Plan your foray into food

Food may not be the cure for all the pub trade's ills, but get it right and it can bring handsome rewards and compensate for declining beer sales and the effects of the smoking ban. Tony Halstead reports

Licensees and pub operators do not have to be "gastro-starred" to run a successful food business. Dining concepts come in many guises these days and no one format necessarily stands out above another.

But one thing is certain - food can be a vital element to the success of a pub and remains the dominant driver for an increasing number of licensed outlets.

Despite the predicted slowdown in consumer confidence and spending, the eating-out market is still in growth and shows no sign of peaking. Last year's arrival of the smoking ban gave the pub-food sector a timely boost and a summer of good weather this year may well mean pub food tills continue ringing merrily.

This all points to the fact that taking the catering road can bring rich pickings. It can, however, also be paved with obstacles and disasters in equal measure for licensees who do not think about a venture properly. So matching your food offer to the type of pub you run is essential to get the best return from an investment.

While much focus remains on the gastropub, it is the very informal nature of the average pub diner that remains the sector's biggest asset. Food pubs have prospered in the last two decades, partly because restaurants have become too expensive and operators highly complacent, according to licensed-property agent Graham Allman of GA-Select.

"Pub-restaurants have done well with food because they have provided the setting and backdrop of a traditional inn where the food often reflects what local farmers and communities are producing," says Allman. "They offer a very good opportunity for young aspiring chefs to showcase their skills, or provide the environment for skilled amateurs to provide above-average cooking."

But Allman agrees that the lines between food pubs and restaurants are nowadays increasingly blurred. "Many pubs, especially those of gastro style, are nothing more than pubs converted into restaurants with a bar element to retain some sort of drinking atmosphere," he maintains.

Allman says sale values of pub-restaurant businesses are very complicated to assess. He believes figures should reflect the disposable net profit of the business, but warns that future trading success invariably depends on the person in charge of the kitchen.

"Where the lead man is also the owner or licensee, when they leave most of the goodwill value of the business goes with them," he says.

Simon Chaplin, director of Christie+Co corporate pubs team, cautions that while food can be an answer to a pub's prayers, for others it could be simply just another headache.

Staff skills

"There is no doubt food done well can be a major draw and help boost trade, but it takes good skills both in the kitchen and in the staff, to ensure it is profitable," says Chaplin.

He says a wet-led pub trading as a freehouse can achieve profit levels of 30% and above due to low running costs, limited staff and consistent trade, while a well established pub-restaurant with a trade split of 60:40 will have a regular pattern of trade and a profitable menu. "It is the pubs that fall between these two that are the most vulnerable to problems," he adds.

Establishing a new kitchen can be an expensive business in the current environment of health and safety, and finding the right staff is more difficult, with chefs being a particular issue. "Competition for customers is just as hot from rival outlets, so finding an identity can be hard," says Chaplin. And with the cost of equipment, staff and marketing, it can easily become a loss leader, he maintains.

In the right hands food can play an important part in growing a pub's profits, which, in turn, will be reflected in its value, and with purchasers looking for a diversity of trade, it could be the right move for some.

No guarantee

A successful pub-food operator needs skills, funding and knowledge of what makes a commercial kitchen tick, says Simon Hall, director of chartered surveyor Fleurets. Licensees who introduce food and expect trade to suddenly rise, with their venue placed on the culinary map, will find instant success is not guaranteed, he warns. "Contrary to popular opinion a revenue stream from food will not always increase the value of your business," says Hall. "There can be substantial costs involved in setting up, promoting and operating a food outlet. If you are looking to introduce food, do so to increase trade and profit and ensure you have the resources to invest and promote it until your reputation grows."

Hall says the best food operations are invariably run by people who understand what it takes to run a kitchen and are able to produce food themselves. "This is a key factor. Without understanding what is going on in the kitchen you cannot expect to control it or the staff who work in it," he says. "You can be sure at some point you will need your own skills to fill in at busy times or when your chef calls in sick."

Hall advises all prospective food operators to look at the current trade and carefully shape an offering around existing customers and new ones who can be attracted. "Look carefully at the additional costs involved, by which time you should have all the answers to your questions," he says.

Hall advises licensees not to automatically go down the "gastro" route. "Just because gastro is fashionable, do not just follow the trend. Do what will maximise your business, not what you believe the industry is telling you is right for your business," he warns. "If you go into a new food-led venture thinking it will be easy, but without the skills and funding to do it properly, you have a good chance of wasting your money. But if you get things right, there are great rewards to be had, with increased income, profit and resulting value."