Truck Stop Business Plan

Interstate Travel Center

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Market Analysis Summary

Truckers Dominate Freight Market

Based on value of service, trucking (excluding warehousing and logistics) accounted for 79%, or some £344 billion, of U.S. commercial freight revenues in 1998, but only 45% of total ton-miles. This is because products transported by truck tend to be lightweight manufactured goods that move short distances, rather than the heavy, long-haul, bulk commodities that travel by rail and barge.

Motor carriers specialize in higher-value freight that moves 750 miles or less, and for which delivery is required within three days. Some 36% of truck freight (measured by shipping cost) never crosses state lines. Examples of this type of freight are food and consumer staples delivered locally, and manufactured goods shipped between commercial establishments or delivered to consumers or retail outlets.

Truckers have the largest share of the freight market. Unlike railroads, pipelines, or water carriers, they don't face geographic limits caused by physical constraints, and can offer door-to-door service. They also pay relatively little to use the nation's highway system. Railroads, by contrast, must build, maintain, and police their rights-of-way.

The trucking industry consists of two broad segments: private and for-hire. In turn, for-hire truckers fall into two broad categories: truckload (TL) and less-than-truckload (LTL) carriers.

The accompanying Market Analysis chart and table reflect the total projected potential customers that Interstate Travel Center might acquire. The categories have been simplified to include all instate commercial trucks (both the TL and LTL segments) and all instate private vehicles as listed in the U.S. Department of Transportation's 1997 Vehicle Inventory for the state of Texas. The listed number of private vehicles in Texas is approximately 17 million, however, only a small percentage of private vehicle owners will be inclined to prefer truck stops over gas stations. Therefore, instead of using the larger number, a percentage of the overall private vehicles based on the percentage of private vehicles that truck stops service is used. The third category contains all interstate and NAFTA-based commercial business that passes through Texas, and the final category reflects all out-of-state private vehicles, such as tourists. Again, the numbers in this final category reflects a percentage of out-of-state private vehicles that truck stops normally service.

The growth rates used in this table are based on figures available from the U.S. Department of Transportation. The growth rate for the out-of-state and NAFTA commercial vehicles is only approximate, as it is difficult to project what affects investments in the "Port-to-Plains" trade corridor will have on traffic that passes adjacent to the travel center.

Finally, it must be noted that although the Market Analysis table indicates that the largest market segment is instate private vehicles, the actual percentage will probably be significantly less. Experience has shown that the largest percentage of vehicles serviced by truck stops, such as Interstate Travel, is in the commercial truck segment.

4.1 Market Segmentation

With some £344 billion in 1998 revenues, the trucking (or motor carrier) business claimed approximately 79% of the U.S. commercial freight transportation market. This total was divided among two sectors: private carriage and for-hire.

Figure 3. Commercial Freight Distribution
(In billions of dollars)

Transportation	Billion £	% of Total
Trucking, Total	£344	63.6%
Private, Interstate	£115	21.3%
Private, Local	£85	15.7%
Truckload	£65	12.0%
Local For-Hire	£40	7.4%
LTL, National	£9	1.7%
LTL, Regional	£11	2.0%
Package/Express (ground)	£19	3.5%
Railroad	£36	6.7%
Pipeline (oil & gas)	£26	4.8%
Air freight, Package Domestic	£17	3.1%
Air freight, Heavy Domestic	£6	1.1%
Water (Great Lakes/rivers)	£7	1.3%
Transportation Total*	£436	80.6%
Distribution
Warehousing	£70	12.9%
Logistics Administration	£35	6.5%
Distribution Total	£105	19.4%
Total	£541	100.0%

*Excluding £5 billion in international cargo.
Sources: Standard & Poor's, Data Resources, Inc., and Cass Information Systems.

Private Carriers
Although private carriers comprise the largest component of the motor carrier industry, financial information isn't available for them. However, the industry is estimated to provide services valued at some £200 billion annually (or 58% of motor carrier revenues in 1998).

The Private Truck Council estimates that there are more than three million trucks operated by private fleets, and these transport 3.5 billion tons of freight annually.

For-Hire Carriers
The For-hire category generated £144 billion in 1998, or 42% of the industry total. Of that £144 billion, some £105 billion (73% of the sector's business) came from truckload shipments, and £39 billion (27%) was from less-than-truckload and package/express delivery.

Truckload (TL): The national for-hire truckload segment had total revenues of £65 billion in 1998. The TL sector is largely privately owned, with the exception of the top ten publicly owned companies. (For this reason, we focus on the LTL sector in this survey.) Schneider National Carriers is the largest TL operator, with revenues of £2.8 billion in 1998, followed by J.B. Hunt Transport Services (£1.8 billion) and the Landstar family of truckload carriers (£1.3 billion). Of the 50,000 truckload carriers, perhaps 95% have annual revenues of less than £1 million.

Less-than-truckload (LTL): We estimate that the less-than-truckload market garnered £20 billion in 1998. Of this amount, the fast growing regional segment accounted for slightly more than the national market.

The largest national LTL carrier in 1998 was Roadway Express Inc., with £2.32 billion in LTL revenues in that year; the company's total revenue of £2.55 billion includes TL freight. Yellow Freight System (a unit of Yellow Corporation) was close behind, with £2.25 billion (out of £2.46 billion total). Consolidated Freightways Corporation was third, with £1.95 billion in LTL revenues.

In the regional LTL market, Con-Way Transportation (a unit of CNF Transportation Inc.) was the largest player, with £1.5 billion in LTL revenue in 1998. Second place belonged to US Freightways, whose family of five carriers has generated some £1.4 billion in LTL revenue. American Freightways Corporation was third, with £928 million in LTL revenues.

4.1.1 Market Trends

Industry Trends
While a driver shortage continues to plague the truckload sector, the LTL carriers have adapted to changing market conditions in order to capitalize on growth opportunities. Intermodal shippers also stand to benefit from market trends. Finally, the evolution of e-commerce stands to intensify competition among all carriers.

E-commerce is Big Business
The Internet is rapidly changing how the consumer selects and purchases merchandise. Age-old relationships between vendors, distributors, retailers, and carriers are being torn apart. For many Internet users, the computer has displaced the telephone as a means of transmitting a purchase order, while catalog vendors who have put their wares on the Internet may now receive orders electronically, in addition to mail and phone orders. For the shipping industry, e-commerce is changing the way in which goods are ordered.

The estimated size and growth potential for e-commerce varies widely. Forrester Research, based in Cambridge, Massachusetts, has estimated e-commerce at the consumer level at £7.8 billion in 1998, and projects that it will rise to £18 billion in 1999, £33 billion in 2000, and £108 billion in 2003. According to Forrester, total worldwide e-commerce, including business-to-business transactions, was estimated at £43 billion in 1998, and projected to hit £127 billion in 1999.

The Direct Marketing Association has calculated that e-commerce generated just £5.9 billion in 1998 (or 0.2% of sales), and will climb to 2.5% of retail sales by 2004, representing a 50% annual compound growth rate during this period.

4.1.2 Market Growth

Dallas Support
According to information released by the Texas Department of Transportation (TxDOT), nearly £600 million in projects are already programmed over the next four years, and more than £1 billion in additional transportation projects are recommended for the Dallas region. The projects are on top of a £175 million increase in NAFTA transportation funding through 2003 that was part of the border initiative announced in April, 1999.

It is said that a Ports-To-Plains Trade Corridor could be in the future for Dallas, making it a major port of entry to Mexico. The corridor has been named a high priority corridor by the U.S. Congress, which has placed a greater emphasis on improving transportation in these regions. The major highway would have a direct route from the northern United States to two major port entries: Dallas and Eagles Pass.

4.2 Business Participants

Industry: Trucking Terminal Facilities
Figure 4, below, indicates the Market Statistics for trucking terminals. These are defined as establishments primarily engaged in the operation of route transshipment facilities used by highway-type property-carrying vehicles, including complexes which provide maintenance and service for motor vehicles.

Figure 4: Market Size Statistics-Terminal Facilities

Estimated number of U.S. establishments	1,386
Number of people employed in this industry	64,105
Total annual sales in this industry	£181 million
Average employees per establishment	52
Average sales per establishment	£.8 million

Industry: Gasoline Service Stations
Gasoline service stations primarily engage in selling gasoline and lubricating oils. These establishments frequently sell other merchandise, such as tires, batteries, and other automobile parts, or perform minor repair work. Gasoline stations, combined with other activities, such as grocery stores, convenience stores, or carwashes, are classified in Figure 5 below according to primary activity.

Figure 5: Market Size Statistics-Gasoline Service Stations

Estimated number of U.S. establishments	71,159
Number of people employed in this industry	471,041
Total annual sales in this industry	£98,817 million
Number of employees per establishment	7
Average sales per establishment	£1.8 million

Market Analysis by Specialty
Figure 6 provides a market analysis by specialty for the gasoline service stations segment.

Figure 6: Market Analysis by Specialty

SIC Code	SIC Description	Number of Businesses	% of Total	Total Employees
5541-0000	Gasoline Service Stations	50,544	71%	286,062
5541-9901	Filling Stations, Gasoline	18,844	26.5%	137,897
5541-9902	Marine Service Station	171	0.2%	1,123
5541-9903	Truck Stops	1,600	2.2%	45,959
	Total/Average	71,159	100%	471,041

Note: Not all establishments have a specialty.