Anand: pragmatic view on bottom-end pubs
Greene King has found solutions for more than 25% of the 400 tenanted pubs contained within its turn-around Independence Pub Company division.
The company placed its tail-end pubs in as turn-around division last year offering full and partial tie options, total agreement flexibility and options to buy the freehold.
The move to take a pragmatic approach is “starting to deliver”, the company stated. Greene King now has 12 free-of-tie agreements, and 46 partial tie agreements.
It has sold 25 of the pubs — 12 to licensees, 18 to third parties and six for higher alternative use values. A total of 39 of the pubs have been returned to the core estate after having their problems fixed.
A further 22 pubs have had their problem fixed but remain in the Independence Pub Company due to their geography. Chief executive Rooney Anand said Greene King is taking a pragmatic approach at its bottom-end pubs to avoid “taking a bath” while pub
sale prices are low.
He said that company’s three operations directors were now compelled to sign off all new licensees joining the tenanted division in an attempt to drive up recruitment
standards.
“They’re spending a lot of time doing interviews — it’s a core part of their job,” said Anand.
First-year retention rates among licensees are up from 70% last year to 88% this year helped by a mandatory induction course for all new licensees.
The company spent £4.1m on rent concessions and product discounts to support tenants, £3m of which has been spent in the second half of the company’s financial year to 3 May 2009.
It has launched a scheme called “Credit Crunch” that guarantees licensee margins and enables licensees to compete more effectively by selling a pint of Carlsberg and Greene King, for example, for £1.99.
A total of 120 Greene King licensees have taken part in Phase One, enjoying a 13.7% uplift in sale of featured products.
A further 80 are taking part in Phase Two and seeing a 11.9% rise in sales volume on featured lines. Average licensee tenure at Greene King is three years and eight months this year compared to four years and one month last year, giving an overall licensee churn of about 25%.
The percentage of licensees receiving discount is 46% compared to 39% a year ago.
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