It's all bad news for pubs; or is it?

We hear it everywhere, pubs closing down at the rate of 30-40 a week, revenue decreases against rent increases, doom, gloom, insolvency, negativity and horror.

Running a pub used to be seen as an easy way to make a comfortable income, the easy route to success; people used to look at the sector as a licence to print money, while enjoying the ‘pub landlord / landlady lifestyle’.

If that was a misrepresentation 10 years ago, it is most certainly a misrepresentation now. Ask any successful publican, restaurateur or night club owner how easy a lifestyle they have and they will give you the same response; the ‘lifestyle’ is one of hard work, long hours and dedication.

A common misconception is that a licensee enjoys the pub lifestyle, mixing with the customers, being the centre of the community and almost ‘being a customer’ who just happens to stand on the other side of the counter.

While this illusion may be possible in some exceptional circumstances, it is certainly not the norm. Managing a licensed premises in order to achieve success is about hard work, gaining knowledge, learning from your / other peoples experiences, managing each person who work in the business and the balance between micro and macro managing the business. If you don’t have an eye for the finest detail it is not for you.

So licensed premises are not for everyone, they should certainly not be entered into lightly and success far from being guaranteed, has to be worked at; hard work and long term commitment.

Have I put you off yet?

If I have, then I may well have just saved you a great deal of heartache and money, if I haven’t then great, because you may just be the type of person who will manage a very successful business; because there is still great scope to be incredibly successful within the licensed hospitality sector.

I am not interested in perpetuating the doom and gloom, because it doesn’t have to be that way. To understand some of the reasons why so many pubs and clubs are going out of business, you only have to open the FT to read how the collapse of the financial system battered the business model of the biggest pub companies; cheap debt used to buy up thousands of licensed premises, which relied on the continuation of that available cheap debt and a non-stop unsustainable growth curve in the country’s wealth. Hindsight is a wonderful tool…

But although these business models were fatally flawed, this doesn’t mean that everyone followed that path and if you look amongst the chaos and destruction which the papers would have us believe affects everyone, there are many many examples of very successful businesses which have been managed well, adapted to the new realities and buckled the trend. I speak with clients every week who tell me they are full, business is growing, they are expanding and taking on new employees.

Take for example The Residences at Mandarin Oriental Hotel who provide their unique services and amenities in the One Hyde Park development, where the Penthouse Sold for a Record Price for a property in the UK at £136 million for the shell. I know they are in the top echelon when it comes to the hotel industry, but they have over the years earned that place through the exceptional standards they set and they continue to demand those levels are maintained.

There are many examples of pubs doing very well; I have chosen some recent examples from various sources:

Pub have cause to cheer as trade outstrips high street – Sales in pubs up 4.9% in the first quarter of 2011
Dividend’s return are a tonic for shareholders in Capital Pub Company – The Capital Pub Company “…[pubs] offering matched to their local environment have traded strongly”
Local hero Capital’s in the money now – “Watson reckons it [the Goldsmiths Tavern in New Cross] could easily improve its takings from the current £5,000 a week to at least £25,000 [following their refurbishment]”
Weatherpoons opens 800^th outlet – Yim Marti “…we are now looking forward to opening hundreds of new pubs”
Drinkers toast Young’s pubs despite recession - Mark Brumby of Langton Capital said of the 4% rise in profits to £11.9 million “Young & Co has the right pubs selling the right things to the right people”
Pubs serve up success story on a plate – “Fullers have been lauded by City analysts for their focus on the five Fs: food, family, females and those in their forties or fifties”

What all the success stories have in common is not the greatest secret in the world, pick up any ‘success manual for business’ and they will tell you roughly the same thing; know your market, deliver value for money through effective cost control and deliver excellence in customer service.

Here are some questions you might like to ask yourself:

When was the last time you communicated with your customers, not the ones you know, but rather the ones you don’t know?
When was the last time you went out and spoke with your potential customers, those who don’t currently use your facility?
Do you stop yourself when the little voice in your head says “I know what my customers want”?
Does your marketing only tell your customers what you are doing or does it ask them what they want you to do?
Do you calculate the value of your customer based on each visit or take into account the life-time value of each customer.
Do you know every cost to your business?
Does ‘value for money’ mean getting everything at the cheapest possible price, without reference to the quality?
Do you review your costs on a regular basis, including staffing levels to ensure that you have the right number of staff to offer the best service at all times, while maximising revenue?
How do you judge the level of service you offer, ‘do you know’ or do receive honest outside opinion?
Do you train your staff before they start work or do you wait and see ‘how they get on’?
Do you agree with the theory that ‘it is better to train someone and have them leave; than not to train someone and have them stay’.
Do you or your employees ever run the business to suit you or them, rather than your customers?
When you get criticism, do you get defensive?
Would you ever consider getting a consultant in to advise you on your business; by consultant I mean a fresh pair of eyes rather than a company who will charge tens of thousands of pounds to tell you to change you logo and sack a third of your staff…?
Do you work ‘in your business’ or ‘on your business’?

These and many other questions will be asked by people running successful business on a daily / weekly basis. If you find yourself knowing the answer you should be making, but if you are honest with yourself would answer them differently, it is time to reconsider your approach and refocus your stratergy.

Date – 1^st June 2011

Submitted by – Peter Mayhew

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