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Six degrees of separation..

31 October, 2006
It's a global brand, but who's running the shop?
Page 14 
Economists tell us that we live in the age of the brand. A litre of cola isn't worth much as a commodity, but stick the right corporate logo on the bottle and watch it suddenly become liquid gold. The global companies who own the right labels to go on that bottle are worth a fortune - far more than the value of the product they have in stock, or the physical plant and equipment they use to produce and distribute it. Likewise a litre of petrol is pretty much just another litre of petrol, but the major oil companies have always tried to project (and protect) their own brand as unique, or at least different, and have jealously guarded their corporate name and logo.
So it is slightly surprising that, with the odd exception, many of those same oil companies have been so keen to get out of direct participation in the UK petrol retail market and have handed over so many of their highly-branded company-owned sites to be run at arms' length by other 'retailers'.In fact in some cases the actual day-to-day operation is now even further removed than that, with several degrees of separation. Some of the emerging operators nominally running mini-networks for the majors, don't have the scale of infrastructure required to employ and manage large numbers of direct staff. So they find someone else who'll look after a smaller group of locations for them, who in turn will find another person to physically 'manage' an individual site. And if there isn't enough provision in the deal to cover things like compliance with accounting and employment regulations - then it's just delegated downwards. Of course, by the time several intermediaries have taken a cut of whatever resource is available, the people at site level may not have the funds to implement many formal compliance controls, or even to find out whether they're actually making any money at all.Obviously, the less direct control that the oil company has over the sites bearing its world-famous branding, the more risk there is that anything affecting the smooth operation of a site, as perceived by the customer, will result in a diminution of that brand's value. From an organisational perspective the loss of control can be reflected in different ways:Low operational standards on site - so you'll find forecourts where half of the facilities seem to be out of action for weeks on end. That's because nobody seems to know who is responsible for calling out the maintenance contractors. Think back a few years to when all the major networks insisted on their staff wearing clean uniforms. Now think of how many sites you know today where the staff can actually get someone to order those uniforms for them...No fuel. This is becoming a frequent occurrence on some sites and it's not helped by some oil companies having automated their ordering and delivery systems to the point where mere humans struggle to make sense of the procedures at all. Result - half the pumps covered up and irate customers making mental notes never to come back to that site again.Site closure. Site profitability so tight that they are designed to run with the absolute minimum of staff. So a touch of sickness or simple absenteeism can leave a site shut for a day without anyone being able to do anything about it. Sod's law says it will happen over a busy weekend or bank holiday period. From a financial perspective the risks are perhaps more subtle, but just as great a threat:Financial over-stretch. Where a previously-small operator has suddenly acquired 10, 20, or more sites and has cash flow issues - and as any bank manager will tell you it tends to be those that bring down more growing businesses than anything else. .The 'no records scenario'. In case anyone had forgotten them, HM Revenue & Customs are still around, and still looking at how businesses run their financial affairs.Who cares about all this? Well, our starting point was that the brand has value greater than the product. But it doesn't take much in the way of negative experiences by customers, or just bad publicity, to reduce that brand from an asset to a liability. As far as the brand owner is concerned, in the longer term, ignorance of what's happening on their sites may turn out not to be bliss after all.