Rating Manual section 6 part 3: valuation of all property classes

Section 880: roadside restaurants

This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.

1. Scope

1.1 This section refers to Roadside Restaurants SCAT code 238. In previous guidance these were identified as Little Chef sites but some of these same premises are now occupied by recognised Drive-To brands. There is therefore a degree of overlap with instructions contained in RM 5: 365 (Drive-To and Drive-Thru Restaurants) and it is recommended that valuers should be familiar with both sections of the Rating Manual.

1.2 The principal difference to note is that the Roadside Restaurants, intended to be identified and valued in accordance with this instruction, serve the passing motorist. Little Chef branded sites still exist. At some of the larger main road service area sites there are recognised Drive-To brands alongside Little Chefs in the same amenity building and the two outlets are in the same occupation with one or both operated as franchises. In addition, some former Little Chef sites have changed branding and ownership and are now occupied solely by coffee and fast-food chains.

1.3 Some former Little Chef sites are occupied by independent restaurateurs. Again, because of their location, they serve the passing motorist. These sites should not be confused with destination restaurant premises which also may be situated by the roadside. These types of properties do not fall within the scope of this instruction and should be considered in accordance with Rating Manual - Section 6: Part 3: Section 875 : Restaurants.

1.4 Roadside Restaurant sites are usually signposted ‘Services’. The following types are typical:

1.Converted houses, usually with extensions in isolated A road locations. The poorest Little Chefs tend to be like this. Some of these have been taken over by fast food chains but they are more likely to be occupied by local restaurateurs when they change hands. 2.Converted houses as above but with petrol stations adjacent that are usually not in the same occupation. These are most likely to be occupied by Little Chef or another fast food chain or a coffee chain. 3.Purpose-built premises situated alongside other main road services such as petrol stations, motels and other cafes/ restaurants. The facilities together are known as a ‘main road service area’. There will be public toilets. The Little Chef occupation will sometimes include kiosks or a gaming area.

1.5 This guidance excludes Motorway Service Stations SCAT 194 Rating manual - Section 6: Part 3: Section 710: Motorway Service Areas/ Major Road Service Areas.

1.6 Key attributes are:

  • Built or adapted primarily to cater for the needs of the passing motorist.
  • Prominently sited on through routes with heavy traffic, often adjoining petrol filling stations or travel lodges.
  • May enjoy a relative monopoly position in a rural location, away from competing or comparable commercial users.
  • Adequate on site parking.

2. List Description & Special Category Code

Primary Description Code: CR
List description: ROADSIDE RESTAURANT AND PREMISES
SCAT code: 238
Suffix: G (Generalist)

3. Responsible Teams

3.1 Roadside Restaurants are a Generalist class. Responsibility for inspection, survey and valuation rests with the Generalist referencers and valuers.

3.2 For Reval 2017, it is anticipated that each Unit will have a named individual responsible for the class. More than one named individual is recommended for succession planning.

3.3 It is also recommended that each Unit should allocate a named co-ordinator, or Lead Valuer, to act as a point of contact within the Unit. This Lead Valuer will be responsible for assisting in the delivery of the Unit’s valuation scheme and also for liaising on value and technical issues with other Lead Valuers across adjoining Units. The Lead Valuer will be responsible for attempting to ensure compliance with this guidance.

4. Co-Ordination

4.1 The Drive-To and Drive-Thru class co-ordination team (CCT) has overall responsibility for this class. The team considers the overlap with the Roadside Restaurant class, as does the Restaurant CCT. The Restaurant team is responsible for the approach to and accuracy and consistency of valuations.

4.2 Caseworkers have a responsibility to:

  • follow the advice given at all times – Practice Notes are mandatory
  • not to depart from the guidance given on appeals or maintenance work, without approval from the co-ordination team
  • seek advice from the co-ordination team before starting on any new work

4.3 It is envisaged that co-ordination within and across the Units will be necessary to ensure consistency of approach. Unit/ Specialist co-ordination may also be necessary where a recognised ‘Drive-To’ brand is occupying a traditional Roadside Restaurant site.

5.1 For the 2005 List, Roadside Restaurants such as Little Chef were valued in accordance with a national scheme based on trading receipts. This approach dated from a time when they were occupied and assessed together with adjacent motels and petrol filling stations. But nowadays these three elements are usually occupied and assessed separately.

5.2 In the 2010 List it was considered that there was sufficient rental evidence to value on the rentals method. This method of valuation was challenged by ratepayer representatives and there are two Valuation Tribunal cases where the rentals approach was tested:

5.3 Little Chef No LC 123, Great North Road, Skeeby, Richmond, North Yorkshire DL10 5EQ

Appeal Reference 272022267842/539N10

The decision in this case was to determine a revised assessment supported by a rental method valuation adopting a £/m² from a consideration of the most suitable rating comparables.

5.4 Warminster Services, Bath Road, Warminster, Wilts, BA12 7RY

Appeal Reference 394023621506/541N10

Paragraph 11: “…the Panel was satisfied that the rental method of valuation, as adopted by the VO for the 2010 rating list for roadside restaurants, was appropriate in this case…”

5.5 In each case the agent argued for a receipts based valuation based on the percentages adopted for the 2005 List. In both cases the VT decision has been to adopt the rentals approach. Neither case has been appealed to the Lands Chamber of the Upper Tribunal.

6. Survey Requirements

6.1 Inspections should be carried out in accordance with the Valuation office Agency Code of Practice.

6.2 Previous advice has been to data capture areas on a Net Internal Area (NIA) basis with Gross Internal Area (GIA) also being noted so as to enable comparison with Specialist property.

6.3 Roadside Restaurants should be measured to GIA for rating purposes in accordance with the RICS Code of Measuring Practice 6th edition or its replacement. Gross Internal Area (GIA) - Measurement definitions - isurv

6.4 In the absence of rental evidence, direct assistance can be derived from Drive-To sites where rents are analysed to GIA.

6.5 Historically different valuation scales have been adopted around the country and in different Billing Authority areas within Units. Also, air conditioning, parking and outside seating have been treated differently, sometimes reflected in the main space value and sometimes valued as other additions.

6.6 This guidance note recommends adherence to the following practices for data capture and recording in the Rating Support Application (RSA):

6.6.1 Air Conditioning

A description of the air-conditioning system should be recorded with the inspection notes. The distribution of the air-conditioning units should be shown on the plan saved in EDRM. Details of any air-conditioning systems should be noted in survey data remarks in RSA including a description of the type of system, the number of units and what areas are covered.

6.6.2 Sprinklers

Fire protection systems, sprinklers etc found on inspection should be recorded on the survey and a note made in survey data remarks in RSA.

6.6.3 Car Parking

Details of the number of car parking spaces should be noted on the survey saved in EDRM. The number of spaces should be entered in the appropriate part of the survey data in RSA.

6.6.4 Outside Seating

A description of the outside seating area should be recorded with the survey saved in EDRM. This information should also be copied into the survey data remarks in RSA including the total area, type of hard surface and number of place settings.

6.6.5 Plant and Machinery

Details of any items of plant and machinery present should be included in the inspection notes. Each item should be recorded individually in RSA. The most likely item to be found at these premises is CCTV cameras. For rateability and valuation, reference should be made to the 2017 cost guide.

6.7 Quality

Adjustments should not be made for quality other than in exceptional circumstances.

6.8 Key rents

All properties where a key rent has been identified must be inspected.

7. Survey Capture

7.1 Rating surveys should be captured on the Rating Support Application (RSA) and the completed checklist, plans and survey sheets stored in the property folder of the Electronic Document Records Management (EDRM) System.

8. Valuation Approach

8.1 The comparative rental approach is the principal method of valuation to be adopted as a significant body of rental evidence exists. It will be necessary to adjust inclusive rents in terms of rateable value. When adjusting and analysing shell rents it is recommended that there be a 10% fit out addition.

8.2 Rents being paid by Little Chef franchisees are not usually at-arms-length. Each transaction should be scrutinised for connections between the parties.

8.3 Rents paid by new occupiers should be adjusted for fitting out costs where appropriate. If fitting out involves more than just a corporate make-over, full details of fitting out costs, including additional floor space provided, should be sought, with a breakdown between rateable and non-rateable works if possible.

8.4 The two approaches to data capture and valuation recommended are as follows:

GIA (preferred method of measurement)

Valuation Scale VVSDRIVEIN1
Parking reflected
Air Conditioning reflected
Outside Seating reflected

NIA

Valuation Scale WSPROVA31
Parking added as car spaces
Air Conditioning valued as an other addition
Outside Seating valued as an other addition

9. Valuation Support

The following sources are available to Referencers and Valuers dealing with the maintenance and defence of Roadside Restaurants.

  • Rating Support Application (RSA)
  • Survaid
  • Class Coordination team for Drive To, Drive Thru and Roadside Restaurant
  • National Specialists Unit

Appendix 1

This inspection checklist should be used for Drive-To; Drive-Thru and Roadside Restaurants and completed on site. Whilst carrying out the survey special attention should be given to the following features:

 Drive-To, Drive-Thru and Roadside Restaurants: INSPECTION  CHECKLIST (GIA) Inspections should be carried out in accordance with the Valuation Office Agency Code of Practice.  
Occupier/ Name of establishment/ Name of Franchisee.  
Address including postcode:  
Drive to/ thru type:  Purpose built or converted      eg: Public House, Retail Warehouse.  Planning: Record Use class on RSA survey.  
Location: Main road, Retail Park, Leisure Park etc (Name of Retail Park/Leisure Park) If on retail / leisure park please note position especially in relation to other Drive-to , Drive-thru's. Whether in a residential area and the degree of affluence Nearby amenities and leisure uses for example cinemas and tourist attractions. Any restrictions on access; Any year round or seasonal trade restrictions If remotely located note whether a 'destination' establishment.  Why do customers visit? Photographs should be taken to show the immediate surroundings.     
Car Parking: as part of hereditament - Car parking for use of customers, noting number of spaces and location, access and restrictions.  Parking facilities nearby: Car parks and availability of on-street parking.  
Opening Hours:  24hr opening? Tenure: If rented the amount payable, when effective and basis agreed, lease term and if any incentives and other factors affecting the rent.   
Areas for private functions:  separate from the main dining area. Play/Party areas etc.  
Building - External Construction.  Approximate age; whether the property is a Listed Building; any particular architectural features. Purpose built; Main structural alterations - for example if converted from previous use.  Number of floors; position and prominence of property and any particular aspect. Access and limitations to entrance. Photographs should be taken of the main elevations of the front and rear of the property  
Outside:  External ancillary areas such as gardens, terraces and smoking facilities. Outside seating areas - noting amount and whether part of the hereditament or not. Note the characteristics of the Drive Thru lane(s)  
Building - Internal    
Refurbishment                                        Date restaurant refurbished    
Fitting out Any tenant's improvements and fitting out works.  Whether excluded from the rent paid.  Obtain costs where possible.    
Accommodation GIA: main space to include the restaurant, food preparation and kitchen areas to include all staff accommodation. Structure and quality of finish Whether the premises are predominately non-ground floor Levels of floors (eg GF; FF) Natural lighting – Good Natural light or lacking Layout of public areas Chiller / Freezer Pod: Where freezer and chiller pods are attached to the building these should also be measured to GIA but recorded as an ‘other addition’. These pods are attached to the main building and the cladding often matches the outside decor, however these pods are prefabricated off site and transported to the site and connected to the main building. Outside storage units either purpose built or containers should be measured to GIA and recorded as a separate line entry. Whether there is any unused/ surplus space Any passenger or food lifts A record of any Wi-Fi and the provider recorded if this can be identified and requires a separate unit of assessment. Any Disability Discrimination Act adaptations. Photograph examples of the main accommodation uses, including the dining area, kitchen and servery.      
Plant and Machinery Details of any items present should be noted. For rateability and valuation, reference should be made to the VOA Rating Cost Guide. [Rating Manual - Section6 - Part 5 - Plant and Machinery](https://www.gov.uk/guidance/rating-manual-section-6-chhallenges-to-the-rating-list/part-5-plant-and-machinery)      
Fire Precautions Sprinklers Security CCTV    
Air Conditioning (age) Cassette or ducted. Extent of area covered. Air-conditioned areas need to be identified separately on the survey. Record make of system.  Heating. Fuel. System            
General remarks      
Date of survey   Survey by:  

Practice note: 2017 - Roadside restaurants

1. Market Appraisal

1.1 Little Chef was established as a chain of roadside restaurants in the UK in 1958, modelled on American diners. The chain expanded rapidly in the 1970s and 1980s and acquired Happy Eater in 1986. At its peak the chain included 439 restaurants including Little Chef branded outlets at motorway service areas. Most of the restaurants were on A roads and often paired with a Travelodge motel and a petrol station. Numbers of sites have reduced to under 100.

1.2 Little Chef has been owned by different companies over the years. In October 2005 Little Chef and Travelodge were sold and split.

1.3 From inception the chain had little competition but gradually more and more main roadside restaurants have been built for chains such as McDonalds, KFC and Burger King. Refurbished petrol filling stations have opened shops such as Marks and Spencer Simply Food and the Wild Bean Cafe concept. Coffee chains such as Costa and Starbucks have opened premises for motorists. The sandwich/ coffee and fast-food markets have grown at the expense of the sit-down diner. With the construction of more motorways it is also the case that A roads have become used less for long-distance travel.

1.4 In April 2013 R Capital offered 78 Little Chef outlets to the market.

1.5 Some key dates post 1st April 2008 are as follows:

Mar 2008 Plans to revamp the brand began involving the Michelin starred chef Heston Blumenthal. The Popham branch of Little Chef was one of the first to trade with a new menu.
Nov 2011 The chain announced plans to install electric vehicle chargers and a new range of signage was unveiled.
Jan 2012 Little Chef announced it would be closing 67 of its 161 sites across the UK
2013 EuroGarages took on the leases of five former Little Chef sites for conversion to coffee shops

1.7 There is rental evidence for former Little Chefs newly occupied by private restaurateurs and also coffee or fast food chain franchises. Having regard to local information is key to determining whether individual values are higher or lower than 2010 List assessments. Whereas two or three years ago there would have been a significant number of vacant sites, at 1st April 2015 this is no longer the case and therefore there should be rental evidence available from new occupiers.

2. Changes From The Last Practice Note

2.1 The 2010 Practice Note advised data capture to NIA and valuation on the comparative rental approach.

2.2 This Practice Note recognises that it will not be possible for all Units to alter the survey data to GIA in time for this Revaluation but recommends that this be carried out where possible. The comparative rental approach is still considered to be the correct method of valuation.

2.3 This Practice Note has the additional guidance that the best rental evidence will come from Roadside Restaurant sites and Drive-To restaurants and advises caseworkers to be clear on the differences between Roadside Restaurant sites which serve the passing motorist and other types of restaurants in the same general locality, in particular when identifying the rental evidence that supports the Roadside Restaurant valuation scheme for the Unit.

3. Ratepayer Discussions

3.1 Discussions with agents have not been undertaken for the purposes of Revaluation 2017.

4. Valuation Scheme

4.1 Valuations should be in an address based matrix across a range of Billing Authorities.

4.2 Where possible sub-location code ‘ROAD’ should be adopted.

4.3 Car parking should be reflected in the unit value and the car parking table WCREFLECT1 adopted.

4.4 There should be a separate ‘other additions’ table for this class.

Practice note 1: 2010 - Roadside restaurants

1. Scope of Practice Note

This Practice Note refers to Roadside Restaurants that are not occupied by a recognised “Drive-in” brand. Drive-in and Drive-thru Restaurants appear in RM5: 365.

2. Co-ordination

For Roadside Restaurants Special Category Code 238 should be adopted.

Roadside Restaurants are the responsibility of Groups (suffix G) unless operated by a recognised “Drive-in” brand where they will be the responsibility of SRU (suffix S).

Co-ordination responsibilities are set out in Rating Manual Section 6 - Part 1.

It is envisaged that co-ordination within and across Groups will be necessary to ensure consistency of approach. Group/SRU co-ordination may also be necessary where a recognised “Drive-in” brand is occupying a traditional roadside restaurant site.

3. State of the Market

Over recent years the number of Little Chef sites has been falling. In 1993 there were 450 sites nationally and by February 2004 this had fallen to 375. However, by June 2008 the number had more than halved to 184, which included Motorway Service Areas (see 4 below) and Scottish sites.

Little Chef, which was founded in 1958, no longer has the market presence that it once enjoyed.

4. Valuation Approach

Historically, there has been limited evidence of open market rents on Little Chef Roadside Restaurant sites as they have been predominantly subject to ground rents. As a consequence, since the 1990 List, the valuation approach for sites occupied by Little Chef has been a rental approach based on a percentage of Fair Maintainable Receipts.

However, where the occupier was not Little Chef, these sites have been valued on a rentals basis in line with other restaurants in the locality.

With the limited number of Little Chef sites now operating, it is not considered appropriate to continue to adopt a different approach for this operator. It is therefore recommended that a comparative rental approach be adopted for all roadside restaurant sites. This will require data capture of the relevant survey data and the Restaurant section of the Rating Manual (RM5:875) should be referred to for this and for valuation approach.

For the avoidance of doubt, areas should be data captured on a Net Internal Area (NIA) basis. However, to enable comparison with SRU sites, it is recommended that the Gross Internal Area (GIA) is also noted.

5. Motorway Service Areas

Where Little Chefs are located on Motorway Service Area (MSA) sites the occupational facts will need to be checked to determine the rateable occupier. In many cases, they will be occupied by the MSA operator under a franchise from Little Chef and will be correctly included in the MSA assessment. Reference should be made to the MSA section of the Rating Manual (RM5: 710).