Taste of success

Changing conditions in the pub market have far-reaching consequences for the trade as a whole. Tony Halstead listens to the experts' views

The pub food and restaurant market is booming. Britons splashed out more than £8bn on dining out last year

and the annual spend is set to rise again in 2007.

Pubs are claiming a growing share of the spoils as increasing numbers of diners desert formal restaurants in favour of the more relaxed, value-for-money offering available down at the local.

More licensees are now playing restaurateurs at their own game by delivering food and service at a level once only available in leading bistros and brasseries. In short, the demarcation between restaurant and food pub is becoming increasingly blurred.

Meeting the smoke-ban shortfall

Food, along with wine sales, is now the big growth area in the pub market and is expected to enjoy increased popularity this summer when the smoking ban comes into force.

With beer sales expected to experience a drop of at least 10%, licensees will be looking to extra dining customers to help meet the shortfall, while many pubs are likely to launch a food service for the first time.

Prudent buyers no longer judge pub businesses in terms of their traditional barrelage returns - instead, they look for potential through developing food sales. Under-used games rooms or bar lounges are redundant spaces with potential for conversion to restaurants or dining areas and many pubs have seen their traditional character fundamentally changing as a result.

Property agent Martin Nicholson says an increasing number of clients registering with his company are seeking pubs that offer separate restaurants or large dining areas.

Nicholson, a partner in Sheffield-based chartered surveyors and valuers Brownill Vickers & Platts, says food-led pubs are beginning to dominate the market.

"A good food operator looking for turnover of between £15,000 and £20,000 per week normally demands a pub with at least 100 covers," he says. "The rationale is that covers can be turned over twice during weekday trading sessions. Sunday has now become the busiest trading day for many food pubs, when covers can be turned round up to three, or possibly four, times. More and more buyers tell us they want food-led pub businesses, but it's not as simple as just securing the right property.

"Overhead costs can be very high, with qualified chefs demanding wages of up to £25,000 per year. Licensees looking to cut costs will do the job themselves, often assisted by a spouse, but they need to have the necessary skills, which not all buyers possess," he warns.

"Opportunities will always exist for specialist operators, such as those who run exceptional ale-houses, but food pubs are slowly taking over. The smoking ban should up the trend, although no firm predictions can be made at this stage - it will be at least six months before the full effects can be evaluated," he adds.

"Generally we are finding that food-led pubs do sell quicker than others coming onto the market," Nicholson reveals.

Higher customer expectations

Licensed property agent Graham Allman, formerly a chef and operations director of the Midlands catering division of Bass, says growth in pub food has been evolving for about 30 years.

"Pubs have left behind an era symbolised by prawn cocktail and Black Forest gateau, and entered a new age where customer expectations are higher, and opportunities for the pub trade are greater," Allman says.

"Current winners in the pub-food market tend to be those individual freeholders and lessees with a 'hands-on' attitude who are able to respond quickly to requirements of consumers and trends," he adds.

But Allman warns: "Gastropubs are becoming extremely high-focus, although I suspect that some of them may only have a short life, limited client-base and high costs because of the staff skills required."

"The ability to develop a group of such pubs is questionable, along with the potential to sell the group on. This sector is again probably best served by individual operators - possibly former chefs and restaurateurs," he points out.

Allman believes the vast majority of pub diners prefer sitting at a table within the main hub of the pub rather than the relatively isolated surroundings of a formal restaurant.

"A short menu offering good home-cooked food with specialities developed by the

licensee using local supplies is a growing trend, especially as many customers have become wise to the fact that many dishes on an extensive menu tend to come from the freezer," he warns.

Removing barriers to entry

Allman says licensees planning to develop a dedicated restaurant area have to be prepared to provide good food at market-appropriate prices as well as the necessary ambience.

"Look at ways of making the dining area flow from the main bar area and ensure there are no barriers to entry," he suggests.

"And remember that if a restaurant area is open, it will need to be heated in advance- not just warmed up when a customer walks in."

Chartered surveyor Fleurets reveals it is approached weekly about buying properties by would-be pub-food operators.

"We see large numbers of people looking to take on a pub and transform its fortunes via introduction of food," reports Chris Irving from the company's Bristol office.

"But in our experience it isn't as easy as that. Many would-be operators dream of running a gastro-style venue without considering the building, its location or the customers currently attracted to the pub."

"The role of the agent is invaluable - they are likely to know the area, possess comparable trading figures from similar venues and have experience of seeing many pubs transformed by a change of offering."

Irving revealed he expected many traditional beer-trade licensees to quit the trade with the arrival of the English smoking ban in July.

"But on a more positive note, we are expecting an influx of talent entering the trade, inspired by the 'new' trading conditions.

"However, we are faced with six to 12 months of bedding-in, as agents seek to do their best to help those leaving the trade while finding the right properties for the 'foodies' who replace them," he predicts.