Alistair Darby replies to readers' questions
Alistair Darby came to the Crawley offices of the Morning Advertiser this week to work as our guest editor. Here, he answers readers' questions.
How do you raise the calibre of tenants the industry is attracting?
We need to ensure that new entrants are attracted by the potential to earn a decent living on the basis that the terms offered by the pub company are fair and transparent, that high-quality training and business development support are provided, and that successful endeavour is not penalised at rent review. Equally we have got to dissuade ill-advised, ill-prepared and unsuitable people from taking pubs in the first instance so that business failures decrease.
I believe that many of the changes we see in our market are a response to changing customer tastes. Painful though this transition is in terms of pub closures, I think that in the long run the pub will still be the best place for people to spend leisure time. That in itself will attract more forward-thinking people who can see this opportunity.
What are Marston's specific plans and time scale to address the issues highlighted in the pubco inquiry?
Regardless of the inquiry, we have been working hard to add value to our relationship with our tenants and lessees and we will continue to do so — witness our latest announcement about the rollout of our Advance agreement and a price freeze for the majority of our draught products. We will submit our revised code of practise to the BII by Easter for accreditation. You can take comfort also from the knowledge that we plan to announce shortly further initiatives designed to help our tenants and lessees.
Is it true that BDMs and Brulines reps receive bonuses when pubs are fined for allegedly buying out?
Absolutely not!
Is there is any truth in the suggestion that it is often the case dilapidations are charged and recharged and are often never properly attended to?
We know that the issue of repairs and dilapidations is a major source of frustration. This is not a new issue, but it is serous and as a result we are working very hard to improve in this area. We have made mistakes and probably we will do so again in the future, but you can be assured that we will do everything in our power to minimise them and put them right quickly.
What is the average tenure of lessees and tenants within your company and what are your ambitions on this?
To be frank, not long enough! The last two and a half years have been very tough for any small business, not just pubs. We are absolutely determined to increase the success rate of our tenants and lessees through agreement innovation, training and high-quality business support. If they can make a good
living our average tenure will increase and we will benefit from that. Also, stopping unsuitable and ill-prepared people from taking on one of our pubs will reduce business failures and so improve measures of average tenure.
Why is Marston's expanding by opening new pubs rather than reducing debt and improving the balance sheet?
We have become established as a leading developer of new, large food-led pub-restaurants. These have consistently delivered high returns for us and, because we choose the sites and design the pubs ourselves for today's market, the risks are relatively low and we get consistently good results.
We are, therefore, confident of generating good profits and cash flow from these pubs. So, although we may not reduce our absolute level of debt, those profits mean that we can aim to reduce important debt ratios over time.
Our strategy is, therefore, to improve our debt ratios, strengthen our balance sheet (these are freehold sites) — and develop our business by building fantastic new pubs.
What can be done for tenants who complain they are unable to compete on price against managed pubs often run by the same company?
We are doing a range of things: providing tactical pricing support; extending retail agreements (where we, rather than the licensee, fund any price offers); withholding wholesale price increases wherever possible; and starting the rollout of our Advance freetrade pricing agreement. Equally, we want to help our tenants and lessees to identify other ways of attracting consumers other than on the basis of price. The more tenants can do to differentiate their offers — whether through service, beer quality or food — the less important price becomes.
What is sometimes overlooked is that the ability of managed pub chains to offer low prices is based on scale, together with a standardised retail offer to reduce costs. Some licensees don't look closely enough at the opportunities offered by pub companies to provide ancillary goods and services at lower cost — and cost management is a key factor in any successful business.
What does Marston's expect its tenants will do if the tie is abolished? What would Marston's do?
I cannot see this happening, and given the choice of freehouses and tenanted pubs in the market there is no reason for it to happen. We believe passionately in the benefits of the tie. But if the tie went, our tenants, just like those of other pub companies, would move to a commercial rent relationship with us and would have to negotiate supply deals with freetrade suppliers — one of which would be Marston's Beer Company. From my experiences of nearly 10 years in freetrade, tenants should not expect the grass to be greener on that side of the fence! Pub companies would reduce overheads by cutting down on business support, but would probably see an increase in business failures — again, this is something we see in the freetrade market. Such a change would, in my view, be better for the bigger brewers seeking to rebuild their margins, rather than licensees or pub customers.
Why is the Government eager to legislate against responsible public houses, but allow bargain booze to thrive?
You should ask that question of the Government. MPs listen to their constituents, particularly if they are small businessmen and women employing people, so get on and bend their ears!
How can pubs compete with the supermarket in the current climate when they are tied for beer?
Rent a pub from a pubco that is doing something meaningful about beer pricing, training and business support — like Marston's — and then accept that there will always be a price gap between pubs and Tesco. Make up for this by offering great hospitality, community spirit, cask beer and all the wonderful things that pubs do so well and supermarkets do badly (or not at all)! If everything came down to price the only shops left would be supermarkets. This isn't just a pub problem: speak to any independent butcher or greengrocer!
Could pubcos use and pay for a mystery shopper programme to help tenants?
Having used such programmes in previous roles I know how useful they can be. We will investigate setting up such a scheme if it is of mutual benefit to our tenants and lessees and us, but in the meantime don't forget that your customers
and local licensees can provide you with fantastic feedback if you ask them to do so.
Why are some pubs re-let on a lower rent and greater discounts after the previous licensee has left?
There are many reasons why a rent is lowered after the previous licensee has left. Common reasons are because a new licensee is investing capital in the pub or because time and support is needed to re-direct the pub if its offer would benefit from a change of direction. Occasionally it is because we have not been sufficiently alert to local market conditions — an issue we hope doesn't happen very often because there is a real cost to losing a good licensee.
How can the trade unite to fight the obvious onslaught from the health alliance?
What we must recognise is that we have a duty to promote the responsible consumption of alcohol. We can best demonstrate that we are taking our responsibilities seriously by being positive about p
