THE INFLUENCE OF SALES COMPARISON APPROACH ON THE ACQUISITION OF FRANCHISED PETROL FILLING STATIONS IN NAKURU COUNTY, KENYA

Abstract

Majority of the filling stations in the country are franchises, the brand having being developed by the parent oil company, therefore, the investor has virtually no obligation to develop the brand and the products. Investors, however, lack information on how much a brand is worth; the brand is an intangible asset and the valuation is subjective. Acquiring a filling station requires a substantial amount of capital for the franchise to authorize one to be a dealer of their products as well as operating capital. Sales are not guaranteed despite the marketing done by the franchise owner and dealers have to contend with unpredictable customer preferences and location constraints. In several cases, the returns fall below the investments, hence, leading to cash flow constraints. As a result, some franchised petrol filling stations in Nakuru County are now experiencing serious cash flow problems, and these have made it difficult for them to meet debt obligations to their bankers. Consequently, an increasing number of these franchised petrol filling stations are now faced with receivership and foreclosure threats from their bankers. This study sought to examine the influence of sales comparison approach on the acquisition of franchised petrol filling stations in Nakuru County. The study results revealed a weak, positive and statistically insignificant relationship between sales comparison approach and the acquisition of franchised petrol filing stations implying that the adoption of sales comparison approach in valuation does not influence the acquisition of franchised petrol stations. The study recommended that the firm considers the similarities in the petrol stations when evaluating a petrol station.