Chief executive Mike Tye is committed to putting a great guest experience at the heart of Spirit’s culture. Mel Flaherty finds out what shapes his business vision.
Mike Tye looks more like Stewart Pearson, the fictional ex-ad exec turned PM’s director of communications in the political satire The Thick of It, than he does Robert De Niro. However, the self-imposed immersion tactics Tye employs before he starts any new job are more akin to the Raging Bull star’s famous method acting role preparation, and happily his business like yet open personality bears no similarity to the shallow, jargon-loving and totally ineffectual character in the BBC cult hit.
In the weeks running up to the start date of a new position, Tye takes himself round, incognito, to as many outlets owned by that company as possible to experience the service and environment. On these pre-start date recces, he asks staff and customers lots of questions about what they think of the service, the brand, the product and the outlets themselves. He says this is the best way to get an objective view of the current performance and perception of and potential for the brands.
Tye, an amazingly youthful-looking 59-year-old, says that way back in his actual youth he worked in shops and the thing that has stayed with him is a real love of serving customers, hence his willingness now to interact with them and those he employs to serve them. “Still now I get a kick from it,” he admits. “That feeling of ‘great, I made a difference’. And the buzz I get as a guest of any outlet [when I get great service] - that’s why I love hospitality so much.”
He says that having studied management science and then worked in FMCG, his very strategy-focused background obscured what he wishes he had recognised sooner in his career: “If I could have learned earlier how important leadership really is and how important harnessing the passion, energy and enthusiasm of people is, I would have been more successful and so would the businesses I have run.”
Tye has now known for some time, he says, that people are the greatest strength and can be the greatest weakness for hospitality businesses in particular. Get that side of the equation right through clear leadership, and systems and processes in place to stop things going awry, and you won’t go far wrong, even if the strategy isn’t 100%, he insists.
He is absolutely committed to making his apparently inherent desire to execute a great guest experience an intrinsic part of the culture at Spirit Pub Company. It sounds very worthy, but it has already worked for him several times over in his career and he obviously really does love doing it.
After all, Tye could have easily retired in 2007 after overseeing the £925m sale of the then 69-strong David Lloyd Leisure (DLL) chain of health and tennis clubs that he ran for Whitbread. Instead, he scratched an itch to try working in private equity born from his dealings with that world during this time (he headed a PE-backed BIMBO team that came second in the race to acquire DLL and was fascinated by the depth of analysis demanded by those considering putting vast sums of their own money into a business).
After a few months of investigating a potential PE-bid for “a very well-known high street hospitality business”, he got a call from then Punch Taverns CEO Giles Thorley, just after Punch abandoned its merger plans with Mitchells & Butlers.
Lots of restructuring and a demerger later, here he is heading Spirit, a business that not so long ago, in his words, “people were saying was for the knacker’s yard”. While the days of being part of a FTSE top 60 company with shares £13 apiece are a distant memory, Spirit is now rated as a buy by most of the analysts watching the sector.
Tye’s clear strategy of reinvesting in the estate and implementing a raft of self-help measures for the company, all the while keeping his eye on the goal - “to be the number one hospitality business in the UK” - is driving the turnaround. “It is about being the best employer, offering the best guest experience and getting the best returns for the investor. If I can do something that makes life better for all three stakeholders, I am very happy,” he says.
In the managed estate, which was the starting point for Tye’s strategy, he says the business is 80% there in terms of investment, branding, guest and staff satisfaction, plus profit potential of the existing business. In the 450-strong leased estate, which is the current focus of management attention, that proportion is 20%. Tye says the rate of change is accelerating and results will be closer to the current levels now seen in the managed estate within two years.
It is understandably harder to influence lessees than it is to direct pub managers you have directly appointed, and this part of the business was even more under-invested than the managed estate. However, Tye’s “naturally optimistic” nature is not daunted by the opportunity that he sees for the leased part of the business, as opposed to the difficult challenge that it would present to many. He is motivated, too, by the potential future for Spirit beyond getting the house in good order: “Two years from now I think the managed business will be in really great shape, and by then the leased business will know just how good it can be.
“We think we have got scope for a lot of growth in the business. We have some great brands, all of which could be close to double the size they are today. We are already on the acquisition trail, on a very small scale, and 12 to 18 months from now, we will know exactly what potential is left in the leased estate and therefore will know what cash we have spare to use elsewhere.”
In the meantime, both Tye and the first raft of franchisees are very pleased with the progress of the franchise model being thoroughly trialled at eight of the leased pubs. The plan is to get to 15 to 16 franchised sites (“so we know the success of the first few wasn’t luck”) before a decision, probably in 12 months’ time on how to progress with implementing the franchise model further within the leased estate.
He is very excited, too, by the premium concept being tested at the George in Belsize Park, north London, and likely to be followed pretty quickly by another two or three trial sites before a possible rollout starting next year. “It is definitely not a gastropub - I don’t want people to go there because it is that new food place, I want them to say they are going to that new pub.
“Whatever day it is, the drink, service and food all has to be really premium,” he says. “We have done a lot of work on how we segment - the more price-led sectors are getting strong and have to deliver even better value through price. And at the top end, there are a lot of affluent people who love pubs, but have not always found pubs that suit them. Companies such as Capital, Real Pubs and Geronimo have done a really good job and we think there is room for something similar, but a little different.
“The place to avoid is the middle, where we have still got some pubs operating - that is a dangerous place,” Tye adds. “What people want is always moving; great brands are those that really listen to their customers and keep nudging in the right direction; not those that sit still then lurch - that way you lose guests then you’ve got to really work hard to get them back.”
He had to do just that with the Beefeater brand for Whitbread, and to this day its turnaround is one of the things in his career that he is most proud of (and he found it frustrating years later when he was no longer involved and it went through that same lurch and stop cycle.)
Tye still has affection and admiration for Whitbread, which he joined after the sale of the wholesale drinks business that he ran with his father who had lured him away from the sales and marketing route he was following in the FMCG sector. He was sent to Germany by the then brewer, he’s still not sure why, given his lack of directly relevant experience at the time, to run the restaurants and wine bar business there.
He came back to Whitbread in the UK, then after the Beefeater turnaround he joined Rocco Forte, running his firm’s transport division including Welcome Break, but left when that got sold to Granada. He then worked for Aramark, the contract caterer, which does not seem the happiest of times in his career. Despite being employed to apply a hospitality retailer approach to the business, now common in that industry, he felt getting the broader business beyond his team to recognise the benefits at that time was “like pushing water uphill with a rake” and remembers it as a time of friction.
No wonder he jumped at the chance to go back to Whitbread, this time to its inns division. That was the time of the then brewer’s evolution into a restaurants and leisure business and he ended up running Costa, then Travel Inn where he led the highly successful merger with Premier Lodge.
“We played it unbelievably well,” he says of the creation of Premier Inn. “The day we signed the deal, we got a message to every hotel from me and the team saying ‘welcome to the new world’ and every employee had a letter in the post. We had the first signage up within a week and within six months we had totally combined the two businesses. Logistically it was the most difficult thing I had ever done.”
Things were going great at Premier Inn when the Whitbread board asked Tye to sort out the under-performing DLL. He recommended to the parent company not to sell just then and he now praises Whitbread for being brave enough to listen and support him in turning things around. Considering the great price it achieved three years later, that respect must be mutual.
