The biggest threat to becoming a successful national branded operator is losing customers’ perception of being small and independent, Loungers managing director Alex Reilley has warned.
The 26-strong group is targeting average sales of £1m per site and per-site EBITDA of £200,000 as it looks to expand to 70 outlets by 2017, Reilley revealed. He said the company would be committing a “significant amount of cash to a comprehensive GM training academy in the New Year”.
But speaking at M&C Report’s Pub Retail Summit, Reilley said the “biggest challenge” is “cultural, and we actually see it as the greatest threat to the businesses’ chances of becoming a really, really successful national brand”.
He explained: “A great percentage of our customers think their local Lounge is a really good locally-owned independent. Others may know there’s more than one locally but make an assumption that the business is based in their town. A surprisingly small percentage of customers know the full extent of the size of Loungers.
“If our customers start to see too much of what’s behind the curtain, they will undoubtedly not like the big aggressive well oiled machine that they find. This has troubled a number of businesses as they’ve got bigger, as suddenly the love that was there turns to loathing.”
Reilley said he was “absolutely determined” not to let this happen to Loungers, and the firm has given a name to the effort to make sure it doesn’t, “The Cause”.
Meanwhile, he revealed that Loungers has achieved a rent to revenue percentage of 5.2% and has a rate of capital employed of 34% for its last 10 sites that have traded for at least 12 months.
Its net debt to EBITDA multiple is 1.6%. “This figure will actually peak at 1.7% at the end of this month after which it starts to decline and the business will eventually be able to fund the rollouts without needing to take on any additional bank debt,” he said.
Reilley was positive about his relationship with private equity firm Piper, which invested £16m in the company earlier this year.
“Piper has been great so far. We’ve really enjoyed the relationship. I think Piper is very pragmatic. They believe investment is actually a very rewarding exercise for a business.
“We feel very well structured now to take up the challenges of growing to a fairly big business.”
