TEXOIL

General Information and Role of Service Station Owner

Texoil, ${?}^1$ a large pefroleum refining company, owns some service stations outright. For the most part, however, it contracts with individual service station owners to provide them with all their requirements of gasoline, oil, tires, batteries and accessories. One of the independent service station owners, who has been under contract with Texoil for $12$ years, has recently put the station up for sale. In addition to notifying Texoil that the station was for sale, the owners put ads in the local newspapers, as well as in a national professional journal of service station owners. The ads said that they were selling for family reasons.

The service station is located on one of the main routes leading to the Port of Los Angeles. This port area is growing because of the consolidation that is occurring among west coast ports. The port is now operating $24$ hours per day, and all expectations are that it will continue to do so$.$ There are several small

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shopping centers in this area and numerous warehouses. There are, however, only two other service stations in the vicinity and neither is run by an owner$-$operator.

The station owners are a husband and wife, both of whom work at the station. They keep the station open $6$ a$.$m$.$ to $10$ p$.$m$.,6$ days a week. The station is closed on Sundays. Their annual income has been approximately $$75,000($before taxes$).$

The service station owner and a Texoil representative are scheduled to meet to discuss Texoil's possible purchase of the service station.

Role of Service Station Owner

It is imperative that you complete this sale promptly. You and your spouse have been working $18-$hour days for the last five years in order to save enough money to realize your life's dream, which is to sail around the world. You are close to realizing that dream. You have made a down payment on a beautiful, old boat and have begun to fit it out for a two$-$year around the world cruise. In order to pay the first $$50,000$ installment on the boat, you sold your condo. You put your furniture in long$-$term storage and you and your spouse are now living in a small rental apartment near the service station. It is not very pleasant there and you are anxious to leave and begin your trip as soon as possible. In addition, you are both nearly $50$ years old and you want to take this trip while you are still young enough to enjoy it$.$

You estimate your expenses for the trip as follows. First, you owe another $$230,000$ on the boat, which must be paid in full before you leave. To get the boat ready to sail will cost another $$68,000.$ You anticipate that your personal living expenses, food, clothing, insurance, etc., will come to approximately $$75,000$