M&B offers lease deal to revive ailing pubs

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By Tony Halstead Mitchells & Butlers, the country's biggest managed pub company, has identified a further 27 houses that will switch to franchise...

By Tony Halstead Mitchells & Butlers, the country's biggest managed pub company, has identified a further 27 houses that will switch to franchise deals in a bid to revitalise their trading fortunes. The move follows a successful trial of the operating format at around 15 M&B sites, including three O'Neill's. As many as 50 sites are expected to be involved in the programme, which is being called internally the Supported Agreement to Trade. The company said it is looking to recruit entrepreneurial operators with the right flair and trade experience to revive pubs across the estate which it admits have "lost it". M&B has, however, insisted directly managed pubs will remain core to its business. Two different franchise leases ­ one for branded operations such as the Irish concept O'Neill's and the other for non-branded houses ­ will be offered to successful applicants. Both types of lease deals will offer 10-year terms and will be assignable after two years with a full wet tie but with wholesale prices giving operators "excellent margins". Director of franchise development Peter Thomas said the pubs selected for the scheme were all houses, which for one reason or another, were now trading below their potential. "We are looking for entrepreneurs who do wonderful things with pubs," he said. "We have selected a sample of pubs across the country which we feel will benefit from a hands-on approach from skilled operators." Thomas said rental return plus a percentage of turnover paid as a franchise fee would form M&B's main income from the pubs. "The franchise element, normally fixed at 5% of turnover, has been built in to reflect the high standard fixtures and fittings and infrastructure which these pubs offer. "We are leaving in a lot of items such as quality kitchen equipment and EPOS till systems for the new lessees to inherit," Thomas explained. "They will also be able to choose from M&B's extensive wholesale beer and drinks lists at prices which will give them very good margins. "The idea is that these businesses will benefit from individual hands-on operators who will trade them back towards the levels they once enjoyed." The houses on offer Those pubs identified for transfer to the franchise lease deal have takings mostly in the £4,000 to £10,000-a-week range ­ substantially less than the company's £14,000-a-week invested average. However, pubs are being offered with no premium and with fixtures and fittings for under £20,000. Pubs on offer include the Adelphi in Leeds, which for years operated as an unofficial "tap pub" for the nearby Tetley Brewery, and Ye Olde Sparrow Hawk at Fence, near Burnley, which was controversially switched from a successful tenanted operation to managed house by Bass.

Related topics: Mitchells & Butlers

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