Developing a New Truck Stop

In South Africa, a truck stop can be a problem, or it can be a solution to a problem, depending on the business approach, site design and operational style of the undertaking. For the purpose of explanation, we will refer to the different styles and approaches as formal and informal truck stops. Please note the assumption that the proposed truck stop will or allow overnight parking for truck customers.

An informal truck stop, which is a facility consisting of some open terrain normally adjacent to a storage facility where diesel is sold. Normally these premises are not fenced, poorly lit at night, with no security, no rules and no ablution facilities or proper food offerings. Fires are often made, using wood, coal and even old car tyres, creating serious air pollution, and the lack of ablution facilities create a serious health risk.

These sites are magnets for all kinds of evil, sex workers, drug dealers, and illegal traders in all kinds of goods. It offers attractive hunting grounds for criminals, and common theft, vehicle hijackings and armed robberies are frequent. In many cities and towns, these uncontrolled informal truck stops are the hotspots for crime, health problems, and a big headache for municipal services, law enforcement and residents.

Furthermore, uncontrolled, informal truck stops create serious risks for truck owners and their customers, as well as for truck drivers and their assistants. They are indeed a problem.

A formal truck stop facility is professionally designed, and constructed, with proper security fencing, 24/7 entrance and exit control management and security guards, decent ablution facilities, recreation areas, tuck shops, and offerings of wholesome healthy meals.

A formal truck stop is normally supplied and branded by a recognized and reputable petroleum company such as Fueleum Energy, so that customers can be sure of the quality of the products.

WHOLESALING VERSUS RETAILING TRUCK STOPS

The question often arises whether a truck stop facility should be a retail undertaking or a wholesale undertaking, and the answer is, that it can be any of the two. The Petroleum Products Act clearly stipulates that the holder of a wholesale license may not directly or indirectly hold a retail license, and vice versa.

A truck stop operated with a wholesale license, is a facility that is closed to the public, where only contracted customers of the wholesaler buy fuel (in minimum quantities of 1 500 litres per transaction) In other words, the contracted customer has an account where pre-paid or post-paid transactions of 1 500 litres or more at a time takes place.

In the sense that a wholesaler may not retail, it means that a non-contracted customer from the street may not enter the facility and buy, which essentially exclude petrol customers, and take away substantial potential business. The wholesale license holder may also deliver petroleum products to end-users outside the truck stop facility (subject to the minimum quantity requirements).

Establishment of a wholesale licensed truck stop requires that (apart from the wholesale license) environmental and local authority clearance must be obtained, before the storage tanks for fuel can be installed. For buildings on the site, normal approved building plans and municipal clearance will be required as applicable for any other business activity.

It is much quicker to establish in comparison with a retail licensed site
Less chance of successful objection against the establishment of the site
The wholesaler may also supply and deliver fuel to other customers in the area, such as farmers, industries, mines etc.

Losing out on potential retail customers passing by
Minimum quantity requirement of 1 500 litres per transaction may exclude certain customers

A retail truck stop requires site and retail licences, and in terms of licensing it is essentially the same as a filling station, and often it operates as both a truck stop and filling station in combination, which means that the normal public can support the business, and it often makes sense to sell petrol as well.

A retail truck stop is not subject to minimum quantity transactions.
The site layout needs to be such that the overnight parking area is separated from the public and secured.
The holder of a retail license may not deliver fuel to customers outside the truck stop premises.

The establishment of a retail licensed truck stop facility is more expensive, due to the additional requirements attached to the license application requirements, and the average time of such an application process is longer. Other retail sites also have the right to object against any new site and retail licenses application, and location of the proposed site is an important factor to be considered.

Although approval of the site and retail licenses may be difficult, and the establishment of the retail truck stop more expensive, and slower than that of a wholesale truck stop, the economic viability of a retail truck stop considerably outweighs that of a wholesale truck stop.

Wider public support base and retail opportunities
Protected by the Petroleum Products Act from other retailers intruding in your business area
More stable income stream than wholesaling
Normally higher return on investment over medium to long term
Profitable established sites are in demand and have excellent resale value

More initial capital required
Longer time to establish