The first 12 months...

By Hamish Champ

- Last updated on GMT

Related tags Pubs Investment Rufus hall

Everybody knows that first birthdays, whether for babies or businesses, are significant events, to be celebrated properly. It's not clear if the...

Everybody knows that first birthdays, whether for babies or businesses, are significant events, to be celebrated properly.

It's not clear if the executives and staff of Orchid Group marked the first anniversary of the pubco's inception with jelly, ice-cream and a cake with a solitary candle, or whether they chose something more… erudite, but there's little doubt they will have celebrated the start-up's achievements in style.

Formed last summer after US investment firm GI Partners acquired 290 pubs from Punch Taverns for £571m - following an earlier deal to buy the Noble House chain of restaurants - chief executive Rufus Hall says everyone connected with the group should be proud of what has been done during the last 12 months.

"We arrived last year and have taken on board nearly 300 pubs, 100 staff, new premises, new systems and put new structures in place. We exited our transitional service agreement by Christmas, six months early, and were at full strength at our head office in St Albans by January. And we sold 16 of our bars for £20m. All of this in a year is some achievement," he says.

Quite an entrance...

That Orchid came into the world with such a bang was not part of an original plan, as Hall, a former managing director of Ha! Ha! Bar & Kitchen, admits: "We were originally looking at buying blocks of pubs, maybe 10s and 20s here and there, but six weeks later the 'gulp factor' came along in the shape of the Punch deal."

The 290 pubs the group bought "ticked all the boxes" investors were looking for, says GI Partners' managing director Phil Kaziewicz, who while not having a hands-on role at the pubco takes more than a passing interest in the operation - unlike many private equity executives - to the point of helping carry potted plants into a refurbished site recently.

Kaziewicz says GI is likely to exit within five years, a normal timescale for such deals. In the meantime he's happy to roll up his sleeves and get involved.

"I'm not going to criticise private equity firms that don't play an active role," he says, "but I like to be involved up to a point, to ask the silly question about how or why something is being done, and so on. It's like holding up a mirror to the business."

The mirror should be reflecting rather well, if recent investments are anything to go by. A case in point is Orchid's £300,000 revamp of the George in Harpenden, Hertfordshire, or the more recent £600,000 turnaround of a Miller's carvery site in Kings Langley, in the same country, now the Young Pretender.

The latter's previous incarnation was running out of steam, albeit still managing to achieve £10,000-worth of business a week. With new managers in the pub and a focus on a contemporary carvery operation sales have trebled in only three weeks since re-opening. Hall says investments are crucial, with money being pumped into a quarter of the estate to date.

Sums range from £25,000 to £600,000, and all 270-odd sites will have seen projects of one size or another completed by the end of the first quarter next year, with those costing under £150,000 being handled internally.

Changing face of the estate

In the process the group will remove brands - such as Q's - from the mindset of customers. "We've taken the view that we want our sites to be the local pub and they should be known by name and not by brand," says Kaziewicz. All invested sites will no longer feature a brand, he adds.

Far from being a daunting prospect, the group was prepared for the investment demands of buying what the team acknowledges was a number of "knackered" pubs, says the GI man. "There's no point in buying something nice and shiny. We're looking for assets that can be improved upon and that takes investment. We're not asset strippers."

New accounting procedures and EPoS systems together with investment in IT capabilities, including free wi-fi access for customers, mean managers have more autonomy than before, while allowing the group to continue to develop savings through scale opportunities.

This begs the question - can the group see its managed houses achieve the level of margin required and still allow its operators the ability to function as if the pub were their own? "Yes," says Hall. "We're committed to our people, who along with our pubs are the most important part of our business.

"We've had to take some tough decisions where managers haven't worked out, but where the person is right for the pub we'll build the investment around them and allow them to run the business their way. We don't want box-tickers running our pubs."

Hall says he and his management colleagues get out and about in the estate regularly, although the group is looking at some form of mystery visitor programme "to get a view of the whole pub, not just whether a customer gets served within 10 seconds of walking through the door".

With the drive to invest in the existing pubs, the inevitable question of expansion crops up. "The size of the estate is currently limited by me knowing every one of our pubs and managers. It's a powerful thing to get to know all these people and the sites where they work," says Hall.

That's not to say the group would be averse to buying individual pubs or packages at the right price. "But we don't want world domination, rather we want to tailor our pubs to local communities," says Hall. Moderation; now there's something you don't see every day in the pub trade…

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