Forecourt Trader - 30 years at the heart of the fuel retailing community

Lodge's logic

02 May, 2006
Derek Lodge says sticking with the business is the best thing for him and his family
Page 25 

Derek Lodge formed Rusdene Services with colleague Jerry Pearson 20 years ago.

Rusdene Services is a good example of an independent petrol retailing business that has operated successfully for many years, and - with the continued management ethos - looks set to continue to do so.
At number 30 in the Forecourt Trader Top 50 Indies listing, the company has seven sites - all in Hampshire and West Sussex - and, if the right opportunity came along, would be happy to take one or two more under its wing."We are happy to continue in a controlled way. We don't have particular plans, but would like to make the odd acquisition," says director Derek Lodge. "Preferably within a 30-mile radius of our existing network. Ten sites is as much as we could comfortably manage while retaining our style."Despite what he sees as grossly unfair pricing by some oil companies, Derek is optimistic about the future for the independent fuel retailer."We believe there is scope for companies like ourselves - regionally-based multiples. We wouldn't, for example, want to have a single-site operation where we would be vulnerable to the competitive vagaries of the market."It is important to spread the risk. We have three very well-established profit centres - fuel, car washing and shops. And we have seven businesses all doing that to one degree or another."What if you had a business that depended on car washing and someone opened a car washing business nearby? What if a Tesco Express opened next door and that was your only business - then you might as well shut up shop."Fuel only represents one third of our income; car valeting is 15%; shops are 50%-plus. Unless you've been able to invest in the facilities to sustain life - you've died haven't you?"Rusdene Services has strong roots that go back to its formation 20 years ago, when two former Esso executives - Derek and his colleague Jerry Pearson - decided to break away from corporate life and make some money for themselves.A chartered surveyor by profession, Derek had been heavily involved in the development of Esso's network in the early '80s. He had joined Esso in 1972 and stayed for 13 years.The pair's first purchase was a site in Uckfield, which they developed to Esso's standard design, and then sold within 12 months for a profit. They then bought their second site - Meon Hut in Petersfield, Hampshire, which is still a key part of the business today.The Rusdene Services business grew by buying sites, developing them to oil company standard, selling them and then leasing them back."We were always looking to build up the retail business," explains Derek."The minute we could hang onto a site we did. We probably had to do a couple of deals to have enough money to hang onto the next site."We had mainly Shell and Esso sites - and two Texaco sites for a while.But then we did some investment-related consultancy work with Total and that was the springboard to a lot of developments. Now five of our sites are Total and two BP."Through the '90s the network built up to 13 sites. Derek and Jerry used their combination of skills, and the experience gained at Esso, and channelled it into the business."We started building things slightly bigger than the old Esso shop - which was 45sq m - to about 60sq m," explains Derek. "Then when companies like Esso started building shops of 100sq m and BP went to 120sq m, we questioned why they were doing it. All they'd done was extend the bags of crisps and cans of Coke. The offer was essentially the same."Then came a step change for the pair when they went to America - to the National Association of Convenience Stores Convention (NACS) - for the first time in 1994."We came back and could see what needed to be done. You have to make the step change and go from 60sq m to 200sq m - and you have to get the booze - the booze was key. That's when we bought our Lee on Solent site. It now has a 200sq m Budgens store. The concept is entirely different from a CTN-based shop."BUDGENS - A NO BRAINER The other site in the network with a Budgens store is Meon Hut. "We chose Budgens because if you could have a daily delivery - six days a week with chilled, frozen and ambient on the vehicle and a strong, fresh-driven brand - why would you choose anything else? It was a no-brainer for us - everything on the same truck, six days a week...great."The Rusdene sites are a mix of transient and residential and the offers vary accordingly. The majority have shops of about 90-100sq m."We are creating a CTN-based snacking and booze offer so that a customer can pop in on the way home from work - to pick up a pint of milk, a bottle of wine, or whatever it might be. The important thing is they just want to get in and out quickly."Some of the shops are branded Smile - a brand that belongs to Key Lekkerland distributor, Symonds. "Those shops are our 'On the Run' offer," explains Derek. "CTN-based with a bit of booze and food-to-go."Costa Coffee is also being introduced into appropriate sites."If you're going to pay money for a piece of kit you might as well get the best you can get your hands on. Plus we get another brand into our business. For the best part of 8-9,000 we can have a Costa branded bean-to-cup machine. Everyone knows Costa."We see the expenditure partly as a marketing exercise - a brand that we can build our business on. The coffee itself is good, of course. But if a customer buys a sandwich, cigarettes and a newspaper every morning on the back of it - even better!"Forthcoming projects at Rusdene include developing the company's Midhurst site - a BP forecourt with a small shop; and also re-doing the shop on the Waterlooville site."You have to keep ahead of the game - you have to re-invest your money," stresses Derek. "The companies that have been successful - such as the Frasers and the Hammonds - have invested lots of their money back into their businesses. We are constantly reinvesting. Even now we're spending, on average, 250,000 on the business every year."Within the context of what we do and what we can do, we won't go overboard, We won't do silly stuff."After all these years in the business, Derek's enthusiasm has not diminished. He has been part of the Lakeside Group right from the beginning: "The core membership of the Lakeside Group are extremely successful businesses. Why are they successful when others have gone to the wall?"You must be prepared to learn from absolutely everybody. We are absolutely prepared to pinch and pick up on anybody's ideas."Eighteen months ago was decision time for Derek, as Jerry wanted to retire from the business. "I decided to buy him out. I love what I do - it's a challenge - and my son Oliver is keen to stay in the business."The market is really 'sexy' now for buying forecourts. A lot of the interest is being driven by city money - forecourts are seen as landbanks of property. We could sell out tomorrow for a lot of money, if that's what we wanted to do. The problem is, you have to pay tax on it. Then you have to find a home for your money - and that's what these other guys are trying to do anyway."It seems a daft thing to do to sell a business that is profitable and earning our family an excellent return. If you won the lottery you would have to invest the money."We're involved in a business which has money invested in it. That yields a return for us - where could we yield a better return?"A lot of people just think about having money. But what you have to have - and the way that money is sustained - is an income. We want to pass the business down the family. The business is a catalyst for family wealth - which is what the middle and upper classes have done for centuries."In our modest way, we've worked for 20 years to establish a solid foundation - and we would like to continue to develop our family business."



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