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Wed 22nd Sep 2021 - Pret sets out plan to double size of business within five years backed by new £100m investment
Pret sets out plan to double size of business within five years backed by new £100m investment: Pret A Manger has set out plans to double the size of its business within the next five years, backed by a new £100m net investment from current backer JAB Holdings and co-founder Sinclair Beecham. The company said the plans, which include expanding into new international markets, growing its shop estate and investing in new digital capabilities, are the next phase of its transformation plan – a plan that shifts the business from “following the skyscraper”, to bringing Pret to more people across the UK and beyond. The new investment by JAB and Beecham come on top of the initial £185m net investment both made to support Pret through the pandemic. The business will expand its shop estate in the UK, with more than 200 shops due to be opened in the next two years, largely located in regional and suburban areas, and including circa 100 franchise sites. As previously revealed by Propel, the first major franchise partnership was signed with The Chesterford Group over the summer, with further agreements with another four franchisees expected later this year. The company said many of the new shops will be located in transport hubs and motorway service stations, further building on Pret’s existing partnership with independent forecourt operator, MFG, and motorway services operator Moto. As Pret expands, the company said it will roll out a recruitment programme, aiming to hire at least 3,000 team members and baristas by the end of 2023. This follows news last week Pret was increasing pay by at least 5% for its UK shop team members, in addition to the £1 mystery shopper bonus and free food on shift. The number of employees now working across the business has grown 28% since the start of 2021, with more than 6,000 employees in the UK alone. In accounts filed this week at Companies House, Pret will report its full-year revenue for 2020 was £299m, down from £708m in 2019. Pret’s operating loss for the year before tax and total comprehensive income was £256.5m during the same period. Over the last month however, the business said its recovery had gathered pace, with trade now “approaching pre-pandemic levels, once again making profit and a major recruitment drive underway”. The business said its regional shops were performing at their “strongest ever levels”, and London City shops had recovered to more than 72% of pre-pandemic weekly sales. A year ago this month Pret launched the UK’s first coffee subscription service, with customers able to enjoy up to five hot drinks every day for £20 a month. The move came alongside new retail partnerships with Tesco, Sainsbury’s, Amazon and other leading retailers to sell bake-at-home frozen croissants, granola, ketchup and coffee for customers to enjoy at home. The business said as it continues its transformation, it will continue to invest in its customer loyalty programme, while also putting a renewed focus on menu development and product innovation. Pret chief executive Pano Christou said: “Last year we were in the eye of the storm during the height of the pandemic. Now we have the chance to build a bright new future for Pret. What the pandemic has shown us is that even at the darkest moments, more people want to experience Pret – whether that’s customers outside of London and other big cities, new franchise partners who want to work with us here and overseas, investors in our business, or people who want to grow their careers here and be part of what we’re trying to build. It’s been an incredibly tough two years, but we have a big opportunity ahead. Last year, we delivered more change than in 30 years of Pret’s history. As we move into the next phase of our transformation, we want to keep the same pace of innovation, but use it to drive new growth. I would like to thank all the Pret team as we would not be in this position without their efforts through covid, as well as a special thank you to our loyal customers who have remained so supportive of our business over the past two years. We’re excited through our business transformation plan we can continue to serve both existing and new customers in more ways than ever before including through our coffee subscription, Pret-at-home ranges and our expansion into new regions. We also extend our gratitude to JAB and Sinclair Beecham, our founder, for supporting the Pret team and I know everyone involved with Pret is excited for what the future holds."

In conversation with Pret chief executive Pano Christou: Christou told Propel that staffing was a key challenge for the industry. In June to September 2019, Pret recruited 900 people. This year between June and September it recruited 2,000 and “we are still recruiting”. He said: “As the sales have stepped up, recruitment has stepped up. We are still looking to bring more people in, it is a challenge, but our recruitment teams are doing a terrific job. The way I look at it is Pret is a top quartile payer, we don’t pay by the hour, but by age. We are not a zero-hour contract employer. We have got the mystery shopper bonus, we have a great discount programme and are moving that back up from 25% to 50%. Equally as we look to grow Pret, it is a great place to grow a career – 85% of our managers started as team members. Unemployment is high, you have two million people who will come off furlough at the end of the month, so I think we need to get through that, but once there is no one on furlough and unemployment gets to below 3%, which I sense will be in a year or so, I think that will also become a different challenge. We will continue to evolve the Pret model to ensure we pay our people well. Equally we are looking at aspects of technology to deal with that over time. It is multi-faceted, our approach to this, but the challenges we have now, I enjoy more than the ones we had a year ago.”

Growth ambitions: Christou said: “Pret before didn’t do franchising, we didn’t work with partners or sell to supermarkets. These are areas we have looked at through covid, and as our core business is coming back on its feet, these new channels are continuing to grow. We have five well-experienced franchise individuals, who have run franchise businesses for many years who want to work with Pret and grow with Pret, and see the opportunity for growth, and we will learn a lot from them as well. We have Moto and MSG to grow with, as well as our own expansion plans for our company-owned shops. Yes, the City has been hit hard, yes it is slowest to recover, it is recovering, but will it get back to where it was in 2019? My sense is probably not, but shopping centres, suburban locations, retail parks have done really well for Pret and we don’t have many businesses in those areas at present. We had 400 stores in the UK and there are businesses that have 2,000-plus here so you have got to think that the brand can continue to grow in the UK. It is not solely a brand that appeals to white collar workers, it is one I believe that appeals to many different people, and there is something for all in Pret.” Christou said covid had “definitely sped up more opportunity” for Pret in terms of expansion. He said: “When your feet are to the fire and looking at opportunities to get the business back up on its feet, you look wide and hard at what opportunities are there. We have been blown away by the interest from potential franchise operators for example. We had 410 stores at the end of 2019, and we have 390 now. We have opened ten this year and will probably open another 20 before the end of the year. We have already got a line of sight on 100 locations pretty much firmed up.”

New international markets: Christou said he was “not at liberty to say what countries we are looking to go into right now”. He said: “But what I can say is that conversations have evolved quite a bit with people in Europe, Asia and the Middle East. We have developed a great business over the past ten years in France, it has grown significantly pre-covid and the team there has done a great job building the brand, and developing what I see as a world class supply chain. For our business the biggest challenge is developing a supply chain. We have a fresh produce supply chain, it is complex to develop, so for us it is looking at adjacent markets. That will be the easiest way to do it, to translate the brand across borders rather than going far and wide.”

Support: Co-founder Sinclair Beecham has always maintained a small shareholding and came forward when the business put in the initial £185m investment during the pandemic. Christou said: “He is a big believer in the brand. As a relatively new chief executive (Christou was promoted into the role three months before the first lockdown), he has been one of the individuals around me that have the insight, wisdom and experience to be supportive to me and the team. As have JAB.”

Vending: Earlier this summer, Propel revealed Pret was thought to be eyeing a launch into the vending machine category, after trademarking the name, Pret Express. Christou said: “I wouldn’t want to comment on that right now.”

Veggie Pret: For Christou Veggie Pret will be a long-term part of Pret. He said: “It is a great brand, but we are not looking to push it that far in terms of growing it right now. We are maintaining the shops that we have with Veggie Pret. As we get through covid, and we are still on the recovery curve, as we pull through that and get to what I would call a ‘business as usual rhythm’ then we will start to assess how we take that forward. Having Veggie Pret gets us to how we continue to innovate around plant-based food.”

Digital: From Christou’s perspective there is still “a lot more we need to do around digital and technology”. He said: “We launched the coffee subscription model here a year ago, and in the US last week, and we are looking to launch it into our other markets in the next few months or so. We are looking to do things such as loyalty programmes and there are other things we are looking at. But I think we have another year or so of further investment on technology to get us to where I think we need to be. We were quite late developers in this space.”

Pret features in Propel’s Turnover & Profits Blue Book, which has just been updated for Premium subscribers. Pret has turned over an average of £586m in the past five years. The Blue Book, which is produced in association with Mapal Group, provides a five-year overview of turnover and profit, ranks 410 companies according to turnover, pre-tax profit and profit conversion. It also provides details of directors’ earnings and highest paid directors. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £895 plus VAT – whether they are an operator or a supplier. The regular single subscription rate of £395 plus VAT for operators and £495 plus VAT for suppliers remains the same. Email to sign up

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