Greene King's franchise set for rollout
Suffolk brewer and retailer Greene King plans to roll-out its new franchise agreement, Blueprint, to 100 sites within its tenanted division in the next two years.
Greene King will also seek to obtain British Franchise Association accreditation for the new agreement, which it hopes will provide access to a new talent pool of franchisees.
The company already has nine of the sites open, with five of these opening last month. Its Blueprint franchise allows "a platform for entrepreneurs to thrive in the highly competitive 'Urban Community' segment".
The franchise deal's aim is to create businesses delivering net sales of between £7,000 and £11,000 a week and a minimum franchisee income of £45,000 per annum.
An initial franchisee investment of between £30,000 and £40,000 per site is required, including a £25,000 franchisee fee.
Greene King will make an average capital spend of £75,000, looking for a 30% return on investment.
The company says the benefits for shareholders will include the creation of a new growth engine for its tenanted and leased business.
Greene King itself expects to earn an incremental £20,000 to £25,000 per site.
The wet and dry offer at each pub will be pre-determined, controlled and supplied by Greene King.
Food hours will be agreed between franchisees and Pub Partners and run from midday to 9pm daily. Serving breakfast is a bolt-on option depending on location.
Overall, the aim is to generate food sales of between 20% and 25% of turnover.
Cash generative
Greene King said it saw an "exciting future" for its tenanted division. It described the division as highly cash generative, driving the company's purchasing scale and generating attractive yields on smaller sites.
The company argued that there was sustainable growth "via challenging the model and taking further control". The focus would be on "agreement innovation and attracting a new breed of licensee".
In the current financial year Greene King will introduce 350 innovation agreements, including agreements called "Love Your Local", "Business Builder" and "Local Hero".
The company has 1,157 pubs in its tenanted division and 389 pubs in its Independent Pub Company turn-around division. Integration of the Belhaven tenanted division began in December 2010.
Deutsche Bank analyst Geof Collyer has issued a buy recommendation for Greene King, saying new agreements at its "Core" tenanted pubs — including the new franchise agreement Blueprint — should help improve like-for-like (lfl) profits.
Collyer said he did not expect the new Blueprint agreement, revealed to analysts yesterday, to apply to more than 15% of its 350 Core tenanted estate.
But he added: "What is more important is that by April 2012, 35% of the Core pubs will have new agreements or positive trade-building initiatives (Blueprint, Local Hero, Business Builder, Love your Local) that should help Greene King improve its positive lfl profits trajectory."
