To the rescue
When Mercury Management sets its sights on its latest project there's no stopping until its core values have been firmly instilled. Hamish Champ reports.
Some commentators, bemoaning the loss of the traditional rural boozer, claim the demise of the local village pub will see an irrecoverable decline of part of our cultural heritage. But while such closures are occurring and are regrettable, there is no getting away from the fact that often these establishments no longer fulfill their remit to provide the product range, service and social environment that have historically induced punters to cross the threshold in the first place. Neither, conversely, should the rise of a replacement model that could better serve its customer base - albeit perhaps differently - be dismissed out of hand.
Talking to Mark Butler and Kevin Thornton, joint managing directors of Midlands-based pub operator and consultancy service Mercury Management, it is clear the pair are on a mission to tackle this particular shift in the industry's landscape.
Sitting in the formal dining area of their latest project, the Mercury Inns' Old Green Man in Little Brickhill, near Milton Keynes, the pair talk enthusiastically about their vision to open a chain of high quality, unique, food-led destination pubs across a section of the country bordered by the M1, the M5 and the northern section of the M25.
"We want our pubs to offer restaurant food and service in a pub environment with an emphasis on quality," says Mark. "We offer high service standards, good quality house wines and an extensive wine list, a famous food dish in each pub and venues with character - log fires in the winter and gardens in the summer."
Mercury has set itself the task of identifying underperforming pubs with development potential within 20 minutes of a significant population centre, refurbish them to a high standard, and make the offer as qualitatively high as possible. Each will offer customers an experience that will encompass pub drinking, casual eating and more formal, "occasion" dining, to surpass what they will have come to expect from a rural pub.
While the Old Green Man is the first of what is planned to be a chain of 10 such outlets set up over the next two years, Mark and Kevin are hardly newcomers to pub operating. With half a century's worth of experience in the leisure and licensing sectors between them, the pair believe they know what consumers want and how best to provide it.
Founded in 1984, Mercury has a good track record of running pubs for itself or for clients such as other pub operators or institutions such as banks that may have repossessed outlets which have defaulted on a loan. The company was bought out by the existing management in 1998 and a spate of fundraising through the government's EIS vehicle has followed.
Currently Mercury owns five freehold properties, including the 25-bedroomed Villa Hotel at Lytham. It also manages 25 outlets for third-party clients, with the capacity to oversee an additional 35, as well as offering other services such as pub "health checks", accounting and business planning, and strategic reviews for prospective pub operators.
So the Old Green Man is the first step in a new era for Mercury. A Greene King pub, it was doing around £1,000 a week before the group pitched to take on the lease of 20 years. "We got it for a nil premium and spent £300,000 on refurbishments," says Mark, noting that as well as having a pub that does considerably more business than its previous incarnation, the upside for Greene King is the rise in the value of the property post-makeover. "We're aiming for weekly takings of £20,000 within a few months, and a pub that was worth £500,000 should soon be worth in excess of £1m," he adds.
Predictably, rising prices for decent freehold sites on what Mark describes as "ludicrous multiples for the returns you'd be getting" means the leased route is currently a lot more attractive. Both Kevin and Mark say there are some "fantastic sites" out there, adding that while the pubcos have the assets, "we have the concept".
That Greene King has taken the plunge with the Mercury team and stretched its tenancy terms - which usually do not extend beyond five years - is a testament to the concept's workability.
But it wasn't always the case that pubcos were prepared to take such a risk on an outfit like theirs, Mark says. "Traditional pub companies have historically been wary of multiple operators such as ourselves, since the risk was obviously perceived as being greater. But they are warming to us now."
Having shown Greene King what it could do with another of its pubs, the Five Bells in Stanbridge, Bedfordshire, Mercury tendered for the Old Green Man site when it became available. "We're proven in the quality end of the market," says Kevin, "and it saw that we could deliver what we said we would." He adds that previously the group "had not been on the radar of the likes of Enterprise Inns or Charles Wells, but now we are".
Meanwhile, the food-led outlets that the pair are aiming to create will all carry Mercury's core values, such as high levels of hospitality, a friendly environment, locally-sourced fresh food, emphasis on training and a "passport to excellence".
Each pub will initially have a similar menu featuring meat, fish and vegetarian dishes as well as pizza - including Mark's own invention, the "Breakfast Pizza" with egg and bacon - and daily specials. But while staff will wear a "connected" uniform, Mark stresses these won't be identikit outlets. "They will have their own personality and match the needs of the local community," he says.
Mercury Inns is close to signing up its second pub, which Mark says is in Buckinghamshire, somewhere "south east of Milton Keynes". Funding for this and future projects will come from either the group's own cash reserves or from brewers. Despite the loan tie that results from borrowing from a brewer and the half a per cent premium that comes with it, it's a policy that works, since "banks won't lend on a leasehold property", he explains.
The tide of opinion on leasehold properties is turning, meanwhile, and in identifying underperforming pubs within easy reach of wealthy, affluent and aspirational customers Mercury clearly believes it can occupy a niche in an attractive, developing market.
Next time a village hostelry is looking to be on the way out, it could well be that Messrs Butler and Thornton are riding to the rescue.
Pictures: The Old Green Man in Little Brickhill, near Milton Keynes.
