In high spirits - Karen Jones to revive Spirit Group

Karen Jones is responsible for reviving the fortunes of Spirit Group, the renamed retail arm of Punch, over the past two years. By Mark Stretton.

It was a classic triumph of hope over expectation - Karen Jones agrees to interview shocker. "I've been waiting until we had something good to say," said the low-profile chief executive. "We're not finished yet, but we are getting there."

As head of Spirit Group, she has one of the most notable, and probably toughest, jobs in the industry. The entrepreneur behind Café Rouge has turned around one of Britain's biggest managed pub estates.

In some quarters she has an undeserved reputation as an over-bearing and somewhat fearsome character. "It comes with the territory," said the Spirit boss. "People see a woman, a mother of three, heading a big company and they make certain assumptions - I must be this and that, I must be a pretty fierce person to deal with and so on.

"There are times when I have to be tough and make decisions quickly, for sure, but that's the nature of my job."

The chief executive is clearly passionate about her company, talking incessantly about all areas of the business. Her enthusiasm and commitment are almost tangible. Words such as "fabulous", "extraordinary" and "amazing" regularly punctuate Karen's sentences when she is referring to Spirit.

Much is made of the fact that Karen is a working mum at the top of the corporate ladder. "Is it tough being a mother and holding down a career? I have a great job, with good money, I have a great family and great support - I'm not really the right person to ask, I think it must be a lot tougher for a single mum who lives in a tower block."

Over the past two years Karen has led the company through a period of transition, culminating last month in a new name and independence from the tenanted division, Punch Pub Company.

The challenge Karen has faced with Spirit has been quite different from previous ventures. "I was used to building things up from scratch," she said. "This has been about building and changing from the top down."

She says there is still work to be done but the company is finally starting to get there.

The lion's share of the Spirit estate came from the Allied Domecq retail arm, part of the business bought by Punch in September 1999. From 2,000 pubs, the managed estate was whittled down to 1,046. "We inherited a bureaucracy from Allied," she said. "We had a bunch of disaffected people, layer upon layer of management and unbelievably high cost levels. It had to come out.

"When you have to turn around a massive estate you focus on the big things, then you fine tune - that's where we've got to - we're fine tuning."

The Punch group was put together with £2bn debt secured against the company's pub-generated cash-flows. The final stages of de-merging will see Spirit split its debt from the Punch Pub Company, a process that should lead to a stock market listing for both companies.

When it comes to managed pub companies investors traditionally look for strong brands that can be rolled out to generate growth. The Spirit portfolio ranges from child-friendly Wacky Warehouse roadside pubs to the laid-back lounge style of Bar Room Bar.

The latter is one of the main growth drivers Karen has identified along with Two for One, a food-focused concept that offers two meals for the price of one, and Q's, the local pub concept that evolved from Mr Q's. "Q's has been a fabulous success," says Karen. "We've see an average sales uplift of 60 per cent."

These three offers are testimony to Karen's commitment to brands, food-led pubs and locals - the "heartland of our estate". So far the Spirit boss has invested £49m in these three concepts.

While public status is the clear objective, Karen says it is by no means a must. "We don't have to float," said Karen. "We can continue to grow the business but clearly a flotation would quicken the process."

The Spirit boss says the business throws off enough cash to ensure that, float or no float, the tools for acquisition are in place. The company will take a serious look at any opportunities on the market. "Up to now, it's been about focusing on the 1,046 pubs we already have. Now we can start to look outward."

After flirting with a career in advertising, Karen joined the hospitality industry full-time at Peppermint Park, an American diner on the edge of London's Covent Garden. "Roger Myers asked me to go and work there, not as anything in particular, just to give it a go. All my friends thought I was mad."

They grew and floated a restaurant business, before selling up in 1988 and using the cash to start Café Rouge in Richmond, which grew to a 104-strong national chain and later acquired Dôme. The company was sold to Whitbread in 1996 for £133m. Karen stayed with the business for two years as managing director before joining Punch Taverns in March 1999.

Given her previous success and the financial gains that went with it, Karen no longer has to worry about the mortgage. But the Spirit chief remains relentlessly driven and passionate about her work. "It's never been about the money," she said. "It's a nice by-product, it should never be sniffed at but it's never been my strongest motivating force.

"I really do love the hospitality industry - it's great going into the sharp end of the business and seeing it work. Nothing gives me a greater kick than seeing people having a brilliant time in our pubs."

Economic slowdown and talk of a pending recession does not worry her. "I think pubs do well in the good times and bad times," she said. "We opened Café Rouge in a recession."

Karen says the group aims to grow food sales throughout the estate from 20 to 25 per cent in incremental growth. "I believe in food pubs," she said. "I think the standard of food in pubs has been pretty dreadful, with honourable exceptions - we want to be an honourable exception.

"It's about three things, price, quality and service. They always have to be right whether it's a 99p chip butty or a £9 steak."

With 17,000 names on the Spirit payroll, one of her main focuses is on people and carving careers for them within the company. "It's my job to make sure everybody's future sings," she said. She reels off countless tales of promotion from within, most recently business development manager Dan Marlow's move to operations.

The company has launched equity share schemes for staff, the second of which was over-subscribed, a fantastic achievement, says the Spirit chief. "People are really starting to believe in the company," she said. "I could show a lovely bound document containing a compelling offer and lots of corporate clap-trap, but if the people ain't right, it's a waste of time.

"Everyone in this industry knows that you can take a tired pub and not necessarily have to spend a penny on it. Put the right person in there and it will take off.

Karen says that her three children are her antidote to work. "You can't be with them half-heartedly," she said.

"There are times when you want to be left alone but nothing beats that welcoming party as you walk through the front door."

Karen also keeps in shape, fitting twice-weekly dawn runs around Wandsworth Common into her schedule, although not at the expense of sleep. "Oh God - I have to have eight hours. I'm not one of these Margaret Thatcher types who live on 15 minutes a night," she said.

Karen says the thing guaranteed to make her blood boil is staff that are either rude or simply don't care. "And boy did we have some horror stories when we took on the Allied pubs," she said.

"There were some dark days at first but those are becoming fewer and fewer now.

"I would still be the last person to say 'that's a brilliant pub - it must be a Spirit pub' but that is the aim. We haven't quite done it yet but we are nearly there. We want to be t