cost of the gasoline, the less the fee you pay. That will help offset the labor and other costs continuing to grow.

Has the decline in gasoline prices increased your pumping volume as people drive more?

I would say we're not seeing demand increased. Cars are more efficient today; they get better mileage. The number of cars on the road is growing, but you're not necessarily growing the number of gallons of gasoline they need.

What's your best guess about future prices?

I think we have a good solid six months to a year before we see gasoline crossing $3 again.

Two trends seem to be working at cross purposes: the rise of the stations with convenience stores and the growing number of self-serve pumps, which free the customer from ever entering the store to pay for gas. Are you losing convenience store business as a result?

Not really. The convenience store customer is very different from the gasoline customer. We only get 25 to 30 percent of customers from the pumps who come into the convenience store to shop. We believe that if you're a convenience store customer, you will come in regardless.

What about impulse sales, like, say, a pack of gum, when a customer is waiting to pay for gas?

Self-service pumps provide us with labor cost efficiency that you can never offset by impulse sales of someone picking up a package of gum. Labor is the largest cost of operating any business.

CORPORATE SNAPSHOT

NAME: Harry Singh, president and CEO, Bolla Oil Corp. in Garden City

WHAT IT DOES: Owner or franchiser of 100 gas stations, including 45 on Long Island, and 50 convenience stores, as well as six affiliate companies

EMPLOYEES: 500 total; 300 on Long Island

REVENUES: $750 million