There has always been a Utopian view of pubs that are located out in the sticks. Glynn Davis finds out if the living really is as easy going as most people imagine.
Long seen as an idyllic part of rural British life, the country pub has been under pressure for many years from changing lifestyles — from the demonising of drink-driving to the smoking ban and increased competition from other forms of entertainment to the inexorable rise in costs.
In answer, many operators such as Adnams have been gradually disposing of what they deem uneconomic rural pubs that no longer fit into their portfolios — either as managed or tenanted properties. Twenty sites have been shed from the Adnams estate in the past three years and four more are presently up for sale.
Jonathan Adnams, chairman of Adnams, says: “With beer sales so low and food more of a part of the mix, the old reasons for brewers to own smaller rural pubs has gone. The linkage has been broken so why have your capital tied up in them?” he says.
If there are both insufficient alcohol sales and returns on the rental on the investment in the bricks and mortar, then he says “why go to the hassle of finding tenants for them?”
The solution has been for the company to dispose of them to owner-occupiers such as artisan operators who, as freeholders, can run them as flexibly as they choose and make the business case stack up on much lower revenues as ‘lifestyle’ ventures.
“We’ve been selling them and 99% have been successfully sold as ongoing businesses,” he says, adding that this represents a return to the old days when many rural pubs were owned individually by farmers and frequented by locals working the agricultural land.
Investment required
So what model for the country pub works today for pub companies?
The reality is that it is all about the ‘scale’ of each unit, suggests Adnams, who adds that all rural pubs must be able to generate 50% of their sales from food. As such, Mark Crowther, chief executive of Channel Islands-based The Liberation Group, says this tends to require the addition of kitchens, beer gardens, car parking spaces, and being able to accommodate a certain numbers of covers.
For his managed houses in semi-rural Jersey and Guernsey locations, he is investing in adding this sort of infrastructure in order to create the necessary scale to generate the required revenues.
Steve Wilkins, founder of Little Gems Country Dining — which runs six rural pubs — agrees and says he looks to generate £1m per year from each of his managed units. To achieve this, he aims to drive 10 cover-turns per week and, since food-led pubs’ business is heavily skewed to the weekend, he requires sufficient covers to push his units hard during these key shifts. The ideal size for his business is about 90 covers.
“Without this number we’d not be able to hit the required numbers during the weekend. We can do 70 on a Wednesday, which is OK, but we need to hit the Sunday lunch numbers that could be 250 diners between 12noon and 6pm,” explains Wilkins.
He recently acquired two more outlets — from Salisbury Pubs — and says they fit his model whereas most rural pubs hitting the market fail to appeal because they are either sub-scale or require substantial investment — many will not have received any funding in the past five to 10 years because sales have dwindled.
Wilkins has successfully built and sold two high street pub chains — Thomas and Carter, and Lewis and Clarke — and says country pubs have a much longer maturity curve, which means much lengthier investment periods are required. But the upside is their longevity because they are largely insulated from fickle fashion trends that afflict high-street operations.
Long-term returns
Patience is certainly something Anthony Woodhouse, managing director of Hall & Woodhouse — which operates many country pubs — knows all about: “We have very patient capital and look for long-term returns, which is why we’ve gradually reacted to the changes in country pubs during generations.
“We’re in the business of owning and running pubs so we don’t sell unless there is [genuinely] no long-term future.”
This measured, non-revolutionary, but gradual, approach to its rural pubs can be seen from the fact that, in 1939, it owned 142 pubs and today it owns only 34 of these same properties. But whatever the nuances of its strategy versus its contemporaries, Hall & Woodhouse, like the rest of the industry, has a focus on putting its investment in larger, managed houses in rural (but not too rural) locations.
“We’ve been buying large, managed sites in rural locations but only if there are large populations nearby and we can trade them heavily from dawn to dusk. [Not surprisingly] there is a lot of competition for these properties,” says Woodhouse.
Community focus
But all is not lost for small, wet-led rural pubs because as well as the gradual shift to more owner-occupied examples, Crowther says he finds such outlets also work well as tenanted businesses provided the live-in tenants are in it for the long term. They also need to be fully “engaged in the community” whereby the pub is used for the likes of mother and toddler groups.
“They have to be part of the community and be sufficiently vibrant places that they can have strong Friday and Saturday evening trade as well as good Sunday lunchtimes then the rest of the week will look after itself,” he says.
Despite the many changes that have wreaked havoc on smaller country pubs we are maybe seeing a cyclical change that is returning many of the surviving outlets to operate in the same way as they did generations ago.
The above feature first appeared in the 11 June issue of the Publican’s Morning Advertiser
