GK Pub Partners looks to double franchise estate

The branded franchise concept was launched in November last year​, when it opened the Maldon Grey in Sudbury, Suffolk.

Wayne Shurvinton, managing director of Pub Partners, told The Morning Advertiser ​how the model, which is the company’s first branded concept, has become part of its portfolio.

He said: “We're really excited about the growth of franchise. We operate about 1,000 leased and tenanted pubs and my view is they'll continue to be the heart of our business and this division, but we do see a huge opportunity our franchise proposition.

“Hive Pubs is our first branded concept, it enables somebody to run their own pub for very, very low entry costs of £5,000 ingoing costs.

“We're excited about the way our franchisees can earn money. There are four ways – they get a guaranteed franchise fee of £20,000, they get a share of turnover, a share of profit and then an annual bonus on top of that. We think that's pretty compelling in the market in terms of four ways to earn money.”

Shurvinton went on to outline how trade has been so far, since the model was introduced alongside how the company is looking to expand this part of the estate.

“I don't think anybody else is offering that level of reward. It's proving very popular for us. We're up to 12 sites now and we're seeing quite a lot of interest from general managers of managed division, assistant managers looking to step into their first business ownership role,” he added.

“We're also seeing quite a lot of interest from some of our major competitors, which is good. A lot of that's driven by the earning potential.

“We've opened 12 of them in the past six months [and] we've got a significant pipeline to the rest of this year. I suspect we'll probably end the year around about 30 franchise pubs, which is good, and then heading into 2023, we've got a really clear pipeline to continue that growth and that ambition we have.”

The criteria for the pubs that fit into the franchise model are those that are the centred into their local area and receive investments of up to £400,000 from the company, the Pub Partners boss highlighted.

Shurvinton added: “Hive is essentially it's all about the community and being a hive of activity. We look for pubs that are more residential, to serve that local community, it offers obviously, clearly good food, good drink, and activities such as sport, live music, karaoke, etc.

“We pour significant investment into these Hive pubs. We've got a clear branded concept, and we want to make sure that investment does that branded concept justice.

“We’ve invested in anywhere between £300,000 to £400,000 to transform these pubs. The transformations are truly spectacular [with] completely overhauled gardens, some of them have got beach huts, fire pits, gazebos.

“They are very modern, well run well branded pubs, which is great. We've seen some really strong performance from our recent openings. Out of the 12 [sites opened so far], the nine that have been trading the longest, are performing way ahead of business case.

“It's a really good proposition for us, delivering really good returns for our franchisees and it's something we think will grow exponentially over the next few years, which we're really excited about.”

Recovery phase

While he was optimistic about the performance of the new franchise model, Shurvinton also laid out how the Pub Partners business was tackling ongoing issues for the sector.

He said: “We're in pretty good shape. From a trade perspective, we're seeing it improve each period, which is good.

“But like any business, it's been well documented, we're still in recovery phase, that's for sure and we've got some challenges to weather, ourselves, and obviously, our tenants around consumer confidence, cost of living and inflationary pressures.

“That said, we’re pretty buoyant, because we're ahead of the market and our competition. All in all, I'm pretty pleased with the progress we're making.”

Furthermore, the company is continuing to pump money into its properties, despite continuing rising costs and challenges.

“What I'm really pleased with is the is the level of investment that we're putting into the estate. Against the backdrop that I've described, we'll invest about £25m into our assets this year,” Shurvinton added.

“We think that's the right thing to do to make sure our assets are in the best shape possible as trade begins to recover. Trade is challenging but we're in pretty good shape.”

However, he went on to illustrate the impact of rising costs in particular on a number of tenants.

Shurvinton said: “Obviously it’s a challenge out there. We're seeing rising costs across the board. It's been well reported about energy prices, that’s a big one. We've seen countless examples of tenants who've seen their bills go up significantly.

“I was speaking to a tenant recently, who is going to pay roughly about an extra £32,000 when their current energy contract expires, that's significant.

“The straw poll that we've done of our tenants, some of these costs are going up by north of 200% and that's clearly not sustainable.

“You’ve then got labour shortages, that's a big challenge that puts pressure on wages. Some of our pubs are reporting labour [costs are as] high as 30%, which is clearly way above historical norms.

“You add in things like food inflation, so chicken, cooking oil, meat, that's all drastically increased. Cooking oil, for example, [has] doubled in the past six months, so it's challenging.”

In order to help its tenants battle the ongoing inflation, Shurvinton referred to its Partners Powering Change initiative – a suite of energy and saving initiatives.

In addition, he described a new financial scheme, which will aim to aid licensees with hosting events.

Tied model strength

The Pub Partners managing director said: “We're continuing to invest in capital and we're just about to launch what we're terming an investment fund.

“That's essentially about £500,000 that will support our tenants with premium draught changes and support them with things like beer festivals and gearing up for summer trade. We're doing all we can to support.”

During the pandemic, Greene King announced rent concessions amid closure periods and restricted trading, something Shurvinton cited when talking about support in place for licensees.

He said: “Clearly, the support that we put in place during Covid was significant. We invested about £45m in our estate predominantly around concessions.

“In fact, the whole industry, I think, invested around about £360m so it shows the strength of the tied model during Covid. That support continues as we enter recovery phase.”

Moreover, he outlined how the company is pressing the Government to provide further support for the sector.

“Outside of this sort of day-to-day trading support, we're obviously trying to continue to use our strong voice across the sector to communicate to Government around the pressures licensees are facing and what Government can do to support,” Shurvinton added.

“We've just recently pulled together actually quite a powerful document, which was called The Voice of the Publican.

“[It] sets out four or five key case studies, hearing directly from licensees about the pressures they're facing.

“We've taken that to the heart of Government, just to make sure they're well versed in the challenges people are facing and equally asking for Government support as well.”

That Government aid he mentioned included “targeted VAT support” alongside help with energy bills as well as business rates.

One suggestion Shurvinton made on business rates was a permanent cut of at least 20% in the multiplier as well as an immediate introduction of 100% investment relief and reducing the revaluation periods down the annual assessments.

He added: “The Government needs to do more. When we had the targeted VAT support, that was very helpful.

“Clearly running at 12.5% for hospitality was back in October was significant so, any reduction would be welcomed.

“But targeted intervention would be more beneficial. It [would] stimulate further growth investment.

“VAT at 12.5% was a lifeline for many pubs, particularly food pubs so if they are going to reduce VAT to 17.5%, I'd ask them to go further, I’d ask them to be more targeted and I’d also ask them to include wet-led pubs who clearly missed out on that previous benefit.

“There are other things the Government can and should do. There should be a small business energy cap, as energy costs have doubled [and] there's no end in sight on that so an intervention there would be helpful from the Government as well.”