Dan Shotton co-founded Redcomb Pubs in the heart of the economic downturn. But against the odds, the group has built a successful estate of 14 pubs and is now making its first foray into the casual-dining market. Here he discusses the company’s journey so far with Mel Flaherty
Three things that Dan Shotton, the joint managing director of Redcomb Pubs is most definitely not: cutting edge; a hipster; worried what people think of him.
“Am I an uber-cool trendy guy with a beard? No, I am a 44-year-old with a young family. And we are not about being the next big ‘wow’. Call me an old fart, but I like a well-run, controlled business.”
The facial-hair-free publican is actually more adventurous, certainly in a business-sense, than he makes out.
Yes, the 14 sites in his company’s portfolio are not doing anything particularly ground-breaking, but they are evidently doing what they do well. Turnover for the group this year will reach around £16.8m – not bad when you consider the former drummer and wannabe rock star riskily launched Redcomb in 2010, just as the credit crunch began to really bite.
And the company is about to embark on a totally new venture – making its first foray into the fast-casual dining arena, having just acquired a new-build site in Paddington, next to the canal and about one minute’s walk from both Edgware Road and Paddington stations.
Lock House, a “concrete box with a mezzanine”, will seat 170 people inside with room for a further 70 outside. It will operate all day, serving simple food, such as breakfasts, burgers, rotisserie chicken and ‘jam jar’ salads, alongside coffees, an “interesting wine list”, craft beers and a cocktail menu. Redcomb is investing £1.4m in the unit, which it hopes to open in September.
“If it works, it might unlock a lot more stock for us because it can go into non-pub places like new builds and high-street retail units,” Shotton says.
He explains that the company decided to try this route because while it has plenty of capex money available (helped by the £15m joint venture, Apollo Pubs, set up with Downing’s IHT Fund to buy Redcomb’s Village Inn in Ealing late last year), securing new sites to invest in is a challenge.
Route to market
When Shotton and ex-Regent Inns colleague Mark Draper (who had run Alphabet Bars) set up Redcomb, they started with tied lease destination country pubs – the first with Punch, which they convinced to invest £200,000 in the Village Gate in Wendover, Bucks. Similar deals followed with Spirit and Enterprise but the intention was always to expand more in free-of-tie leasehold and freehold properties.
“For us, it was a route to market because it is such an expensive market to get into. But raising money against tied leases, even now, is almost impossible,” Shotton says.
Once Redcomb had got going, Shotton and Draper entered discussions with three other former Regent Inns colleagues – David Franks, Peter Mackie and Quentin Williams – who had set up their own pub business, Broken Foot Inns (BFI). The BFI trio were at a stage in their careers where they wanted to take a step back from day-to-day operations, whereas Shotton and Draper were still hungry to grow and just needed the cash to feed their aspirations. Redcomb started running some of the BFI sites and BFI took a small equity stake in the business, but a full merger was always planned and took place a couple of years ago.
The combined portfolio today is a mixture of just a few tied leases, some free of tie and some freehold. The estate is also balanced between country pubs with accommodation (the group has 100 rooms across six sites where they account for around 25% of sales, achieving an average room rate around £82 – or £95 for business guests – but generate 8-9% of total group turnover); country pubs with food; suburban pubs in south and south-east London and a couple of central London freeholds.
The minimum criteria for potential Redcomb pubs is that they take an average of £25,000 a week, are in areas with lots of chimney pots and provide other reasons to visit – for example, the lake with swans at the group’s latest site, Worplesdon Place Pub & Hotel near Guildford, Surrey. The firm is moving away from both remote destination pubs and the suburban and central sites that larger pub companies looking for exposure increasingly overpay for.
Shotton says growing the number of Redcomb sites to 25 in the next two years is an achievable aim, especially if the Paddington model proves successful. He adds that he is looking at a couple of pub “package deals”, one of which involves three pubs, of which one may be done as another joint venture with Downing.
“Some people think you should centre on one thing, but I don’t agree with that, especially for a company our size. If the weather is good, our sites with outdoor space do well but those without don’t, so it is good to have that spread,” he offers by way of example.
Shotton is in his element at the moment; his favourite part of the job is acquiring and developing new sites. He loves the freedom to make quick decisions and to create bespoke solutions that being an independent operator affords, but he is also a stickler for systems: “Our ethos is we are entrepreneurial and have lots of fun but the starting point has to be a platform of structural discipline to deliver the basics – the profit margins.”
While Redcomb is not really a public-facing brand, about eight of the sites do have the same menu (there is a group executive chef) and many run the same promotions. Managers are given a lot of autonomy, though, and are encouraged to try and drum up business, however they see fit. One of the key common elements is the drive to ensure the units all deliver good value. Shotton says his pub restaurant customers usually have two courses and spend £22 to £25 per head: “It doesn’t matter if an area is hugely affluent – I want people to walk away and say that was great and come back two or three times a week, and not just see us as a treat.”
Keeping margins tight without raising prices takes a lot of control, especially when Redcomb pays market-leading salaries for managers and chefs and incentivises GMs with annual bonuses that kick in at 90% of budget to keep them focused on reaching their goals right until the end of the year. GMs can earn 25% of everything over budget – last year, the top site manager received a bonus of £39,000. The result is excellent staff retention rates, which are also helped by the firm’s investment in personnel development. A lot of the group’s head office functions (there is no physical head office as Shotton and Draper like to be out in the business) are outsourced – not only because it is cost effective, but also because Shotton appreciates the input of fresh eyes and experience, often from outside the hospitality industry. However, the executive chef and learning and development manager are permanent recruits.
Shotton says that out of the MD duo, Draper is the more fluid, having learned his trade with independent companies, while his background has moulded him with a different, complementary skill set.
Having fallen into studying business and hotel management at the then Oxford Polytechnic, he decided the pub business sounded fun and joined the Bass graduate programme. During his time there, Shotton spent time in every department.
“This included auditing so, for a year, I was counting bottles. It was as dull as dishwater but it gave me a good understanding in control in the managed model and that has stayed with me,” he says.
He also got involved in running and developing new brands including Village Inns and Ember Inns. The opportunity to get some smaller company and central London experience lured him to Regent Inns, though, which was a pivotal point in his career as it introduced him to his current business partners. A spell at Whitbread followed then a dabble out of pubs at Riley’s, the snooker hall operator, before he joined Urban & Country Leisure, the pubco set up by Ross Sanders when he bought Massive Pub Company from administration.
Shotton recalls his time there as great fun and provided invaluable experience. Over time, it emerged that the way he believed a company should be run was at odds with Sanders’ approach. But, he has no regrets and says that job showed him it was possible to make good money from pubs and gave him the confidence to take the leap of faith to set up his own business.
Despite taking the focus on cost control to heart, Shotton says he was never naturally a big company man.
“I don’t know if I was too naïve or too honest, but I couldn’t just tell people what I knew they wanted to hear if it wasn’t true,” he explains.
And that’s something he endeavours to ensure doesn’t happen with him now – hence the informality of the head office set-up, the GM company update/social gatherings every two months and the positively encouraged individuality of each of the sites.
It seems like the best of both worlds – safe enough, but definitely not boring.