Engine oil and boiled sweets no longer exhaust the retail choice at petrol stations – nowadays filling up the car can save you a trip to the local supermarket.
David Quinn reports on the implications
The retail offer at petrol stations is changing. The era of small, grey kiosks selling little but Ginsters pasties, WD-40 and replacement windscreen-wiper blades is over.
It has been replaced by a new type of forecourt boasting larger, supermarket-branded stores selling a wider range of fresh food and other goods.
Sentimentalists may mourn the passing of the traditional garage kiosk, surely one of the few places where Marlboro Lights and Magic Tree air fresheners are sold side by side.
For others, larger outlets and the onset of supermarket branding are a natural progression as fuel companies move into the 21st century. Tougher competition and a desire to maximise the value of sites have forced a shift in outlook.
“There’s been a realisation that the shop is an underused asset and we are now seeing things happen on the ground,” says Colliers CRE director William Jolly, a specialist in roadside property.
“If we hadn’t had price wars and tighter margins then it may never have happened,” he adds.
There is an increasing propensity for fuel companies to link up with well-known supermarket brands, producing forecourt shops that sell a good selection of foodstuffs as well as car-related paraphernalia.
Tesco with Esso, the Sainsbury’s-Shell pairing and Safeway’s link-up with BP are arguably the big three. Following in their wake are Spar (Texaco), Budgens (Q8/Total Fina) and Costcutter (Murco).
Jolly offers an explanation for these couplings: “It’s clear that while oil companies had quite a significant grocery turnover, they weren’t the best at marketing.”
He adds: “If Esso was sourcing and selling products at a petrol station, it might struggle to make the same profit Tesco could on the same site.”
These partnerships stand in contrast to the previous relationship between oil companies and supermarkets, which became rivals after supermarkets began to sell discounted petrol at their stores.
Industry pundits see the new spirit of co-operation as a much healthier situation with better long-term sustainability.
However, as oil companies increasingly come to favour larger sites that are better suited to grocery retailing, smaller filling-station sites are falling by the wayside.
Operators are aware that consumers are willing to drive further out of their way if the retail offer at a petrol station is good enough, and this is contributing to the loss of small filling stations.
“In essence, there are fewer sites than there were because the economics are favourable to high-volume sites,” explains Jolly.
In theory, it should mean that former petrol stations are being sold to developers for alternative uses. But this is not always the case.
Gerald Eve partner Chris January says: “The sale of filling stations has created new opportunities. However, many of these are too small for roadside hotel operators or unviable for residential developers.”
The desire to maximise the value of filling-station sites is also manifesting itself in the increased activity of fast-food operators involved in forecourt trading.
Motorway opportunities
McDonald’s is keen to expand its presence at the roadside and is exploring more A-road and motorway ventures, according to the company’s roadside development manager, Brian Youlden.
The restaurant operator, like Burger King, has begun taking integrated single units, which it occupies in tandem with convenience stores. This allows a presence on a site smaller than might otherwise be required.
Jolly explains: “It benefits both shop and restaurant due to the crossover of trade. The customer can walk through from one bit to the other.”
Youlden says: “We’d like to do more of these if we can get the right sites, but obviously the oil companies have been rolling out their ventures with supermarkets, which makes opportunities limited.”
Other restaurant chains are also looking increasingly at roadside locations, although not necessarily at filling stations, according to GVA Grimley partner Roger Ahmed.
“Pizza Hut has recently changed tack and is expanding its business by targeting roadside sites as well as in-town locations,” he says. “Six Continents is another good example of an expanding operator as it continues to roll out its Harvester brand.”
A recent development in the roadside restaurant market is that the 400-outlet Little Chef chain has been put up for sale by Compass, which is also offloading its 12,000-room Travelodge hotel brand.
An auction of the two businesses is expected to fetch £600m, according to analysts, and it could open up opportunities for new operators in the roadside market.
However, it seems more likely that an existing player, such as Whitbread, Six Continents or Welcome Break, will take control of one or the other part of the portfolio, and they might wish to retain the Little Chef and Travelodge branding.
Service stations
New approach forces better customer service
Like petrol stations, service stations are undergoing something of a sea-change.
One new operator is taking a radical approach to counter the perception that service stations are overpriced and offer poor service.
Swayfields Group, which owns the Extra chain of service stations, has created an element of competition among retailers at its sites.
Rather than control retailers through franchise arrangements, it simply leases space in a similar way to a conventional shopping centre or airport. “The idea is to create choice and competition in the building itself, which obviously helps maintain higher standards and lower prices,” says Swayfields managing director Andrew Long.
The company operates just three service stations, all on the A1(M), but has 13 more at various stages of the planning process, including sites on the M6 at Warrington and on the M25 at Cobham.
The three most established service-station players – Welcome Break, Moto and Roadchef – are having to respond to this new approach and are looking at ways to improve customer service and market share.
Welcome Break, for example, is using research firm FootFall to analyse the movements of customers, in order to help it to arrange more staff at peak times and in the busiest parts of its sites.
Planning
Traffic through the forecourt, or the forecourt generating traffic?
The rapid expansion of forecourt retailing to encompass supermarket-branded grocery provision throws up a series of problems for the planning authorities.
The neighbourhood context of filling stations is now awash with major food retailers that can have a big influence on the pattern of local retail spend and traffic movement.
According to Nick Taylor, partner in Drivers Jonas’s planning team, the planning background against which retail applications at petrol stations may be judged is not especially clear.
“PPG 6 states that only ‘occasionally’ is it necessary for retail developments of less than 2,500m2 to provide evidence on the sequential approach, impact and accessibility, and this is when the development is likely to have a large impact on a market town or district centre,” he says.
It could be argued that the new wave of forecourt grocery stores, most of which are between 2,000 sq ft and 3,000 sq ft (186-279m2), fall well below the threshold for submitting a retail impact assessment.
However, as so often with planning law, the matter is not as simple as it first appears. As Taylor points out, senior planning officials have made some contradictory noises about this seemingly simple deduction.
For example, Michael Bach, the civil servant with overall responsibility for drafting PPG 6, has said: “Food stores in petrol stations will need to be considered carefully in terms of their likely impact on local centres, especially village shops, as they may undermine the vitality of local shops and, because of their out-of-centre locations, result in more shopping by car.”
Given the seeming contradiction between the contents of PPG 6 and the comments of those who helped draft it, Taylor has analysed some recent appeal decisions to help obtain a clearer picture.
He suggests that those submitting retail planning applications for petrol forecourts should be mindful of several factors. These include: the need – in planning terms – for the new convenience-store element; the availability of any sequentially preferable sites; the effect on nearby centres and local shops; the impact on the amenities of nearby residents; and whether the development will be acceptable in highways and transport terms.
The first of these points – the need for new development – is perhaps the point that must be most clearly illustrated by applicants.
“The onus is on an applicant to demonstrate a need for the proposal in accordance with PPG 6 and the planning minister’s statements,” says Taylor.
He suggests that a “qualitative deficiency” in the range of food retailing in the surrounding areas is likely to be a factor in the granting of an application.
A questionnaire aimed at local residents and retailers, tackling such issues as the role and the health of any nearby centre and whether there is a gap in provision, can be helpful in establishing such a retail deficit.
