Business Opinion
TRG challenge is the scaling up of B&P
That Jeremy Brunning and Graham Price should sell their small but perfectly-formed pub company to The Restaurant Group (TRG) is a bit of a surprise - although £32m is clearly a very tempting cash-in for 15 pubs (six of them are freehold).
Brunning and Price have spent 26 years patiently building this company into, for my money, the best food-led operator of its size in the country. The Good Pub Guide readers have rewarded their devotion to retailing detail by voting Brunning & Price (B&P) the Pub Group of the Year on three separate occasions. Food quality is utterly outstanding and many of its sites are breath-takingly well developed - like the beautiful Corn Mill in Llangollen.
Given the rather remote situation of many of its heartland sites in the North West, turnover per pub is extraordinarily high. With 14 pubs trading, each is taking an average of £24,000 per week excluding VAT (£1.28m per annum). (Its next site, Sutton Hall in Macclesfield, is due to open in May next year and is Brunning & Price's largest ever purchase price for a pub - it's costing £1.81m with duty and fees.)
TRG is paying an average of £2.157m per open pub or 8.2 times historic pre-central overhead. B&P's annual rent-roll is below £400,000 for nine leasehold sites, which works out at a fairly modest £40,000 per annum or so per venue - or a blended average of below 4% of turnover going to pay rent.
For TRG, the acquisition of B&P is another large step in the direction of destination pub dining. It already owns the Blubeckers chain, which has an identical spend-per-head of £16 and occupies many former pub buildings. B&P would have made a superb acquisition for Mitchells & Butlers (M&B), especially bearing in mind the management team have agreed to stay on at TRG. Indeed, any of the major managed operators, could have learnt a lot from this style of operation.
Only the gastropub concept Project S at M&B compares to B&P's pubs in terms of food quality. It seems to me that B&P has a more authentically upmarket "pubby" take on quality food and cask ale, and has successfully engendered an entrepreneurial culture among its managers. It served over 400 different varieties of cask ale in the past year, selling 1.3 million pints of beer and lager.
What's also interesting about B&P is it's palpably mature approach to communicating with its staff and customers (see its website, for example) and transparency on financial matters. I've never come across a private pub company that posts its results on its website within a couple of months of its year end in June. Its latest year showed turnover up 11.58% to £19.95m and pre-tax profit marching along to £1.22m against £1m the year before.
For trend-watchers, chairman Jeremy Brunning also gives a few clues on where B&P's operational focus has been in the past year. "(Operations director) Duncan Lochhead has been leading a steady overhaul of our wine lists," he reports. "I believe there is still a lot of room for growth in the pub wine market in the UK and we intend to be at the forefront of it."
The challenge now is whether TRG can scale up B&P in a way that doesn't dilute its offer. Jerry and Graham, after all, have struggled to find more than one or two suitable candidates a year, although financial fire power is always an issue in this size of company when it's independent. Strategically, TRG has increased its overlap with M&B. In the normal order of things, when M&B wasn't focused on its convoluted property deal with investor Robert Tchenguiz, TRG would have moved further up the grid as a possible takeover target.
