Business IdeasCo-ownershipFranchiseBusiness & Entrepreneurship

Power Fill and Marz Fuel Gas Station Co-ownership for as low as P330K: Initial Review(13-min read)

The charitable Ilocana and I have been exploring other long-term investment options as well as business ventures. Along the way we came across the concept of co-ownerships, specifically co-ownership of gas stations. The first gas station we got acquainted with was through PhilCrowd, the next one we saw in a franchise expo, and further saw its number of branches when we were farm hunting in Batangas.

IS CO-OWNERSHIP CROWDFUNDING OR FRANCHISING OR ENTIRELY DIFFERENT?

Just a segue, sorry but let me rant first. Crowdfunding is gaining popularity but I think the crowdfunding groups and SEC have work to do to iron things out when it comes to firming up regulations covering it. I’m not really sure whether co-ownership is entirely different to crowdfunding, because basically it’s the same concept. They pool funds to run a business.

Or is co-ownership more related to franchising because the number of investors are limited to a few, but they shell out much bigger amounts compared to crowdfunding where it’s a really a crowd (many people) that’s funding it? We never hear of SEC warning us against legit companies offering franchising, so is co-ownership more related to franchising than crowdfunding? Well, based from our limited experience, co-ownership really feels more like pseudo-franchising, it feels like becoming business partners with the companies, becoming silent investors. So I guess this is more of two informed parties coming into a private agreement rather than a group soliciting funding publicly and online from various retail investors, and the two parties may never meet in face-to-face.

Either way, these concepts are not entirely new in the Philippines. Matagal nang uso yung magkakaka-sosyo sa negosyo. Panay internal arrangement and agreement among groups. Maybe it’s just getting popular and more noticeable nowadays given the internet, and more and more people are becoming business-minded, especially millennials. So Juan can’t really blame the SEC for issuing those advisories to warn the public, part of their job. A quick Google as of today (Sep 30) yielded no results for SEC advisories on both PowerFill and MarzFuel. But who knows, after I publish this post and more word about them gets out, maybe SEC will notice them too? LOL!

Caveat emptor. This is not a solicitation to invest. You know me. I’m just sharing what we do and the risks we take with our limited resources, our advocacy to give other retail investors options too. We are risking our own money, money we can afford to lose. Huwag naman sana. But hey, at the end of the day, your money, your rules. You’ll be the one to pull the trigger.

With all the SEC advisories coming out, I don’t want to be faulted and cited as soliciting investments for these 2 companies. May penalty kaya! LOL! Just spreading initial information out there for people to conduct due diligence on. Besides we’re not the first one to invest here! They even attend expos and roadshows organized by malls and business groups! Personal disclosure, we have initial investments with the two companies but both stations are not yet operational so we can’t really say if the investment will be profitable and if the risks we took will pay-off. Fingers crossed.

Now as follows are some quick information about the two companies we have tried who are offering co-owned gas stations, plus the pros and cons, as well as new learnings we had with dealing with them. These information are based on our discussions with them, as well as the limited experience we have with them so far. Expect new posts about them as and when we have updates.

POWERFILL

  • P330K minimum investment (P300K goes to shares, P30K (10% of investment) goes to fees and charges)
  • If all investors put just the minimum, around 20 investors or less. Excluding PowerFill share of ownership on the station (can’t recall in their presentation actually).
  • 42 branches and counting according to their website
  • Started 2009
  • Office in Ortigas extension
  • Gas stations located in provinces (North and South) as well as in Metro Manila
  • 25-year contract renewable
  • Accepts investments while at the same time looking for suitable locations on a per batch basis (parallel processing)
  • 1% rebate per month if no location assigned to you / no ongoing construction 12 months after the investment
  • Gas station to be managed by company
  • Profit sharing in net income (net of operational expenses). %share in gas station income depends on invested amount divided by total initial capital spent to build and operate the station (varies according to location and size, to be discussed with the company)
  • Profits may include profit from commercial spaces and lease to be built on the gas station premises (convenience stores, etc.) in the future
  • Quarterly reporting of business performance and income payout
  • They offer solo franchises too if you’re that big time
  • Company website: powerfill.ph

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Pros (again based on our limited experience of 12 months)

  • Smaller minimum investment required but you can add more if you want a bigger share of the pie
  • They have locations near and inside Metro Manila (for those who live in the metro and prefer visibility)
  • They accept smaller lot sizes (<1000sqm) so should be easier to locate lots for lease (usually 200 to 500 sqm).
  • They accept investments at the same time that they look for potential locations so investors can approach them anytime and invest money
  • Discounts in all branches when you gas up
  • They will do everything from securing locations, permits, daily operations, etc. You just sit there and wait for your profit-share
  • 1% rebate in case of delayed location assignment starting month 12 from investment. This stops once a location is assigned to you and construction begins
  • They update you monthly on the status of the investment and possible locations. We learned a lot in terms of how securing permits work, how tedious it is to discuss with lessors and LGUs, why it takes a lot of time especially for gas stations, what LGUs do legally and not-so-legally to allow potential gas stations to enter their cities and municipalities
  • Online access to books and business reports of the gas station assigned to you
  • SEC registration of the gas station where all co-owners are listed
  • Assumed ROI is 5 to 7 years (inclusive of 1 year delay due to construction) based on their base case sales pitch
  • Contract may be renewed after 25 years, or co-owners can decide what to do with the investment and the equipment. Lease term may be renewed as well.
  • Shares may be sold back to the company or transferred to other owners

Cons

  • You can’t choose your location. They assign a location to you. Getting locations assigned to you can take a while. Especially now. One, they probably became more popular due to expos and PhilCrowd and so more people invested but they got a bottleneck in terms of securing new locations which takes a lot of time. Also, they claim that because of Duterte, it’s hard to secure all the permits fast because there’s no more red tape and under the table negotiations whereas before, grease money made everything fast with the LGUs. Really now? Haha.
  • According to them, historical experience is that they get to operate 6 to 12 months after investors put in money. From our actual experience, we invested last year and it’s been 12 months but no location has been assigned to us yet. Am I complaining? Sort of, but we still remain patient. We know they’re trying. Which means it might take additional 6 months or more from now in terms of getting a location assignment, construction and actual Day 1 of operations. We got our first 1% monthly interest fee though for the delayed location assignment. There might be another payment next month if we still don’t get a location assignment. At the rate they are going, I’m sure they have lots of fresh investments but many pending location assignments
  • You rely on their reports (which I hope are transparent and honest enough) in terms of business performance and your share of the profits. You won’t operate it on your own so you save on headaches but you won’t learn as much unlike if you do the actual operations. You’re a passive investor but they will get the votes of investors if there are significant decisions to be made on the business
  • 10% admin fee and charges
  • Because of their presence in Metro Manila, lease rates are much higher compared to provincial so higher OpEx though vehicular traffic is higher too. Maybe they compensate it by leasing smaller lots only. But if you lease smaller lots, there is less development to be done in terms of possible expansion or creation of commercial spaces etc.
  • They’re still accepting co-ownership investments so if ever we want to invest again for a second gas station (let’s say the first one turned out to be very profitable), then we will line up again with possibly tens or hundreds of other investors waiting for their location assignment. So that might mean an additional 12 months of waiting or more.
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MARZ FUEL

  • P400K to P440K minimum investment (everything goes to shares, the offers in the internet vary)
  • If all investors put just the minimum, around 20 investors or less. Excluding Marz Fuel share of ownership on the station (can’t recall in their presentation actually)
  • 43 branches and counting per their website
  • Started in 2016
  • Offices in Anonas QC and in Calamba
  • Gas stations mostly located in Batangas, Laguna, Cavite, Quezon. No plans yet to enter Metro Manila.
  • 25-year contract, non-renewable
  • Looks for long-term lease locations first, securing all the necessary permits before finally offering it to potential investors; investors get assigned to the next location ready for construction
  • Construction to commence once the station is fully-funded, before they move on to offer the next station
  • No rebate in case of delay in full-funding and/or construction
  • Gas station to be managed by company
  • Profit sharing in net income (net of operational expenses). %share in gas station income depends on invested amount divided by total initial capital spent to build and operate the station (varies according to location and size, to be discussed with the company)
  • Profits may include profit from commercial spaces and lease to be built on the gas station premises (convenience stores, etc.) in the future
  • Quarterly reporting of business performance and income payout
  • They offer solo franchises too if you’re that big time
  • If you’re interested to know more, click this sign-up page or you can send us a message so we can connect you to their contact person.
  • Company website: marzfuel.com
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Pros (again based on our limited experience of less than 1 month as of this writing)

  • They only offer co-ownership once they have a ready location with all permits in place. When we signed up less than a month ago, the location they are offering to us is in Indang, Cavite.
  • I think this works to their advantage because they address the bottleneck first (e.g. looking for location) before looking for funding whereas PowerFill have so much investment money but slow progress in location (too many dependencies on LGUs) so many investors are waiting and their money is tied up (but this could be advantageous to PowerFill in terms of having operating cash flows)
  • Once the location is fully-funded, construction commences. Historically, they claim to finish within 6 months and commence operations. We’ll see if they can live up to expectations. Can they beat the turn-around time of PowerFill?
  • Discounts in all branches when you gas up.
  • Similar to PowerFill, they will do everything from securing locations, permits, daily operations, etc. You just sit there and wait for your profit-share.
  • They claim to have easier time securing locations because at the end of the 25-year lease, the lot owner / lessor will have full ownership of the gas station (so lot owners find this very enticing)
  • Cheaper lease rates because they are focused in provinces, they can also get much bigger lots (minimum 1000 sqm) with higher upside in terms of future developments. The location in Indang is said to be 1500 sqm.
  • Probably less choosy and brand-conscious people too in terms of preferred gasoline brand because we often see small players in the provinces compared in Metro Manila
  • They are supposed to update us monthly on the status of the investment and construction (we only signed up recently so it remains to be seen if they can do this). In fairness, they also cited the usual reasons for delay as mentioned by PowerFill on LGU issues and corrupt practices by those in power tsk tsk.
  • Online access to books and business reports of the gas station assigned to you
  • SEC registration of the gas station where all co-owners are listed
  • Assumed ROI is 4 to 6 years (inclusive of assumed 1 year delay due to construction) based on their base case sales pitch
  • Shares may be sold back to the company or transferred to other owners
  • If they have new locations ready for funding, they offer it to existing investors first as priority before they offer it to new investors. They accept walk-in investments as long as an existing location is not yet fully funded and assuming existing investors will not fund it fully.
  • No 10% admin charges and fees (unless they already built it in the minimum investment)

Cons

  • Slightly bigger minimum investment required compared to PowerFill
  • You can’t choose your location. If you don’t like the location they are offering now, you wait until it’s fully funded and until they secure another location for lease and funding. So less cycles to accept investments.
  • No 1% rebate in case of delayed location assignment because you get a location assignment upon contract signing. But no rebates as well in case it takes a long time to fully-fund the location and to finish construction. Contract says they will try to finish the earliest possible time on a best effort basis
  • Contract ends after 25 years because the lot owner / lessor will have ownership of the gas station after contract expiry.
  • You rely on their reports (which I hope are honest and transparent enough) in terms of business performance and your share of the profits. You won’t operate it on your own so you save on headaches but you won’t learn as much unlike if you do the actual operations. You’re a passive investor but they will get the votes of investors if there are significant decisions to be made on the business
  • No presence in Metro Manila for now where vehicular traffic is much higher (though lease rates are much higher too). They’d rather focus in the provinces for now.

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WHY GAS STATIONS?

There you go. I hope I did not sound biased to any of the brands. Maybe I have less “cons” on Marz for now because we just started with them, therefore we have very limited experience on what promises they can or cannot deliver whereas for PowerFill we have 13 months of experience and counting. We feel though that PowerFill is trying their best, they just have too many dependencies on outside parties beyond their control (availability and cooperation of LGUs and lessors)

Why gas stations? Well yeah electric cars are the future but it might take a while for it to dominate the Philippines. And since we have lousy mass transport, people will still use private cars and vehicles. Gas prices are becoming more and more expensive and people have realized that cheaper but quality fuel can be bought from smaller players. The fuels they sell are not of inferior quality (contrary to old beliefs) because their suppliers are also among the big 3 and their gas pumps are checked regularly by the government. They can afford to sell for much less without hurting profit margins because they have significantly lower marketing expense and OpEx compared to the big 3 and the next 4 or 5 other medium players. Target market of these small players are those in the transport business where every peso counts (UV Express, jeepneys, delivery trucks, tricycles etc.) and even some private users who want to save money on gasoline.

Again, caveat emptor. We would very much want for these investments and business ad-ventures to be successful for our own sake but (1) we haven’t proven it yet and (2) we cannot and will not guarantee its success for you. Keep you posted. Let me know if you want a presentation from Marz by filling up this form. You may contact PowerFill directly in case you are interested. Excited for these two!


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