Fears grow over Granada's M-way services monopoly
Tuesday 25 June 1996
"We've made our views known to the [Department of Trade and Industry]," a rival operator said last night. Tim Ingram Hill, chairman of the 11- strong Road Chef services chain, the country's second largest, with just 16 per cent of trading volume, added: "The longer it takes, the better for Granada and the more they will benefit from the situation."
Granada promised to sell the Welcome Break business, which it inherited following its pounds 3.9bn takeover of Forte, within 15 months of the deal going unconditional in January.
However, the OFT said yesterday that until a formal undertaking is signed, "the clock will not begin ticking". The undertakings could be signed this week - a full five months after the Forte deal closed.
Granada insiders insisted last night that the company would still sell the sites by April next year, within the time frame originally agreed. But the lack of a formal agreement with the OFT has heightened resentment in the industry, where Granada now controls 56 sites out of a total of 70 in Britain, or 80 per cent of the market.
"I don't think it's good for the industry that Granada is allowed to have such an extended time to deal with the disposal," Mr Ingram Hill said. "I'm surprised that it's been suggested that 15 months was ever an acceptable time."
Motorists can drive from the Channel ports to the Lake District and only encounter one service station not owned by Granada. The RAC recommends at least two stops on a journey of this distance. A similar situation exists on the M4 westbound from London.
Food and drink prices at Forte Welcome Break sites were increased by 3-5 per cent shortly after the hostile bid was declared unconditional earlier this year. The increases were part of a general repricing at Forte's Little Chef and Happy Eater sites and its hotel operations.
Granada already charges a hefty premium at its popular Burger King motorway outlets, which are operated on a franchise basis. According to an investigation by the Independent, prices for a Whopper Meal (a large beefburger, a portion of chips and a regular drink) can be as much as 35 per cent higher on the motorway than in the high street.
For instance, a meal in Baker Street, central London, costs pounds 3.05, while Granada's Cherwell site on the M40 charges pounds 4.88. In some cases, a family of four could save pounds 4 by leaving the motorway and purchasing four Whopper meals at a nearby Burger King. The outlet in Banbury is just 10 minutes drive from the M40 Cherwell site, but charges pounds 3.88 per meal, pounds 1 less. The savings are even greater along the M6, where a Granada Whopper Meal at Stafford costs pounds 4.25, compared to just pounds 3.19 in the high street at Stoke-on-Trent.
Granada last night defended its pricing policy. "We do charge premium prices," Graham Wallace, chief executive, leisure and services, said. "But we invest significant money to build our sites, and must meet stringent conditions set by the Department of Transport on the quality of the product and the environment. No other Burger King in the country has to meet our conditions on toilets, car parks and so on."
A Burger King spokeswoman said: "You pay a little more for the convenience. Franchisees are at liberty to charge what they see fit, according to market forces."
Mr Wallace added that the price differential between the motorway and the high street had remained relatively constant over the past year.
Critics of Granada's dominance point out that the lack of competition allows the market leader to establish and then defend sharply higher prices. Road Chef, which offers the Wimpey brand on its sites, charges a far smaller premium to high street prices, according to a survey by the Independent.
Mr Wallace reiterated Granada's promise to find a buyer for Welcome Break "within a finite period''. He added: ''It doesn't do anybody any good to rush a sale."
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