Enterprise Inns is in a 'win, win situation', says chief executive Ted Tuppen. Lorna Harrison reports.
When Enterprise Inns acquired two managed house estates in the space of a year, there was much speculation about the company's future.
Since its formation in 1991, the company had always been wholly tenanted and the deals with John Labatt Retail in 1996 and Discovery Inns last April was seen as a move away from its long-term strategy.
However, the speculation was soon quashed when chief executive Ted Tuppen set about selling off the bigger managed houses and converted those remaining to tenancies.
"Any business which turns over less than £5,000 a week is not suitable to be run as a managed house," he said. "All of the acquisitions were being run as managed but the vast majority should have been tenancies. We had tenants queuing up at the door to take them over and for many of the managers it was a wonderful opportunity."
Enterprise now boasts a tenanted/leased estate of 1,220 with plans to double its size in the next five years.
The company successfully floated in 1995 and has just released its annual results.
Enterprise made a pre-tax profit of £14.5million in the year to the end of September.
The acquisition of Discovery will take exceptional costs of £1.7million from those profits, but chairman Hubert Reid said: "The integration of Discovery into the estate was completed by the financial year end, and we'll be able to wring out the benefits of that in the year ahead."
The results prove the potential of the tenanted and leased sector, said Reid.
The company has pledged to invest £7.5million in its existing estate over the next 12 months, and will be looking to expand further through the purchase of batches of pubs and suitable single houses.
"When we floated, the world thought we'd gone bonkers because we were a tenanted estate," said Tuppen. "It was very tempting to say we would run managed houses as well but we firmly believe in the concept of tied leases and tenancies. We stayed with it, we floated and have been successful because we are firmly focused on our strategy for tenanted pubs.
"The tie is absolutely essential to our business and it is important that it continues. It is the backbone of our industry and people seem to forget that the system has run well for many years.
"The way I see it, the licensee is a small businessman who can bring enthusiasm, flair and a host of other abilities to the pub but the vast majority need an active organisation behind them to maximise the business opportunity.
"We give our tenants the backroom support they need, especially with finances. We have become successful because of our close relationship."
Enterprise offers contracts which range from a probationary six-month tenancy to a 21-year lease. The company's main suppliers include all the national brewers - so unlike some companies, tenants generally have a say in what beer they are tied to.
Enterprise recently launched its code of practice which gives prospective tenants a revolutionary 28-day cooling-off period. This allows licensees to change their mind, for whatever reason, should they feel unhappy with their pub or the job in general.
The code was drawn up with the help of its licensees and it has also resulted in the abolition of the controversial upward-only rent clause in its leases - a move aimed at making sure all its tenants are happy.
Enterprise is dedicated to training and expects new recruits to sit a BII Induction course. It was shortlisted in one of the categories at the recent National Innkeeping Training Awards, organised by the British Institute of Innkeeping.
The company expects to take on up to 130 tenants next year, depending on acquisitions and it tends to recruit through roadshows and press advertising.
Enterprise employs regional managers up and down the country, each looking after around 50 pubs. "Their sole objective in life is to make their pubs successful," said Tuppen.
On top of looking after their own batch, the regional managers are constantly on the lookout for new pubs and Enterprise will consider buying any pub as long as it is:
- capable of providing a good home for the licensee
- able to provide a current and potential earning potential for the licensee
- an attractive pub which will attract the right tenant.
On the last point Tuppen said: "We have had to do a lot a lot of housekeeping to ensure that the pubs are of a good standard. If they are not we will not get the people we want."
Enterprise has two branded offshoots, one being the Shamus O'Donnell's Irish pub chain.
Enterprise has set its agenda for the future and clearly wants to be the biggest and the best tenanted estate.
"The way I see it we are in a win, win situation," said Tuppen.
"Our tenants want to make their pub successful and we want them to be successful.
"We are committed to the long-term success of our licensees and if they are happy we will benefit."