Waitrose provides a Welcome Break

What do you use a motorway service area for? A comfort break? Perhaps a chance to check emails or phone ahead to your destination? Perhaps a night’s break before continuing your journey - or maybe a chance to avoid the supermarket queues at home and pick up some groceries on the way home?

Waitrose is entering into a franchise agreement with Welcome Break to open up food stores in some of its motorway service stations. It is another sign of how food retailers are looking to extend their reach away from the superstore and also how businesses are responding to our changing needs and wants when we set off on long haul drives on our major roads.

The motorway service station experience that we now expect in the UK has travelled a long way from the dismal standards of the 1970s and 1980s. True the range of services provided varies enormously - there are some service stations where you have to wipe your feet on the way out rather than on the way in - but increasingly we assume that a stopping off point will offer wireless access, the option of a comfortable hotel room and at least the chance of some decent food-to-go rather than the outrageously over-priced crap from tired fast-food outlets that was the only option just a few years ago. Whitbread (through their Costa Coffee and PremierTravel Inn brands), Marks and Spencer (with their Simply Food brand) have both made sizeable in-roads into the market for food at motorway service stations.

And now Waitrose is getting in on the act - starting with a food store at the Oxford Services at Junction 8a on the M40, followed by a second due to open in the middle of May at South Mimms on Junction 23 of the M25 - both of which are potential gold mines.

A few economics-related points about motorway service areas (MSA):

First - each MSA effectively has a local monopoly - it is rare for motorists to consider driving off road for a few miles to find a local town for their petrol, food and drink. And there is usually at least ten or fifteen miles between each MSA.

Second - the MSA market as a whole is best described as an oligopoly. The majority of motorway service stations in the UK are now owned by three companies, Moto, Welcome Break and RoadChef, as well as the emerging player Extra.

Third - as you might expect given the potential monopoly profits from operating service stations, the MSA market is tightly regulated - in this case by the Highways Agency prohibits MSAs from building sites bigger than 5,000 sq ft on one side of a road.

Fourth - the arrival of well known high-street food and drink brands into motorway service areas does not mean that you will necessarily pay the same price for a latte or for your fresh salad as in a standard store. Both the owners of motorway service areas and the retailers themselves justify higher ‘travel prices’ on the extra costs of servicing outlets by the roadside - Highways Agency regulations mean that they must provide a 24-hour food and fuel service, have a minimum number of car parking spaces and provide picnic and toilet facilities.

Motorists have long expected prices to be higher - but at least we now get a better experience and a high quality - an improvement in dynamic efficiency!