City Diary — 9 July

Sweet service solves crisis

Crisis management guru Jonathan Hemus, of Insignia Communications, uses

a recent visit to a gastropub as an example of how you manage your way out of a sticky situation. One of the members of his party found a sliver of glass in his knickerbocker glory and alerted the manager. What followed was textbook. The manager apologised profusely, spent 20 minutes talking to Hemus and his guests, insisted the offending dish would be removed from the menu, and gave them their entire meal and drinks for free. The outcome? Hemus and his party were happy to return to the gastropub shortly afterwards. "Great customer service is similar to great crisis management," he says.

Missing in action: lease assignment​

One striking problem for the industry is the virtual disappearance of people willing to pay a premium to have a lease assigned to them — one large property agent is saying that it has achieved just one of these in the past six months. At Enterprise Inns, 48% of current licensees have arrived in the estate having paid a premium to buy the remainder of a lease. Boss Ted Tuppen tells City Diary: "There is a strong correlation between the degree of disgruntlement and the amount paid for a lease. The virtual disappearance of the assignment market had made life much more difficult for those leaving."

Changes on AWP at Enterprise​

Enterprise Inns proposes to introduce more royalty-free AWP machine agreements in its estate. The deal means licensees are offered a risk-free "royalty-free" AWP machine share option, which already applies to 2,200 pubs since being introduced just over two years ago. Tenants are offered a guaranteed percentage share of machine income, and Enterprise pays the rent and duty and pockets the rest. Licensees face no risk and Enterprise stands to lose money in a situation where a pub's machines are low-take. It's fair to say, though, that Enterprise's control of the machine estate increases in this deal. What happens, for example, in a situation where Enterprise is losing money but a licensee is earning a few bob? "We have the right to remove unviable machines — it will happen from time to time," says Tuppen.

Bowled over by Bilimoria's spin ​

Good piece in The Times about how no one ever challenged Cobra's success claims. Santham Sanghera says he was as guilty as anyone for falling for the story spun by founder Lord Bilimoria. "I was one of hundreds of journalists

who wrote positively... mindlessly citing growing sales without mentioning the lack of profits. Frankly, I should have realised when the company sent me some Cobra wine to try — a drink that tasted like fermented mouthwash — that its attempts to diversify were going to get it into trouble."

Simply a process of elimination?​

Last week, City Diary reported that the chief exec of a major pubco was receiving PR advice from a high profile agency on how to boost his personal profile — and wondered if he was getting "restless". Ian King, deputy business editor of The Times, emails City Diary: "Just been reading your City diary. Is the restless pubco chief to whom you are referring Ted Tuppen?" It's not, but more guesses are invited.

Bank takes wrong kind of interest ​

More evidence of the banks acting in a fashion for which the only appropriate word is greedy. Pubs 'n' Bars, which has breached its banking covenants, found its interest bill shooting up last year by £150,000 after its principal bankers decided in April 2008 to charge 2% above Libor rather than 1.5% above base. Thanks for your support, guys.

Dividing difficult to conquer​

Interesting insight from Greene King boss Rooney Anand. A while back, you'll remember, the company split its managed pubs into two divisions, headed by the two Jonathans, Webster and Lawson. "Splitting a company is harder than making an acquisition," says Anand. "There's a sense of loss and divided loyalties." Meanwhile, Loch Fyne boss Mark Derry is set to step down after two years running the business since it was acquired by Greene King, as was planned. Loch Fyne will be tucked under Jonathan Webster's wing.

Franchisees need bailing out too ​

Punch Partnership's boss Roger Whiteside introduced the franchise model at Threshers, where franchisees are suffering some of the same problems as Punch tenants. At Threshers, parent company First Quench Retailing is also being forced to offer special help — it's reduced the fee that it charges its franchisees, for example. Threshers charges a so-called "management service fee" of 3% to 5% of the store's sales. However, it's reduced this figure for six months in the light of the "very tough" current trading environment.