Winner of the Best Pub Employer (up to 500 employees) category and a finalist in Best Managed Pub Company (2-50 sites) at the 2019 Publican Awards – north-east-based operator the Inn Collection Group recently opened its 10th site, the Queens Hotel in Ambleside, Cumbria.
It’s third acquisition in the past 12 months, the Queens Hotel is the Inn Collection Group’s second site in the Lake District.
Inn Collection Group managing director Sean Donkin spoke to The Morning Advertiser about the process behind the group’s recent growth, as well as hints and tips for would-be multiple operators.
How should a new site fit within the existing estate?
“Small-scale operators must consider the geographical implications of operating an additional site,” Andrew Spencer, an associate at leisure property specialist Fleurets, advises.
“While the large pub companies have the operations and infrastructure to cope with a broad geographic spread of venues, smaller-scale operations need to question how a new site will geographically work in conjunction with existing ones.
“A new site needs to be properly overseen and managed, without detrimental effect to the existing operations. Of course, this new location also has to work with the specific style of operation; consider the demographics of the area and whether your particular offer will work well in this location.
“Furthermore, operators should carefully consider funding, making sure they account for all costs at the inception of the process. Costs include, but are not limited to: deposit, fees, stock, marketing, fit out and repairs, staffing and, of course, working capital.”
What are the key things you look for when you’re searching for a new site to add to your portfolio?
The first thing is we’ve got a very specific target geography that we’re trying to operate within - that’s south of the Scottish borders, north of the southern border of Hull in the east, Lytham St Annes in the west and anything in between. That’s because it’s an area in which we operate currently, it’s an area we feel we understand and to which our model of pubs with rooms is relevant.
The second thing is we look at the ability or possibility of adding bedrooms. Obviously there are a lot of pubs out there without bedrooms, but that’s a fundamental part of our business plan. So it could be that it’s just a stand-alone ‘boozer’, but if it’s got land or potential to expand it we would look at that.
It must finally be able to create the returns that we require as a business.
What are the key benefits of being quite selective over the geographic location of your pubs?
Management time. We could pick pubs up all the way round the country, but how closely could we monitor them and support the unit managers? Anything within a two-and-a-half hour drive of our heartland is where we try to remain at the moment.
How do you assess the potential of a site?
We have our own internal procedures that we follow. One would be web-based research first.
Secondly, there would be three or four mystery visits where we would go along ourselves and assess the sites.
One of the founders is responsible for selecting these sites before they come to my attention then we discuss them internally. Then finally, following that, we’d ask for access to information from the vendor and create an internal business plan for the site.
Is there anything that you take as a big sign to walk away from a new site?
If any of them fail our initial tests. If they’re not in the geographical region, have no ability to create or expand bedrooms or enhance the offering and, thirdly, if we don’t feel that it’s capable of creating the cash returns we need.
There’s nothing specific – I wouldn’t look at a site that was derelict and say ‘we’re not going to do it because it’s derelict’, we look at everything. I know everybody says this but it’s purely based on the best possible locations. We probably review a dozen a week and walk away from far more than we seek to take further.
Do you seek external collaboration or advice?
We use agents – all the usual suspects. We use our own knowledge and our own contacts, and that’s just in terms of actually getting them to the consideration stage. If we were to take it further down the road we would do a full diligence suite on the site. That would range from the building surveys to valuation reports, we would conduct desktop research, use STR hotel benchmarking data – we would do the full lot.
What signs are there that you’re ready to take on a new site – how do you determine the pace at which you can grow? Is it more ad hoc?
Not really ad hoc or opportunistic. We’ve got a pre-defined rollout of about three to four sites per year – that’s our target – but that’s based on numerical returns. We’ve got a fixed amount in our head that we’re prepared to commit to each year.
It may be that you add three really big sites, it may be that you add five slightly smaller ones – we have minimum criteria of profitability that the sites have got to be able to generate. It’s not as simple as saying we’re going to do one every three months, or one every two-anda- half months. Sites come on the market, or we get approached by vendors, every day. So yes there is a bit of opportunism – if there is a really good site that we’ve been watching, which we feel would be right for us, we try to move on that quickly.
In terms of the business being ready to take on new sites, we’ve got private equity backing, we’ve got agreed funding from a bank to support this type of growth and style of growth. Obviously they’ve got vetting procedures they have to go through, but if there’s a gem we’ll certainly jump on it.
What advice, hints and tips, would you give a smaller operator looking to expand their estate of pubs?
You’re not as good as you think you are! Running one site is relatively smooth, running two is the next big step. From my perspective, once you hit seven, you really need to change the way you think in terms of resource and staffing. We don’t wait to feel pinch points and then react – we plan ahead. We’ve probably got one more hire to do and then we’re set to get from 10 to 20 sites.
What is the main challenge you’ve faced in growing your pub company’s estate?
Prior to June last year we had a very small central office resource so I’d say empowerment of the team members and recruitment of people who have a similar mind-set. We don’t just pick the first person who comes along, we really think about what you want them to do for us and then allow them to do it. We’re quite strong on promoting from within.
Any other advice?
Do as much consideration and due diligence as you can, or that you can afford to do. When you’re starting out there will be some things that you wish you could do and can’t afford to do, but do as much as you can before you agree to take on a new site. I know quite a lot of people who have gone from one to three motivated by the desire to have more pubs rather than the desire to select the right pubs for their model or brand.
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