Punch seeks the multi talented

Leasing through major pubcos, such as Punch, gives aspiring entrepreneurs an opportunity without taking on massive debt

When Steve Jordan was told he was being made redundant from his job in middle-management with brewer Vaux, he decided to break out and form a business of his own.

Steve was not the only person to be shown the door - the Beer Orders meant that British brewers not only waved goodbye to thousands of pubs but also to layer upon layer of management.

He saw his misfortune as an opportunity to establish his own pub company but one of the biggest barriers to entry, as for any start-up company, was property, or raising the funds to buy it.

Needing sites but lacking cash, he leased two pubs from a brewer, running one himself and placing a manager in the other. Steve focused on turning round the run-down pubs and it was not long before he looked to expand with more outlets.

The business grew rapidly. Former Carlsberg-Tetley managing director Roger Parker joined Steve in 1996 and today they run 15 pubs under the name Marbury Inns and Taverns, all leased through other pub companies.

In the trade, the duo are labelled multiple tenanted operators. Steve and Roger place managers in the pubs they lease and act as a separate company. "We want to run quality businesses," said Steve. "Our skills are developing businesses and adding a lot of value."

They are not alone in setting up pub companies by leasing from others.

Leasing through major pubcos gives the opportunity for aspiring entrepreneurs to establish pub companies without taking on massive debt. "I was strapped for cash when I set the business up," said Steve. "We couldn't have established Marbury unless we had leased."

Half of the duo's estate is leased from Punch Pub Company, Britain's biggest landlord. Punch, due to float in March, now has 17 multiple operators - companies within the company - and is keen to strike more deals with corporate tenants.

Punch directors Francis Patton and Stephen Gould have pulled together a package specifically aimed at attracting entrepreneurs who want to take packages of pubs.

Until now Punch had no special considerations for such operators, but with a growing number of multiple tenants on their books, the division is fast becoming important business.

"It would be foolish to ignore quality multiples," said Stephen.

"Our definition of a multiple is someone with at least five outlets. We're not talking about a lessee who perhaps wants to take on a second pub but a dedicated multiple operator who will place managers into those outlets."

The company does not offer any reduced fees on leases but with Punch's wealth of resources at their fingertips, entrepreneurs such as Steve and Roger benefit from the operational structure of a national company.

An organisation of Punch's size holds substantial buying power with suppliers, the savings from which can be passed on to these smaller companies that run some of its pubs.

"We accept that guys with 15 or 20 pubs would get good discounts in the free-market," said Francis. "But our super-growth leases suit many of our multiple operators who can make big savings."

Punch recently appointed Baines, the market intelligence specialist, to undertake a complete review of its pubs and to categorise them according to character. Baines established 11 different types of pub within the 4,300-strong estate ranging from local community, to food, to city destination.

"We can now see what we've got on our estate," said Francis. "Therefore we know how best to market the pubs and what type of licensee we can place in there."

As well as providing valuable information on the profile of the Punch estate it also means the company could bundle together same-type packages of pubs to be offered to multiples. "Some people are food retailers while others are late-night specialists," said Francis.

"This ensures we offer the right pubs to the right people."

Punch also recognises that small niche players can pay more attention to detail. Many of the pubs that would perhaps be churned from the estate are now put into the hands of a corporate tenant, who can extract more value by working the asset harder.

One such operator is Leo Murphy who founded the Balaclava Pub Company. The former Greene King director takes underperforming community pubs, with low weekly sales, by the scruff of the neck.

Leo Murphy is Punch's largest multiple tenant, with 27 pubs. The two parties came together when both Leo and Punch bid for the same pubs.

Leo was looking to launch a multiple-unit company. He received a tip about a 32-pub package up for sale from an acquaintance at BDO Stoy Hayward, the advisors handling the sale.

But before Leo could do anything Punch had already agreed to take part of the package. Leo contacted Punch chief executive Stephen Lambert to see if any of the pubs could be salvaged.

With a proven track-record, Leo was taken seriously and following an extensive meeting, Punch ring-fenced 76 pubs for him to analyse, with a view to leasing en masse.

Eventually, Murphy agreed to take 26 community-focused pubs. With extensive industry knowledge and an eye for numbers, Leo is exactly the type of person Punch wants to attract.

The group believes it has in place an attractive package to keep the multiple operators coming to Punch. Among other services, the company has established a central operations team that will solely assist the multiples. The company will continue to ring-fence packages allowing the potential multiple tenant exclusivity while they scrutinise any available package.

Punch is currently in various stages of discussion with a further 11 multiples. Stephen Gould says he wants to see 10 per cent of the Punch estate accounted for by multiple tenants, a call to arms if ever there was one.

One of the biggest challenges a company will face is finding the right locations. Through Punch, aspiring entrepreneurs can pick and choose the venues they want.

One of the biggest liabilities a company will have is the cost of property. By leasing through national pub companies, niche retailers can eradicate that liability from their balance sheets.

• Read moreabout Leo Murphy and the Balaclava Pub Company.