Speaking to the Morning Advertiser (the MA) recently, Greene King Pub Partners managing director Dan Robinson agreed that consumers were cutting back, but he remains optimistic.
“Consumers still want to come out and have a good time, they still want to use pubs as a place to meet with friends and family, and the big events are even more important now for us to support.
“The Bank Holiday weekends, the Euros etc., putting stuff on, people will come but you’ve got to differentiate yourselves.”
And it’s a strategy that is working for Robinson, and his colleague Penny Baldwin, franchiser operations director who oversees the Nest and Hive concepts.
“Last year was a good year for us,” he points out. “We outperformed the market again, and it’s great to see our partners have outperformed the market as well. And we’ve had a good start to this year as well.”
That doesn’t mean they don’t recognise there are a fair few challenges for the sector though: “Clearly operators are facing some pretty big costs, with the changes from April landing,” he says.
“But the first quarter of this year, we’ve really focused on sitting down with all our partners and getting to grips with the costs that are going to hit them, and what actions they need to take to mitigate those costs, looking at ranging for example, where are the opportunities to drive trade and drive margin.”
Baldwin adds there’s no cookie cutter solution: “Every franchisee scenario, as with our tenants, is different. So it’s understanding what they’re facing into, how we can support and what levers we can pull collaboratively.
“The top line has been positive, and it’s about driving that top line because it helps everything else flow through the P&L.”
Franchise appeal
And with the challenges operators are facing, are they finding that franchise offer more appealing, with the greater protection from some of the wider challenges?
Robinson acknowledges the appeal, but says both sides of the business remain popular choices: “There’s probably a bit more shelter from the partners’ point of view in franchise, however, there’s still lots of opportunities within the leased and tenanted side of the business, and both models work well.”
“It’s showing in the recruitment side,” adds Baldwin, “it’s not just franchise, we’re seeing that leased and tenanted applications are strong as ever.”
Greene King is supporting that side of things with the recent launch of a new recruitment website, following a million pound investment and that’s already paying dividends says Robinson.
“That’s definitely had a big impact on the number of applications coming through. Launched that in December and certainly in the first quarter we’ve had a record number of applications coming through for both parts of the business.”
The website acts as a one stop shop for anyone looking to take on a pub, regardless of the model, and allows operators to make an informed choice of what will work for them.
The franchise operation continues to go from strength to strength, with over 80 sites now, an expansion into Scotland and it continues to grow week by week. The first Hive site was launched in 2021, and the Nest concept, now 15 strong, premiered in March 2024.
Sustainable growth
Part of the key to that success is ensuring that growth remains sustainable, and it certainly isn’t at the expense of the leased and tenanted business either, both Robinson and Baldwin point out.
“I don’t think there has been any friction between pubs moving from leased and tenanted to franchise,” says Baldwin. “It all comes around naturally. There’s always cycles in leased and tenanted, based on when agreements are signed.
“We know when they’re coming to the end of their agreement, and great business conversations are obviously already being had quite well in advance with the tenant and BDM.
“There’s quite often circumstances where the tenant wants to stay on, and if they’ve got a brilliant business case and model for that pub and they keep the pub and it stays as a lease and tenanted site.”
Robinson adds: “We’ve got a really good pipeline for franchise and we’re not trying to grow at a ridiculous pace with it.
“We’re not looking to overstretch ourselves - the biggest challenge with programmes like this is getting the right people and the right franchisees and recruitment. So we run at a manageable pace.
“And the pace we’ve been moving at is probably the same pace we’ll move over the next couple of years in terms of openings, around 20 and 30 a year is the plan.”
The move to Scotland has been the most recent development and Baldwin says the interest has been huge.
“It’s a new concept for Scotland and our BDM there has been inundated with people wanting to talk about it. The agreement is the same, we’ve just tweaked the offer slightly, we’ve got Tennants on the bar, and Irn Bru cans!”
Friction free
And while other pubcos have found themselves facing friction between franchise operations and they’re more traditional leased and tenanted businesses, Greene King seems to have side-stepped the issue.the two branches of the business co-exist.
“We’ve not really had any major challenges,” says Baldwin. “There’s always caution when we do a franchise near a tenant, but as long as we differentiate the models, we’ve not really had any major challenges.”
Rather than bang heads, she says the BDMs and operators work together to align their operations, both on the partners side and the managed, to avoid undermining each other. “They work together to share insight and details,” she adds.
Investment has obviously been a key part of the driver of the businesses success, both across L&T and in the franchise side.
“Overall, last year we invested 23m pounds into the estate and most of that was in the L&T business. However, we are obviously spending significant amounts on Nests for example because they’re a new concept, but we still invest heavily in both parts.”
He said that level of investment was only going to increase in the year ahead to continue to support and drive the business forward.
Further development has also seen the company create new roles to support partners and BDMs, with the appointment of two drinks category managers, one centrally based and one field-based.
“There’s a growing focus on gaining insight, and then how do we translate that for the BDMs and partners to use to grow their market,” Robinson says.
Energy has been one of the big headline challenges operators have faced in recent years, and Greene King has stepped up activities to support here as well.
“We did an energy audit with each of the partners in conjunction with the Zero Carbon Forum,” says Robinson. “That helped them understand what energy they were using, what it’s costing them and where were the opportunities to make some savings.”
He said that work has been followed with a number of trials with partners, looking for opportunities, bringing in cellar management systems and voltage optimisation, with Greene King funding some of the activity to assess the impact for operators.
“We asked people to volunteer to be part of it, and they’re now sharing results with us, and we can understand where the opportunity for investment is in the future,” Robinson says.
Strong relationships
And those investments, support and developments are certainly helping to cement the relationships between partners and pub co. Around 94% of the estate is on substantive agreements, and the average tenure is 8 years 2 months.
And the business is set to continue to lobby the Government on behalf of its operators, he adds.
“We’re looking for rate reform from Government. We know there’s some reform coming, but we don’t exactly that it looks like yet.
“As a business we lobby Government regularly, meet with MPs regularly as well, and invite them along to investment openings, so partners get the chance to talk as well. I would hope they would listen.”
While business rate reform is key, he keeps a key eye on the question of VAT: “I think it’s interesting what’s happening in other countries around VAT and hospitality, and I would absolutely support that as an opportunity in our country and industry.”
Hopefully all these measures will put Greene King operators in a strong position for the year ahead. “It’s going to be a challenging 12 months for the industry,” says Robinson, “but I think that we’re positioned in a good place. We’ll continue to invest behind our partners and support them and there’s still quite a few trading opportunities to go.”
