For any aspiring pub, bar or restaurant operator, the recent sale of groups such as Bel & the Dragon, Living Room and Strada has them dreaming of what the future might bring. With reported sale-prices of more than £2m per site for each of these deals, it will leave some believing that the industry is a sure-fire way to make a quick fortune. In reality, however, it is very rarely that straightforward.
We regularly meet budding entrepreneurs who have exciting ideas, but the majority either under estimate just how much it will cost to launch a new business successfully or think that they will be able to build a chain and sell it on within two to three years. If you look at any of the recent corporate deals, they have involved established businesses where the estates have been fitted and maintained to a high standard and where the brands look to have a decent shelf- life with further roll-out potential.
The larger groups are always, therefore, wary of buying businesses where trade may have quadrupled recently, but only for a short period of time - so there could be a sharp downturn once the "honeymoon period" ends. When
reviewing possible opportunities in the early stages of
building a chain, it's important to try to ask the questions
the larger groups tend to raise when appraising new
opportunities. Is the location busy or accessible enough? Are the demographics right? Is the property big enough? Are there external areas for smokers? Is the rent too high? Could the length of the lease be too short to make a return?
The key is to obtain independent, professional advice -
otherwise the site may never appeal to a multiple group, even if it does become a success.
The industry desperately needs new entrepreneurial
operators if it is to remain fresh. There will always be the opportunity to make a good living for those who enter the industry for the right reasons and with a long-term strategy. Those who think that a chain can be built from scratch and sold on in its infancy are likely to be in for a nasty surprise.