Spirit Leased to rollout turnover-based rent deal
The Joint Venture Agreement, as it will be known, is already in place with 18 operators, and Spirit expects to have more than 50 up and running by the end of the year.
Chris Welham, MD of Spirit Leased, told M&C Report: “It will soon represent more than 10% of our [433-strong] estate and will be the standard for all new deals – growing at a rate of 30 to 40 per year.
“The JV Agreement completely transforms the relationship between the pub company and the operator, as it encourages both parties to talk about growing sales across all categories.”
Gaining traction
Available as both a 10-year lease and five-year tenancy, and based on an element of fixed rent plus a percentage share of turnover, with free-of-tie pricing, no rent reviews and no RPI increases, the deal has already attracted interest from newcomers and experienced, multi-site operators alike.
Some 80 Spirit Leased pubs are currently in the hands of multiple operators, but at least one third of new deals are going to people with existing, established pub businesses.
Welham said that all JV Agreements start with a focus on the appropriate customer offer for the site, with operating cost levels and product pricing benchmarked according to that format.
Spirit Leased has determined a distinct plan for every one of its pubs centred around five elements: product, price, service, environment and communications.
Customer feedback
Welham points to 90%-plus average mystery guest scores as one of the main drivers of Spirit Leased’s success (EBITDA per pub up 10% in the past financial year). “The correlation between business growth and high levels of positive customer feedback is clear to see,” he said, adding that this is helping the company make the move “from the Premier League to Champions’ League”.
Spirit Leased is this month relaunching its online ordering system, Spirit Direct. Currently around 25% of the company’s operators use the site, but Welham hopes to increase usage to over 50% following the redesign.
