On the back of its full year results this morning, JD Wetherspoon’s chairman Tim Martin talks to MCA about the rollout of its pizza offering, EU product swaps, the scope of its accommodation arm, transport hubs, and how the brand is approaching succession planning.
Planning for the future
JDW has initiated strategic planning meetings on the future of the business. When asked if there was any kind of succession plan in place, Martin told MCA. “We are having a series of leadership meetings for senior employees at Wetherspoons in 2018 – 50-60 of the most senior staff on a monthly basis. We are trying to prepare for the future in a general sense, without being too specific, trying to identify the key things at Wetherspoons that we want to preserve for the future.” He joked that although he is hoping to run the business for another 40 to 50 years, some pessimists have said that’s unlikely. “I go round the country a quite a lot right now,” he said, adding that in years to come he may need to reduce the frequency.
In terms of focuses over the next 12 months, he said the business was “trying to come up with some more smaller initiatives that actually make a difference to staff and customers”, which he said was much more difficult than spending millions on a new pub, for example.
He said the purchase of freeholds had pushed its debt. “We have swapped our rent for interest rates,” he said. But on the purchase of freeholds, where JDW has been an existing tenant, he said: “Instinctively it feels like the right thing to do, but it’s always dangerous.”
Martin told MCA that the trials of its pizza offer had been progressing well, with a rollout now in progress. “I think it’s going to be in 500 to 600 pubs within the next couple of months,” he said. While he said the addition of pizza has been quite expensive to set up – as it has had to buy pizza ovens and rejig the kitchens – the pizzas are popular. “Managers and staff think that they are a plus,” he added.
On the long-term scope of the accommodation arm of its business, Martin said they have quite a lot of upstairs areas in its pubs across the country that are empty, but that you could generally only get up to eight rooms in each. He said the company was now considering its wider approach to the accommodation market. Noting that Premier Inn does not consider a site with the scope for fewer than 50m rooms, he said: “We are pausing a bit to say, ‘do they know something we don’t?’.”
He said they could technically have a national hotel chain, with around seven or eight rooms in each pub, but at £70-80k in build costs per room, “we are proceeding cautiously”, with the expansion of this side of the business.
On the chain’s decision to make product swaps from EU branded products like Jägermeister, Martin said there was no real reason that JDW hadn’t stocked the cheaper alternatives before – which the chain has said actually performed better in taste tests. “Juncker has done us a favour. He has pushed us to look elsewhere. I’ll have to buy him a pint,” he said. Martin added that businesses tend to plough on in their own way until something provokes them to consider alternatives.
However there do not appear to be any moves afoot to axe the Lavazza coffee brand - which he said was JDW’s biggest selling branded product. “Lavazza is a great company. We have deal with them that lasts a while, as we have with others,” he said. Martin added that they hadn’t pitched the product swaps as a way to get reductions in prices from suppliers, but that some of its EU suppliers did have concerns their products would be axed and he said he was sorry about that.
While he wouldn’t be drawn too much on pricing, and the role it would play in achieving the 4% increase in like-for-likes that Martin said was necessary in order to achieve last year’s profit levels, he did say that “if prices go up, we will try and keep them as low as we can”.
He said the business was going down to a 40-hour working week for its managers. He said reductions in the number of hours worked per week in recent years had “certainly helped with retention”. He added that paying above the minimum wage rates, with the addition of bonuses and shares gives them a competitive advantage.
When asked how he saw the scope for expansion within travel hubs, he said: “In general terms we like travel hubs. A lot of other people do too, so they tend to be very expensive.” He said airport locations tend to be very impermanent and a lot of capital required if you want to move the pub – he said he some airports locations they were on the third iteration of a pub in the same terminal – “but it’s good for business”. “We just have to see if we can make money at those rents. For us it won’t be that many,” he added.
Martin said Wetherspoon’s had not noticed any impact on sales from the closure of its social media sites. “There are a lot less people visibly slagging me off, but we hadn’t noticed any impact on trade,” he said.
He admitted that the introduction of free coffee refills had had a “dampening” effect on margins, as customers were now drinking one and a half to two cups of coffee for the price of a single cup. “It lacks business logic, but it is popular,” he said.
JDW: Product swaps, pizza and succession planning
On the back of JD Wetherspoon’s full-year results this morning, chairman Tim Martin talks to MCA about the rollout of its pizza offering, EU product swaps, pausing to evaluate the approach to accommodation, transport hubs, and how the company is approaching succession planning.