Once-troubled brewer Charles Wells is convinced a fairer dea

Anthony Wallis, retail director of Charles Wells, is refreshingly honest about the problems that beset the Bedford brewer and pubco a couple of years ago. "We were aware it was a problem. We had difficulty in letting our pubs and not just those at the bottom end. The quality of tenants was not there ­ even for our good pubs. "Clearly there were good tenants out there but we weren't their first choice. We wanted to know why they were going to Greene King or whoever and not Charles Wells." The answer was plain for Charles Wells to see ­ it just wasn't offering attractive-enough terms for would-be licensees. "We didn't have the range of leases. A three-year agreement was not attractive to entrepreneurs. If they wanted to get into the food side, they needed 15 to 18 months to build up their business." Wallis is candid about the reason why tenants had been left out in the cold. "For a number of years, we had invested heavily in the beers and brands. We then realised that we needed to put more investment in the tenanted estate. Now the focus has moved to retail." The first step involved commissioning an external research firm to gauge the public's perception of Charles Wells. Wallis says every pub in the estate was given the once over, involving an assessment of the external appearance, such as upkeep of the building fabric and lighting and condition of the car park, plus an internal appraisal including atmosphere, quality of service and the state of the toilets. The research found that customer awareness on who owned a particular pub was very low, so to was awareness of the beer brands. These factors culminated in Wells' launching its Pub Alliance programme, with the key strands being new contracts replacing the old three-year tenancy agreements. The options now available are: tenancy at will; three-year lease; probationary three-year fixed lease; 10 and 15-year leases; 20-year lease; and an agreement to lease. The company has also taken on some of the more mundane duties, which were previously the tenants' responsibility, such as lighting and minor repairs. Wallis says this was in response to licensees popping down to their local B&Q and buying domestic fittings, which were not up to meeting the demands of commercial use. "On repairs, I think we are probably a bit over-generous now," says Wallis. The new approach appears to be working well. Says Wallis: "A vast number are now considering 10-year leases. I think there is now a high degree of trust within the company. We can't afford to be a charity, but if a tenant says he's got a cashflow problem then we'll help. We will give them a business wealth check to see what needs to be done. That is done independently and costs us £600. If they say they want a rent reduction, we'll send in an independent agent to assess the situation." Another initiative involved looking at the rent levels, discount rates and machine income. "Generally, the rent is an operational issue but, on average, it is about 40% of net profit. Wines, spirits and minerals are discounted at an average rate but not by such a margin that people could buy them from a cash-and-carry much cheaper. And we only take 40% of AWP (amusement with prizes) machine income ­ that is a lot less than many companies ­ and we take no income from pool tables." These moves have convinced Wallis that licensees are getting a fair deal and moves him to remark: "I don't think we have a serious problem with people buying out [of the tie]." Wells is also in the middle of construction of a £1m building at its Bedford brewery that will house a training centre, with space for up to 120 attendees. Wallis says the company is committed to improving the expertise of its business development managers. All BDMs are going through the advanced qualifications courses run by the British Institute of Innkeeping and the aim is to have everyone fully qualified to AQ Diploma level by early 2003. The brewer is also giving licensees access to a sales development manager, who has the responsibility for maximising wet sales; helping with the external and local marketing of the pubs; assisting internal merchandising and marketing, and maintaining beer quality. Additionally, a transition is underway in the way its property portfolio is handled. Wallis remarks: "In the Eighties and Nineties, our project team was more architecturally-led. Now we are more commercially-based with the emphasis on retailing." As part of this transition, the asset management of the pubs has been handed over to property agent Gerald Eve. The continual churn in pub ownership does create the opportunity for more acquisitions but Wells' retail director steers a cautious line. "We can take a lot more measured approach because we don't have to please City analysts. For instance, if we were offered 30 pubs in Bristol, we could manage that, but 30 spread out across the country is a completely different proposition." The company has said it wants to double the estate of 210 tenanted/leased outlets and 45 managed houses within the next 5-to-10 years. Wallis says "hundreds" of pubs have been looked at but all were "overpriced". Managing director Paul Wells voices similar frustration. "Acquisitions are hard to do at present. Structurally, we have everything in place to expand in any direction ­ we've got the computer systems and the people and the resources to handle it." Another parcel of the Pub Alliance programme is giving licensees the platform to air any grievances or concerns. This takes the form of holding regular tenants' forums. "Hopefully, we are an organisation where everyone can have an input. At the forums, we get a lot of real dialogue where we can say what sort of things do you want?' and they can say what can you do to help us?' That is how the decision to set up a buying group came up." Nonetheless, Wells' managing director is adamant that it is licensees who hold the keys to future prosperity: "We are just giving them the nuts and bolts.