Subject: The tenanted pub company model, Gourmet Burger Kitchen and Scottish licensing
Authors: Paul Charity, Ann Elliott and Stephen McGowan
The tenanted model has made real progress by Paul Charity
I have to declare an interest in the current row over statutory intervention in the pub company model. I am a believer in the low-cost entry opportunity offered by the model. Back in the mid-1990s, when I was editing a weekly newspaper in deepest Lincolnshire, three of us took over a broken Inntrepreneur pub on a high street. This really was a low cost of entry – the previous licensee had scarpered and we were in for free. We pooled our spare cash and invested £10,500 in a refurbishment. The pub’s takings increased ten-fold and at the end of the first year it was producing profit of eight times my annual salary editing the weekly rag. Welcome to the pub trade! It was a sign of the period’s giddying pub property pass-the-parcel character that this pub swiftly moved through the hands of Phoneix and Unique before coming to rest with Enterprise.
We went on to operate pubs for four other tenanted pub companies, ranging from regional family brewers through to Punch Taverns, where the current chief executive of Everards, Stephen Gould, was our direct contact at the time.
Nothing untoward ever happened over the course of many years although there were times when we were irritated by the red tape and, at times, a lack of imagination. When leases came to an end, the larger companies tended to act with a slightly terrifying commercial ruthlessness when it came to charging you for dilapidations, frustrating when you’d handed a pub back in much better condition that you’d found it.
But, on the whole, it was a very positive experience, enabling me, in fact, to be mortgage free in my 30s. I gave up running local newspapers for a time to work in our expanding pub business full-time before moving back to media work after deciding I wasn’t entirely suited to the operational side of the pub business.
It was in 2004 when the first Select Committee met to examine whether tenanted pub companies where treating their tenants fairly. I think the scrutiny arose for the same reasons that the high street has been the subject of intense pressure in respect of responsible retailing. There was a time in the late 1990s when high street pubs were not run with the professionalism that prevails now. High streets in mid-sized East Midlands towns where we operated were a messy affair come late evening on a Friday or Saturday. The problem was one of high volumes of customers mixed with less-than-perfect control of premises – these were the days before doormen even needed a professional qualification.
For the very large tenanted pub companies, size itself has been a problem. They grew quickly and many bought pubs they shouldn’t have. Professional support for tenants was limited and far too many poor quality licensees were allowed to take pubs. Many half-decent pubs were sent marginal by the smoking ban, causing distress. One pub company chief used to talk about his business model being driven by the law of large numbers. But there came a stage where the law of large numbers began to work inexorably against the larger companies. Put simply, too many people lost money running tenanted pubs for MPs not to notice on a constituency-by-constituency basis. The name of certain companies cropped up over and over. Some of their bosses made terrible public relations blunders – and made enemies when they could have made friends. And business failure in a tenanted pub company context is a mutual failure – and when there’s a lot of it, questions, searching questions, deserve to be asked.
Tough economic conditions – and political scrutiny – have forced the major pub companies to reinvent themselves in recent years. Punch, for example, is unrecognisable from its former self. Vastly improved professional support and retail focus is the order of the day. I have spoken to around 140 Punch licensees personally in the past 18 months and only one had a complaint about Punch – and it related to a legacy issue. External avenues of redress are available for those who find themselves in conflict with their pub company. Large companies will continue to make mistakes and should, certainly, be subject to scrutiny. I have always believed that RPI clauses are upward only rent reviews by another name. And I think that the large companies should have made more progress in developing their best retailers. By now, the large estates should look more like the Domino’s network with the best retailers running more sites. In fact, too much talent has been squandered in the past. Right now, though, it looks like the lessons on nurturing talented retailers have been learnt.
But these are not issues that require government intervention, not least at a time when so much is changing for the better. It’s ironic that statutory regulation could well be on the way when professional standards have reached new heights in the running of the major companies.
Paul Charity is managing director of Propel Info
Gourmet Burger Kitchen is back to its best, argues Ann Elliott
I thought there might be a time when the world got fed up with burgers, but it isn’t going to happen any day soon. Ed’s Easy Diner is on a roll, Dirty Burger is really on trend, Patty & Bun is exceptional, Burger & Lobster has customers queueing around the block and Meat Mission is wonderful despite most of the burger (and its bits and bobs) falling into my lap when I eat there.
I would never have put Gourmet Burger Kitchen (GBK) on the list of ‘must eat burgers’ and we have never worked for them as an agency. Last time I went there it was cheap, tacky, sticky and totally unappealing. The sort of place that gave burgers a bad name. So then – what to say when about to have coffee with Alasdair Murdoch, chief executive of GBK?
This industry is full of fantastic, inspirational people and Alasdair is one of them. I don’t know him well but I was won over by his overwhelming enthusiasm for the brand and its future. He spoke with conviction, integrity and passion about his mission at GBK. I hadn’t appreciated that GBK has had such a fantastic time recently with double digit like-for-like growth on occasions and three times the market like-for-like growth for most of the year.
Alasdair has achieved this through intense focus on improving every element of the product – he has methodically explored each aspect of the brand and changed every element that hasn’t delivered to his exacting standards. GBK has identified where it needs to improve its value to guests, and addressed this. No stone has been left unturned.
He started off by looking at the burger and significantly improving its quality and its provenance – he can now say, with some pride, which specific farms supply his meat. He relooked at the bun so it’s a brilliant complement to his burger. He looked at all the accompanying sauces and ensured he had the best. It was the shakes though that got me – absolutely wonderful and moreish. I was challenged not to drink a whole glass and failed.
Alasdair’s energy feeds through to his team - he knew everyone in the restaurant and his enthusiasm and passion was evident in how he spoke to them. After listening to him talk for an hour or so, I am not surprised that the brand is outperforming the majority of its competitors. I’ve been reading Steve Job’s autobiography recently and Alasdair seems to share his immense attention to detail though luckily none of his more extreme personality flaws.
I know I am not the only one, but I judge the quality of a burger on how it tastes when naked – take the bun away and do you still have a product that tastes exceptional? I always order a naked burger in our local restaurant (Nelson’s in Buckingham run by ex-Ivy chef Louis Myhill. See the video ‘Louis and the restaurant’ to appreciate how it really feels to set up a restaurant from scratch. I have 15 copies to give away). It’s always fantastic because Louis applies the same attention to detail to his naked burger as he does a full dish.
I’m looking forward to the battle of the burgers immensely and to having Shake Shack in London. My last experience of Five Guys in the US was really poor so it will be interesting to see how that develops. Naked or full dressed, outstanding burgers are created by outstanding people. Let the battle begin.
Licensing in Scotland is an endless circle of reform by Stephen McGowan
Licensing is not so much a moveable feast as a quantum-leaping smorgasbord throughout the UK, and Scotland is by no means letting the side down. It is increasingly obvious that Holyrood and Westminster appear to be trapped in a circle of endless licensing reform.
The immediate example is of course minimum unit pricing (MUP). As a topic, this has done the rounds for some time and at present we are awaiting an appeal of the recent Scottish Court of Session decision which found that MUP was in fact legal, to the Supreme Court and onwards to the European Court of Justice. The Commissioner’s own views on this are expected shortly and may well be out by the time this article is published. Minimum pricing is in the Scottish National Party’s (SNP) doctrine and they will not relinquish it as a policy.
However, the SNP has committed to delay the introduction of MUP as law until the appeal process has been exhausted. Scotland may have had a referendum on independence from Westminster by then, and whether the next Scottish election is for an independent or devolved parliament there is no guarantee that the SNP will be returned. If Labour succeeds, MUP may die off as they were not supporters throughout the various attempts to legislate for it.
Another example of cross border provision-creep is “multi-buy” bans with England and Wales apparently considering this as a viable alternative to MUP. Those may be shifting sands however, because the Scottish provisions are so woeful that the ban does not apply to multiples of multipacks and only applies if a single of a product is also available. Both of these loopholes incentivise the operator to promote more, not less, thereby defeating the objective. Recent statistics leading to media reports that the multi-buy ban was the direct cause in a drop in consumption ignores the wider trends Propel readers will be aware of.
Then there is the English licensing authority consultations across the country on late night levies and early morning alcohol restriction orders (EMROs). Thankfully, we don’t have EMROs in Scotland and our version of the late night levy, the “social responsibility” levy, has been punted into the legislative long-grass, but is yet lurking there, with scowling eyes.
However it is not a one-way street. The Scottish Government released two consultations in late June 2013 – one to introduce a new licensing regime for venues with an adult orientation focus, which readers will know already exists down south; and another to explore a Scottish version of the “Primary Authority” arrangements concerning partnership between business and local authorities for achieving regulatory compliance.
There is more to come. A Scottish alcohol licensing consultation, which was in reality a sock-puppet policy totem crafted by Alcohol Focus Scotland, may yet reap all manner of licensing madness. There is talk of establishing a national licensing policy which would sit above all local licensing board policies. For “national licensing policy” read “health driven diktat”. This is of considerable concern. There are strenuous efforts at all levels to remove the local knowledge and decision making of locally elected, and therefore accountable, councillors who sit on the licensing boards in Scotland. The health lobbyists would have licensing boards close their minds entirely to such irrelevancies as sustainable growth in the local economy, job creation, civic and local amenity, tourism, and the human happiness which alcohol and the hospitality trade can engender.
Another proposal on the cards in Scotland is considerable new powers for licensing boards and police to mark certain parts of the cities of Scotland as dry zones in connection with football games. In fairness, some licensing board convenors have come out against the proposals but the idea that all pubs surrounding Celtic Park or Ibrox should be closed when there is a game on is ridiculous and ignores the fact many of the local businesses surrounding football stadia are entirely dependant on football trade. This proposal has arisen from yet another task group, the Joint Action Group on sectarianism, which resulted from an old firm game a couple of seasons ago at which the respective team managers did not conduct themselves very well. It may well be considered that the group has to be seen as having achieved something, and licensing is often a soft target.
The rumbling over licensing fees continues apace north of the border. We too are impacted by the EU Services Directive and the landmark outcome in the Hemming versus a Westminster City Council shop case earlier this year. The Scottish Government is in the process of a formal review of fees and this judgment should influence it. I note that there already calls for rebates on fees under the 2003 Act and I expect the Hemming pebble to cause ripples all the way up to John O’Groats.
Lastly, the public health objective continues to be an ungraspable nettle. As our “fifth” licensing objective, it is certainly the most controversial with the NHS now appearing at licensing hearings in various parts of Scotland to greater and lesser success. Licensing lawyers are now faced with reams of statistics with no causal link to particular premises. Yet there are even now calls by the health lobby to remove “causality” from the mindset of the Boards. It is, after all, a troubling little legal concept. Akin, perhaps, to natural justice.
Stephen McGowan is chairman of the British Institute of Innkeepers (BII) Scotland and a partner at TLT Solicitors. Visit www.TLTsolicitors.com