One important lesson pub, bar and restaurant owners have learnt in the past couple of years of hell on the High Street is that wherever you might look to make cost savings to try to maintain your margins, there is one place you had better leave untrimmed - refurbishment spending.
You might make the bottom line look better in the short term by extending the time between unit refurbishments, but don't think the punters won't notice, consciously or unconsciously, that your venues are looking a little more tired, a little more blunt at the edge. Gradually they will start drifting away to fresher, sharper-looking establishments, a trend that is either exacerbated or made more noticeable at a time when consumer spending itself is getting tighter.
Companies as diverse as PizzaExpress and Yates Group have found that in the present climate, like-for-like sales decline fastest at unrefurbished outlets and improve fastest at refurbished ones. Nostalgists might sigh for the white marble tabletops that were one of the signatures of PizzaExpress for several decades. Thousands of couples must have played footsie between those black iron table legs on their second date, while enjoying a Veneziana and a glass of Pinot Grigio. However, what they loved in the 1980s is likely to suffer from over-familiarity in the 21st century. The company's £24m refurbishment programme, brought in to try to stem its precipitously plunging like-for-likes at older venues, has been exchanging white marble for red-brown wood, tweaking typefaces and altering lighting levels. The make-over, though expensive, looks to be putting the required fresh zing into the relationship between PizzaExpress and its customers. Figures are hidden now that the company has been taken over, but last year like-for-likes were up 10% at older restaurants that had undergone refurbishment, against a 3% decline in sales in the London core, where most of the company's older restaurants are.
The figures are even further apart at Yates's Wine Lodge, where trading figures released in July this year showed l-f-l sales increase at refurbished outlets up 3.1%, while like-for-like sales at unrefurbished lodges deteriorated further to show an 11.1% year-on-year fall.
The difference a makeover makes has been spotted by the analysts in the financial community. As a result they have been asking companies to be transparent about how much they are spending on refurbishments, so that those who are skimping can be spotted before the like-for-like sales start to slide. Thus the statements that accompany full and interim results now include the latest fashionable number - refurbishment spending as a percentage of sales.
Last week both Regent Inns, in its interim results, and JD Wetherspoon in its full-year statement, included this figure, though both might have wished not to, since they showed a year-on-year decline. Regent said it spent £5.1m on the refurbishment of existing venues in the first half, representing 4.4% of sales, down slightly from 4.7% in 2002. Wetherspoons said capital investment in its existing pubs for the full year was 2.2% of turnover, or £16.1m, down from 3.1% of turnover, or £18.6m in 2001/02.
Both companies did well to be so honest. Wetherspoon's figure may be down but still represents around £28,000 per pub right across the estate which, since newer pubs would have needed no expenditure, implies substantial spending on those outlets targeted for refurbishment. Regent's spending is more tricky to analyse, since it presumably includes money spent on converting unbranded outlets to brands, which is not really refurbishment. But it still points to a management determined to spend now to ensure future punters continue to return, rather than skimp on the maintenance and shovel more money to the bottom line this year to keep the share price up. It is a policy that should be applauded by shareholders, by employees, by City analysts and by customers. Expect more companies to start being open about their own dedication to keeping their outlets as new-looking as possible.
