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

Money Talk: When it comes to sub-letting, it's usually 'see no evil, hear no evil'

In common with many other sectors of the economy, the petrol retailing industry has seen a quiet, persistent, trend over the past couple of decades: call it 'out-sourcing', or 'contractingout', or just 'sub-letting'. The owner of a business or premises feels that some activity isn't producing the financial returns that they feel it should. The question then is what do you do with the problem area or activity? If it's a whole business say an entire forecourt one obvious answer would be to sell it. But often it's not quite so simple.

Frequently it's not the whole business that's under-performing financially. On petrol sites it might be an old car sales showroom or workshop. Or it might be a rollover wash bay that hardly sees any use today. Frequently a solution seems to pop out of nowhere: a 'friend of a friend' of the owner happens to know someone who'd be interested in renting part of the forecourt. They'll pay a fixed amount each month and you'll never have to worry about that part of the business again. Problem solved.

Consequently on many petrol forecourts different activities are actually now carried out by multiple proprietors. The people in the workshop have no involvement with the fuel or shop operations; the same goes for those on the hand car wash.

Sometimes it applies to the shop yes, the people working there sell fuel and shop goods, but they don't work directly for the forecourt owner either. A bit messy perhaps, but it's the modern way and it can work reasonably well; there would almost certainly be fewer forecourts still open around the country if it didn't. And in a more general sense, of course it also works at a higher level across the whole petrol retailing industry. A couple of thousand sites where commission operators pay rents to a network owner in order to sell the owners' fuel but take on the day-to-day shop and forecourt operations at their own risk.

What might seem odd to those unfamiliar with this industry is a tendency for owners who've sub let part or all of their business to positively shy away from wanting to know anything about the financial performance of their tenants as long as the rent is paid on time each month.

Taking an interest

Historically site or network owners took far more interest in how their agents, licensees, franchisees or com ops were performing financially. Apart from checking the credit worthiness of the people operating out of their sites, having some view of their financial transactions and performance also gave the owners at least a little comfort as to the activities that were going on.

The owners weren't naive enough to believe that they could see everything happening on their sites, but at least they could be seen to be taking a reasonable interest. It wasn't just curiosity; they knew that ultimately any problem caused by their tenants could lead back up to the owners.

As we said earlier, these arrangements work reasonably well most of the time, but two recent news stories should cause site owners to consider the consequences of taking the hands-off approach to on-site activity too far.

Clear implications

Neither story was related to a forecourt, but the implications should be clear enough. The first concerned a manual car wash operation found by the Health & Safety Executive to be in breach of Health & Safety regulations. So far so routine, but read further and you find that the original visit to the premises also involved the police HEET (Human Exploitation & Emerging Threats) team and part of its investigation was in conjunction with HMRC's National Minimum Wage team. The authorities have adopted a joined-up approach: attract the suspicions of one agency and you'll find several others involved. If that isn't enough cause for thought the second case might just clinch it another prosecution related to contraband tobacco sales. What stands out here is the quote from HMRC in its press release: "Each premises where a suspected offence was detected will now have the business accounts audited and the owner and employees may be subject to personal financial scrutiny." The message is clear HMRC won't stop just with the people directly involved in any illegal activity: if you own the site you're likely to find them looking through your business records and personal financial transactions in some detail. That's not a pleasant experience even when you've nothing to hide. If you've sub let, perhaps it's time you showed a little more interest in what 'business' is actually taking place on your site?

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Weekly retail fuel prices: 2 October 2017
RegionDieselLPGSuper ULUL
East120.5363.90127.17119.00
East Midlands120.03127.76118.80
London120.3757.90128.81118.85
North East119.80129.71118.46
North West120.19127.87118.63
Northern Ireland119.22125.23117.53
Scotland120.2463.80126.78118.50
South East120.7259.90129.39119.48
South West120.39128.00119.02
Wales120.0459.90126.47118.61
West Midlands120.0865.90128.12118.84
Yorkshire & Humber119.73127.02118.57

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