The Motor Fuels Group has recently become the focus of attention following its year-long, two-site trial of BP’s Connect and Wild Bean franchise - and more especially because with these sites now running successfully, the company is ready to sign up two more.
"The franchise trial is the best decision we’ve made," says director Sailesh Sejpal - known as Sej - who runs the group with co-director Sharad Raja (Raj). But he admits to being rather surprised at PRA director Ray Holloway’s negative comments towards the franchise in last month’s issue of Forecourt Trader - "he’s not given it time"; and of the scepticism of other retailers, particularly following his presentation to the recent BP dealer conference in Spain - "some asked if I’d been paid...".
But Sej is adamant about the benefits of the scheme: "Having piloted the two sites for 12 months, we have proved it’s a do-able deal. It’s working for us," he stresses. "People have said ’you can’t be making money’. And I’ve said ’if you care to come down, we’re happy to share with you what we’ve done’."
Sej and Raj however, do understand people’s hesitation: "With any franchise there’s a concern about losing control," says Sej. "When they think of a franchise they think of McDonald’s or a KFC. We’re finding that BP has been receptive to what we have said. The company has listened and learnt from us, and vice versa.
"Of course you’ve got the marketing fee of 3%, and you’ve got the 3% loyalty fee. But when all is said and done, the stock price-file BP has is better than what’s in the marketplace at the moment. On top of that, every deal that’s negotiated in terms of over-riders you share on your net-sale throughput, not on your purchasing, which is a nice way of doing it. That in itself equates to possibly 2.5-3%. So you’ve already got your marketing fee back. Therefore overall it’s costing 3%.
"We told BP that if it wanted us to buy strictly from its distribution company, there had to be something in it for us. Let’s not forget that as dealers we negotiate our own terms with companies like P&H who give us kick-backs. So what’s different from us doing it with BP?
"BP does better deals than we would have got from other suppliers because of its buying power. I think there was a concern about delivery costs - which we highlighted - and now BP is looking to see how these can be trimmed.
"We are having six-day deliveries on these sites, so you get your fresh produce and everything on a daily basis, which is where the cost comes in. But overall, if you equate it back to what margins you’re going to make, it’s still slightly better than if we were to run it independently ourselves." The likeable duo believe Wild Bean definitely stands up among the big coffee brands in terms of quality - and is the right offer for the market.
"I think the attraction is not so much Connect, but Wild Bean, which accounts for 20% of the throughput," confirms Sej, who says both trial sites are "heavy-duty". One is in Wigan off the M6 and does 15mlpa; the other is in Ashton-under-Lyne, and does 11mlpa.
The franchise-trial opportunity came about following a series of interviews and presentations: "We got picked thankfully," says Sej. "We knew what we wanted in terms of sites - and got what we wanted. Thankfully we’ve come out of the other end quite positive and enthusiastic and, yes, it was the right decision.
"After all we’ve got the brand name; the shops are doing £30,000 a week; anything in our industry is now grab and go in terms of food - and here you’ve got fresh, hot product being cooked on the premises; and on top of that, BP’s fuel operations manager Peter Malloy has gone on record to say BP will look to roll M&S out to the franchisees. That’s always been at the back of our minds - if it doesn’t happen it doesn’t matter. That’s not why we joined. But M&S is starting to roll out on 80 BP sites over the next three to six months. That shows the trial has gone fairly well. I’m guessing they might pass it on..."
Sej claims the company has been able to run the trial sites more efficiently than BP, by cutting about £70,000 in running costs across the two sites, particularly on labour and wastage. But this hasn’t affected operating standards - one site was 15th and the other 22nd out of the 165-strong Connect/Wild Bean network in BP’s mystery motorist scheme, Gap-Busters.
"One thing BP hasn’t resolved is the operation system, which is still hooked up with its pos," says Sej. "That is being developed, and as more franchisees join the scheme I think BP will roll out Retalix - a US system, which should give us more control.
"We are not concerned that BP sees the figures before we do. Any franchisor would want to see them. Speak to any franchisee and they’re all hooked up to the mainframe at head office. It is a partnership - we share everything. This is why I think BP is not going as fast forward [with the franchise scheme] as it would like. Because dealers think ’why should I share this information with these guys?’ But if you do share, and you’re getting a huge benefit by doing so, that’s got to be a plus. So people need to change their thinking a little bit.
"The other thing, I’ve got to say, if dealers have been working with BP for many years, they must know it is a good company. People there will listen to you; it’s not the sort of company which is going to hang you out to dry."
While some retailers may be spluttering on their morning coffee at such a comment, Sej and Raj are quite self-assured: "Oil companies have never needed dealers more than they do now..." they concur.
"If you’re going to get into bed with a franchise, you’ve got to have an element of trust, otherwise it’s not going to work," stresses Raj.
Both Sej and Raj admit to being slightly concerned at the many changes in personnel at BP head office, but believe BP is under orders to make the franchise work.
"I’m guessing there is still some hesitation in other dealers taking it up, but I think that will probably be taken care of in the next six months - as soon as the third, fourth, and fifth dealers come on board, the doubt in people’s minds will go away. At the moment we feel a bit isolated, so yes, we’d welcome other people to join.
"We’ve shown the sites to anyone and everyone who’s anything to do with BP and that’s been nice as you get to meet a lot of different people.
"Our franchise was the first worldwide, but it’s now proving successful in America."
Meanwhile there’s no doubt Sej and Raj feel working closely with BP has been of great benefit: "What we’ve learned quite quickly is that the future lies in a market that has to provide the convenience factor to the motorist; fast food on-the-go is the future of our industry. "Why has Esso done On the Run? For exactly the same reason," stresses Sej. "You’ve got to have confidence in something BP has thrown millions of pounds at."
=== Motor fuels group - the background ===
Sej and Raj have individually been in the industry a long time - the former 28 years and the latter 30 - starting out as hard-working commission operators.
Raj has a wholesaler business, Highway Stops Ltd, which specialises in oils and car care, and used to supply all Sej’s sites, which traded as Fuelstop.
Five years ago their long-standing friendship progressed to the point that they decided to join forces.
In 2002 they formed Fuelstop UK Ltd, and acquired four sites jointly under that banner - on top of the 11 run by Sej and six run by Raj, which were initially kept separate. "The idea was that we’d open up companies every time we bought a parcel of sites," says Sej. "So if we wanted to off-load four sites to somebody we could just sell the company."
Out of that operation was born Motor Fuel, which now, under its own independent banner, has 27 sites.
However, at their Wembley-based head-office, Sej and Raj are currently working on bringing all the companies (belonging to Raj and Sej and the jointly acquired sites) under the Motor Fuel banner - Motor Fuel Group plc - which will start trading on April 1.
They also have Motor Fuel Solutions, which has 30 Total company-owned group-operated (cog-op) sites, which brings their total network to 70 sites.
"In the background we always have two or three sites at the lower end of our network which we sell and then replace," explains Sej. "We also acquired another 15 sites from BP in November - we will take over those sites by March. "Our overall volume is in excess of 300mlpa (including cogop sites). Shop volume is £34m (excluding cogops)."
While there was no particular purchasing strategy at the start, the way the Motor Fuels network has developed over the past two years has followed a pattern of buying good sites just off the motorway networks. "We’ve got sites off the M1, M6, M5, M40, M4, M3," says Sej. "You come off the motorway - there we are. So since it’s worked out like that, it is now our template. And while we both passionately enjoy what we do - once inside your blood this industry’s very infectious - we will want to retire one day and it could be very attractive for someone like Tesco Express to take those sites."
Meanwhile, the company’s plans are onwards and upwards. "We would like to put another 15 sites on next year as a minimum," says Sej. "I still feel there are further sites that BP will divest in the next 12-18 months. I don’t think they’re done just yet. We’re hopeful we’ll be in the mix of things again, and hopefully get want we want.
"While our main acquisition route has been through BP, we’re also looking more generally at the marketplace, and because we’re now seen as very acquisitive we’ll get a ’heads up’ before anyone else, if there are things on the market."