Enterprise Inns plans to roll-out its “managed tenancy” agreements to a further 25 pubs following trials at 25 sites in north west England.
Under the agreements, which have been trialled over the past few months, Enterprise and the tenant jointly agree on a trading strategy. This has typically involved a value offer, with the licensee agreeing to sell drinks at a lower price during stated trading periods - Enterprise will pay the difference so the tenant’s margin is maintained.
The tenant also agrees to open-book accounting, where Enterprise has access to the pub’s trading figures, as well as the use if EPOS, to attend certain training sessions and take on additional marketing packages; these will be funded by the company.
Enterprise chief operating officer Simon Townsend said: “We would work with the publican to ‘spec out’ CAPEX that both agree would help deliver the retail proposition. That may be signs and lights, it might be an outside re-painting job or new fixtures and fittings.”
Townsend said CAPEX is typically low, between £20,000 and £30,000, although the spend is not limited to this figure.
There are currently three templates being trialled: a lower retail price offer, a mid-range offer and a simple food package. “We are working on other templates that may involve more expansive food offer” Townsend added, although it’s not aimed at “top end” food concepts.
All agreed steps would be stated in a side letter to the tenancy agreement.
Townsend said: “The main thing is about driving sales; all in all it’s about driving a refreshed retail proposition through the pub. We are looking for significant increases in turnover.”
The agreement is currently being trialled in 25 pubs in the north west. “We’ve identified another 25 or so where a similar proposition could work, mostly in the north west where we think we’ve got the skills and infrastructure to do it well,” said Townsend.
He said it’s too early to say how far the concept will be expanded beyond that, or what kind of returns are generated for Enterprise and the tenant.
The development follows news that other major tenanted pub operators Punch Taverns and Greene King have recently been trialling franchise-style agreements. Marston’s Pub Company launched its franchise-style Retail Agreement last year.
Townsend stressed that the managed tenancy agreement is not a franchise, although he described it as “very interventionist”. “It’s based on a completely standard tenancy or lease agreement. It’s an evolution of the model.”
