Serving food is crucial to rural pubs
Originally written by Jon Neale, this article has been updated and extended by Adam Bannister.
Britain’s 58,000 pubs are central to its society.
Ask any tourist about the appeal of the UK and pubs are likely to crop up, while Eastenders and Coronation Street wouldn’t be the same without their boozers.
The archetypal country pub, complete with ivy and timber frame, is the dream of many in the industry.
However, the entire licensed trade in Britain has undergone a revolution in recent years, driven by increasing importance of women, young couples and families to the trade. The Carling and Tetley’s pumps have been supplemented by a variety of British ales, continental lagers and New World Wines.
Service-orientated
Nevertheless, the process is still in motion. Run-down, old-school boozers still dot streets in every corner of Britain. Every week, they are bought up by eager visionaries and transformed (although sometimes into flats).
The fate of haunts traditionally frequented by working class men is inextricably, and terminally, tied to that of Britain’s heavy manufacturing industry. While their clientele grows older, the younger generation, who are more likely to work in creative and service industries, are going elsewhere for a drink – and they’re taking their girlfriends.
John York, southern recruitment manager for Punch Pubs, notes that “the whole industry has become more service-orientated. As a pub company, there is a move towards bigger outlets and the need to develop food or accommodation.
"Improving the offer is often linked to the segment of the population you’re trying to attract. It might involve converting an old boozer to a lounge-led food operation, which is more female-friendly."
It might also involve screening live football and rugby matches. You’ll have to pay for a licence to do so, but it could be a real money-spinner if you’re the only pub in the vicinity that does. Live sport is a big draw, and a regular one these days as there are football or rugby matches on television most days of the week.
You won’t find football on at gastropubs, which attract affluent young couples, often with children. These upscale pub-restaurants – where it’s out with the dartboard, Artex walls and pork scratchings, and in with the brown leather armchairs, Staropramen and sea bream – have flourished since their emergence in the early 1990s.
Gastropubs and other pubs which serve food have been better able to cope with the smoking ban that came into force on 1 July 2007.
The financial results of the Wetherspoons chain, whose pubs serve meals, seem to contradict this, with pre-tax profit down 13% in the half year to 31 January 2008. However, this figure was exacerbated by a difficult economic climate, despite which average weekly food sales rose from £7,900 per pub to £8,600, partly offsetting the losses.
And, being at the budget end of the spectrum, Wetherspoons attracts drinkers from low-income groups, among whom rates of smoking are higher. Therefore the smoking ban is another development, along with tax hikes on alcohol, making it more difficult for what is now derided as the ‘old-man’s pub’.
Off-trade
However, for pubs with large beer gardens the smoking ban may have been a boon, especially if theirs is the best – or only – one in the area. Having some sort of outdoor seating, or the space to accommodate some, should therefore now be a consideration for anyone considering buying a pub.
Not all government legislation has complicated the life of a publican. Public houses were given the chance to boost revenues when 24-hour licensing was introduced in 2005. Few applied to extend their hours, however, with the average pub opening time increasing by a mere 21 minutes.
But before you consider applying for an extension beyond traditional hours, you need to ask yourself whether enough of your customers will stay beyond 11pm to make it worthwhile. And are you willing to extend your already long working hours?
Times have become tougher for the pub trade, with 27 closing each week, according to the British Beer & Pub Association. More people are drinking at home because of the smoking ban, the social stigma attached to drink driving and bargain-basement prices in the off-trade.
Pubs are set to become even more unaffordable for low income groups after swingeing tax rises were applied to beer, wine and spirits in the 2008 Budget.
This is also a business sensitive to economic downturns – demonstrated by the 6% drop in beer sales in 2007.
Nevertheless, this is still a massive industry, and massively important to the British people. Around 15 million people – about a third of the adult population – go to pubs every week, and 58% of British people consider pubs to be a national institution and an important part of their cultural heritage, according to a YouGov poll for the British Beer & Pub Association.
Many pubs are still extremely lucrative, even though today’s pubs sell 14 million fewer pints a day than at their peak in 1979. Offering food seems to be pivotal to profitability, with 80% of pubs now serving food.
A free house gives the entrepreneur complete freedom in running the pub, although this is beyond the reach of many. Prices are high, with independent buyers competing with the big pub companies, who are always desperate for space, and residential developers.
But with so many prospective buyers having substantial equity in their houses, hope is not lost. John Gower, operations director of SBS Commercial, an estate agency and business transfer agent (meaning it sells businesses as well as properties) explains: “If you buy a freehold you have the long-term property appreciation. Banks are happier lending on a property-based rather than a lease-based business, and will lend up to 70%.”
Gower adds that the vast majority of freeholders have had experience of the pub trade, with most seeing tenancies or leaseholds as the first step on the ladder to their own free house.
Transferable lease
The traditional ‘tie’ between larger breweries and tenants was cut after a 1989 report by the Monopolies and Mergers Commission, although some smaller operators still run the traditional tenancy system. Tenants, who usually sign up for a three-year period, are obliged to sell the brewery’s own products, so the opportunities to use your own initiative are limited.
Pub companies such as Punch offer a long-lease system, which gives potential publicans far more latitude in running their business.
This option is ideal for those who lack the experience or funds to acquire their own pub. Gower estimates gross profits on leaseholds are around 45%, compared to 60% for free houses.
But unlike the traditional tenancy, the lease is transferable, so there is a greater opportunity to make money than there used to be.
“If you decide on a leasehold, the ingoings are a lot lower,” says Gower, “but you do need to look carefully at the terms of the lease. You have a lot more support from the pub operator in the way of training courses and so on. It allows people to get into running a pub at a lower capital outset.”
Typically, the potential leaseholder pays an initial premium, which can range from four to six figures, and then an annual rent of perhaps £10k to £50k.
John York of Punch Pubs has a clear vision of the attributes of an ideal candidate. “For leasing and tenancies we are looking for business partners with entrepreneurial flair,” he says, before identifying people skills, the ability to handle money, and a willingness to work unsociable hours as vital. “People have a number of backgrounds — but enthusiasm is vitally important,” he adds.
Even if they had no direct experience of the trade, says York, most business partners had worked unsociable hours at some point before in their lives, be it as milkmen or merchant bankers.
John Gower echoes York’s warning over the working hours. “Don’t buy a pub just for the social life,” he warns. “A lot of people have the dream of retiring, buying a pub in the Lake District and living a quiet life. But the brewery will deliver first thing in the morning, bar opening hours are lengthy, and you will have to stay half an hour after closing time. And you have to organise your orders. The nearest comparison is the hotel industry.”
But surely it can’t be all bad? “It is a way of life, and for the right person, it’s a fabulous and sociable way of life,” says Gower. “I’ve met many people who’ve been in the industry for 20 or 30 years and thoroughly enjoyed it.”
So the message is clear: that idyllic, rural free house could be yours — but only with hard work and a clear vision.
