One might say that the gulf has widened in the dispute between retailer Owen McKay and his supplier. In our November issue I recounted the story of a strained relationship between Owen, who runs Smithy Garage at Warrington in Cheshire, and Gulf Retail. Owen had nothing but praise for the image Gulf had given his business but he wasn’t finding the petrol prices competitive enough for him to hold his own against a nearby BP. He says he had a verbal agreement with Gulf for better prices. When these were not forthcoming, he bought elsewhere.
The upshot was lengthy discussions and both parties decided to call the deal quits.
Owen was aware that the image would have to change but was unprepared for the letter he received from Gulf offering two options to terminate his contract. The first option came to just over £20,000, made up of balance for the signage (£8,157.40) and loss of profit (£11,883.85).
The loss of profits was calculated as Gulf’s expected profit of 0.41 pence per litre, multiplied by the agreed annual aggregate volume, 1,000,000 litres, multiplied by the number of years (three), less the volume that Owen had purchased.
The second option was to purchase the signage and pay for the removal of all marks and trademarks relating to Gulf. But he would still be liable for Gulf Retail’s estimate of loss of profits (£11,883.83).
He has opted for the latter and as this is being written has sent Gulf a cheque for the sign. He is however, disputing the loss of profits on the basis that he couldn’t sell at Gulf’s prices.
“I said to them that I would buy at the right price. I wasn’t after cut price, but it’s very competitive up here. Gulf’s price to me was what BP was selling to the public for. So if we maintained the contract we would be out of business. I have to sell at the same or less than BP – which is on the main road whereas I am not – or I will go out of business. So where does this £10K loss of revenue come in?”
He concedes: “Okay, the contract doesn’t say price support but I thought we had a gentleman’s agreement or I would never have signed.”
Well, Gulf is digging its heels in too saying that the bottom line is, the deal is a Platts-related product price agreement and it is not a margin-type contract. Gulf has no margin-related type agreements, and the contract carries no mention of price support or marker sites. “Mr Mackay knew this from the start of negotiations, and agreed to sign the agreement of his own free will and after the relevant legal advice,” says a spokesman. Gulf maintains that the deal is a package of product supply, signage and image, pump maintenance, subsidised offers such as a credit card package, and marketing support from a major brand.
Owen maintains that sporting the imagery amounted to good advertising for Gulf in his neck of the woods. It looks as though the outcome of this will be decided in court.