The Big Interview: Simon Townsend
The other reason for a chief operating officer to be cheerful is his firm’s performance. Last November’s interim results were, for Townsend, a turning point, and the following quarter’s figures, released last month, confirm the positive trend.
Income per pub is rising and the proportion of the estate on substantive agreements is now at a ‘normal’ level – 90%.
It was as low as 82% three years ago,” he says. “That equated to a 100% increase in non-substantive agreements and tenancies-at-will, which had resulted from business failures. The effect was a huge drag on our performance.
“We’ve been fire-fighting for several years, but now we’re seeing a number of hard-won improvements that have been a long time coming.
“We’ve been selling 500-plus pubs a year that were not sustainable businesses for us, taking out the weak links. We’ve reduced bad debts and overdues from pubs to us, and we’ve reduced the level of financial assistance we have to give to pubs. At its height that was £18m; last year it was £15m and this year it’s heading for less than £10m.
“These are important metrics. Enterprise is beginning to feel like a stable business. And that’s with no following winds. It’s not as if the economy has been helping. This is all self-made by our pubs and by us. It’s really encouraging.”
Indeed, Townsend declares that he’s “more optimistic than I have been for a number of years”.
He joined Enterprise in 1999 after being won over to virtues of the tenanted pub model during the period he spent at Marston’s. For most of the time since then he has effectively been number two to chief executive Ted Tuppen, complementing his boss’s broader strategic vision with his operations skills.
It’s been an unusually stable partnership. “I have a strong and productive business relationship with Ted — we work well together,” he says. “Ted’s a very impressive individual and he’s always got ideas, always challenging.”
But for inspiration Townsend also looks to the skills demonstrated by the company’s tenants and lessees.
“I’m inspired by the resourcefulness and innovation of great publicans. I take my hat off to our tenants’ achievements in the past few years.
“Our job is to empower them and I’m confident that now we can put certain things behind us and get on with that job.”
BISC issues
The “certain things”, of course, include the scrutiny of the pubco model, and in particular Enterprise Inns, has come under at the Business, Innovation & Skills Committee (BISC) inquiry. Townsend is mildly angry about it.
“The BISC inquiry has given us a negative profile — quite unfairly, in my opinion. The repercussions have not been helpful and it’s been hugely frustrating for us. Statements are made purporting to be facts. We ask for evidence so that we can do something about it, but are rarely able to get the information.
“It makes it hard to defend ourselves or counter the allegations. And it reflects on the team at Enterprise. It makes them out to be dishonest and disreputable. So that’s not been healthy.
“Yet the scrutiny and interrogation has caused all businesses in the sector to raise the bar. It’s been a force for good, in the sense that potential lessees are required to take more professional advice.
“It’s strengthened due diligence across the trade and that’s put us in a better position to attract high quality publicans.
“My overall impression is that the industry has moved on considerably. We’ve improved standards, transparency, and constantly evolved the code of practice.
“Government has given us that responsibility, we want to enact those commitments and do it with speed. What happens after that is for the Government to decide.”
Townsend has also witnessed a sense of positive change emerging without the BISC’s help.
“Quite separately from the scrutiny of the inquiry, there has been a huge evolution in how the model is constituted — and that is down to the competitive pressure,” he explains.
“All companies have had to evolve the model rapidly in order to ensure that they attract and retain the best publicans, and we now have a wide array of agreement types and discount flexibility.
“At Enterprise we are prepared to negotiate about anything with anyone on any basis — including free-of-tie. We’ve got 130 free-of-tie agreements in place now. Where that fits, we will do it.
“But if they want tenants to be able to demand a change of terms — well, that’s just not right.”
One particular success has been Project Beacon, a group of 110 pubs that are being operated as “managed tenancies”. “Not a franchise – yet,” says Townsend.
“It’s still a traditional tenancy agreement, but one where we can put forward a detailed vision for the pub, for example on pricing.”
Income at Beacon houses that have been trading for more than four weeks is up by nearly 30%, and another couple of hundred will be on the agreement by the end of 2012.
Downsizing
Another, arguably positive, change is that Enterprise, along with the other major tenanted pubcos, is now a good deal smaller than it was. But Townsend insists that “size of estate is not the issue”.
“It’s about the attention you can give to each pub. In a challenging period, business development managers (BDMs) are reacting to business failures and it makes it very difficult for them to negotiate and respond in an effective way.”
The problem has been exacerbated by the number of assigned pubs on the Enterprise estate.
Half its tenants joined the business by buying a lease from an existing tenant — a good thing in a benign economic environment, but when times get tough it exposes tenants who have paid too much.
“A rising market in 2007 meant full premiums were being paid and there was very little reason for us to withhold consent. They can overpay for the pub, but we can’t judge; it’s not approved by us.
“A tenant might have paid £100,000 and then they find that the business is unsustainable. We have had to deal with a lot of situations like that.”
Change has come in recent months, though. “We’re able to spend more time on our pubs now,” says Townsend. “We have reduced the number of pubs that each regional manager looks after and increased the number of divisions to 14, so we have upgraded the resources we put into each pub.
“The average number of pubs per BDM is now 48, compared to more than 60 in 2006. That figure is continuing to head south and it is a really important statement of intent about the way in which we believe we can work with pubs.”
Dealing with dissent
Other operational resources at Enterprise have been upgraded too. Townsend is especially excited about the new ways of communicating with tenants that the company is putting in place.
In spite of all that, he knows he’ll still have to fend off the criticisms. “I suspect certain individuals and groups will find it very difficult to change their views about the company, but I have a huge belief in the tenanted model’s ability to create fabulous entrepreneurial businesses, and Enterprise wants to be at the heart of that.
“We never set out to be the biggest pub estate, but we always wanted it to be the best quality.
“I can see only an increase in innovation, flexibility and investment, and that’s accelerating. Hopefully, we are entering a period of growth.
“There’s something about this industry that enthuses you, even in the most difficult trading periods,” he adds. “I’m inspired by great publicans who can rise to any challenge the market throws at them.”
My kind of pub
“I’m a cask-ale drinker — always have been. I enjoy a great pint of hand-built beer — and if a pub can feed me too, all the better.
“I love pubs with character and there’s a super one called the Farmers Arms at Wellington Heath, Herefordshire. It serves a lovely pint of Wye Valley IPA. And I’m happy to say it’s one of ours. It’s not my nearest, but I will make an effort to go there.”
Key dates
1986
Simon Townsend begins his career as a graduate management trainee at Whitbread
1987
Appointed area freetrade sales manager
1988
Regional account manager for Whitbread-owned distiller James Burrough
1990
Joins drinks company Allied Lyons as business development manager
1992
Major business director for spirits subsidiary URM Agencies
1993
Joins Rank as field sales director
1995
Promoted to business development director
1996
Returns to brewing industry as director of sales at Marston’s
1999
Moves to Enterprise as marketing and logistics director
2000
Appointed to board
2006
Becomes chief operating officer
