Operators who move with the times will prosper, pubcos say
The positive assessment came from both Scottish & Newcastle Pub Company and LT Pub Management last week, with both firms citing a combination of factors they reckon have influenced market conditions for the better.
Acknowledging that the economy isn’t out of the woods yet and trading conditions in the pub sector remain tough, S&NPC’s Ken McGown and LT Pub Management boss Billy Buchanan said there’s no shortage of opportunities for existing and potential lessees.
The stock of outlets available for lease is reckoned to have risen post-recession. That pubcos have upped their game in terms of the support they offer lessees, the transparency of their leasehold agreements and the flexibility of deals available are also said to have contributed to the positive market conditions.
There are still great opportunities to make money in this sector but operators have to up their game.
Although he acknowledges that securing funding from banks remains an issue, McGown said the capital required to take on a pub lease compares favourably to some other business sectors.
“Unfortunately there is no magic answer – you can’t take on a business with nothing,” he told SLTN.
“And with any business cash flow can be a difficulty at the start so being properly funded is essential.
“Lending is still tight but I think the banks are like that with all businesses, not just pubs.
“But the entry costs for running a pub are still pretty low, especially when it often includes accommodation.
“Potential lessees really have to do their homework and understand the financials.”
In a bid to help its new and existing lessees make the most of these opportunities, S&NPC, which has an estate of 1350 pubs in the UK – 130 in Scotland, has ramped up the support it offers.
Its Bar Boosters scheme is designed to help operators tap into alternative revenue streams, from dry cleaning to groceries. And it has just implemented a new approach to pub signage (see page 30), which it reckons will help make the exteriors of outlets more appealing to consumers.
McGown said the pubco is challenging its lessees to think about how a pub should operate.
“Being one dimensional is not an option,” he added.
“Trading conditions are tough, there’s no doubt about it. But operators need to realise the industry is changing, customer tastes and lifestyles are changing.
“People’s expectations are higher generally and there’s much more leisure choice at home now so operators have to up their game, whether that’s on beer, wine, entertainment, cocktails.
“You’ve got to challenge the way you operate and think a little bit wider – and that applies to all types of outlet.
“I think people sometimes have this romantic idea about running a pub.
“It’s hard work but there are still great opportunities to make money in this sector. We’re there to support our lessees where we can; if it’s working for them it’s working for us.”
It’s an approach shared by Billy Buchanan at LT Pub Management, which has an estate of 1150 tenanted and managed pubs across the UK.
In Scotland, the firm currently manages an estate of more than 100 tenanted outlets that were part of R&L Properties, as well nine former Castle Inns managed outlets on behalf of the administrator, Deloitte.
Buchanan told SLTN the firm has upped its support for tenants in the pubs it runs.
Although lessees are ‘tied’ to buy from LT, he said the firm buys from a range of suppliers; it’s also supplying tenants with glassware and bar kits for events like Halloween and Christmas.
Pubcos have upped their support for lessees; they don’t want them to fail.
Buchanan reckons anyone taking on a pub lease now has timed it just right.
“I think it’s a good time to go in – the opportunities are there for good pubs with good ideas,” he told SLTN.
“We must be pretty close to values kicking back up again.
“A lot of the pubs that are available are good businesses and it’s still a good way to make a living.
“I’d say anyone taking on a lease now is getting in at the right time.”