December 25, 2003

Almaden Valley Community Association News

The next AVCA meeting is Monday, Jan. 12 at 7 p.m. at McDonalds Restaurant, 5925 Almaden Expressway. Check the AVCA Web site, www-avca-sj.org, for any changes.

The loss of service facilities at the Almaden Valley auto service stations
By Ray Strong, AVCA Secretary and Bob Boydston, AVCA President

A recent AVCA meeting speaker was Hank Rullhausen owner of the Chevron franchise service station located at Redmond and Almaden Expressway. This service facility services 30 to 40 cars per day. Mr. Rullhausen explained that as a presumably unintended consequence of a possible change to San Jose Municipal Code 20.80.550, the Almaden Valley would lose the service bay facility of his Chevron station.

Apparently, California law classifies prepared food (e.g. hamburgers) and alcohol as one category of goods and specifies that each city in California may take a position to allow sale of this category of goods by service stations or not to allow such sale. San Jose currently does not allow such sale. Morgan Hill and Cupertino do allow sale of prepared food and alcohol by service stations.

Rullhausen reports that where the city allows the sale of prepared food and alcohol by service stations, the service stations franchised by Chevron, Union, and Shell, have generally converted the service stations with service bays to convenience stores without service bays.

Some time this year, a number of service station owners including at least one under the Rotten Robbie brand, approached the City Council with a request to be allowed to sell prepared food. It should be pointed out the Rotten Robbie can sell food now if it is in a package and the customer puts the package in a microwave himself. The City Council referred this matter to the City Attorney for investigation. The Council is expected to rule on this change early in the new year. Subsequent to this action, Rullhausen received a letter from Chevron, which he interprets as requiring him to convert his station to a convenience store and gasoline station and to remove the service bays within 24 months of the time the City Council rescinds the law prohibiting service stations from selling prepared foods and alcohol.

Rullhausen reports that Chevron receives a fixed percentage of his revenue whether it is from automobile service or from the sale of foods and beverages. He suggests that it is easy to see why his station will have reduced revenue as a convenience store and gas station compared to the revenue it has currently. He also says that Chevron has the legal right to compel him to pay for the construction required to make the changes to his station from his own pocket, his only recourse being to be bought out by Chevron for his original franchise purchase price.

According to Rullhausen, Chevron has a policy of preferring the neat and tidy look of a convenience store to the less neat and tidy look of the full service station, in spite of any arguments about reduced revenue. He further stated that Chevron owns (as opposed to franchises) 84 stations in California and none of these owned stations provides auto repair services. However, with respect to franchisees, this policy is apparently only applied in cities that allow service stations to sell prepared food and alcohol.

Rullhausen urges the City Council not to change the current law. He argues that the consequences will include (a) loss of all service station service bays from Chevron, Union, and Shell brand service stations in San Jose, with consequent loss of jobs, and (b) sale of alcohol at gasoline service stations.

It is apparent that Chevron, by practice, will not make an exception to accommodate a local situation. San Francisco handled this problem by requiring that no service facility could be removed without an alternative one being built nearby to maintain availability of service.

While loss of service facilities is inconvenient and loss of local jobs is serious, at least one member of the AVCA board believes passing a San Francisco style law to control where service bays must be provided is an unwarranted interference in the operation of our free market. In the long run, this type of law adds to the “unfriendly to business” climate in California and has its own seriously negative set of unintended consequences.

Another point of view from another board member is that some regulation of business is desirable. A man who buys a gun and successfully robs a bank is an example of a free market activity with a good return on investment. Clearly this type of activity needs to be regulated. How much regulation there should be is often open to question. One of the ways a market operates is that business and people leave if there is too much regulation. That feedback may be the best way to find the limit of regulation.

AVCA urges the San Jose City Council to fully weigh the effect of all unintended consequences if the code is modified.