In defence of Enterprise

Enterprise Inns, like its nearest pubco rival Punch Taverns, is portrayed by some of its more acerbic lessees as Public Enemy Number One. Until recently such an attitude has been of little consequence, an occupational hazard almost.

But with the current problems being experienced by many licensees and the growing popularity of campaigns to rid pubs of the beer tie, the flak has become heavier.

Certainly Enterprise is no stranger to being on the receiving end from lessees unhappy at what they see as the inequity of the current lessee/landlord relationship, with its emphasis on the tie and upward-only rent reviews.

And while the Solihull-based pubco has made much of its commitment to its retailers, saying investment and financial assistance being offered to pubs "were appropriate", for many licensees this is just lip service.

Many believe that beyond corporate edicts highlighting the challenging times and the quality of its estate, Enterprise has shied away from engaging with its licensees about developments across its estate and its future, as well as prospects for the wider market.

However, Colin Pedrick, managing director of the pubco's East division - which comprises 4,000 of the group's 7,500-odd pubs - says he is keen to develop Enterprise's relationship with its retailers, with programmes designed to make the entire business a more mutually beneficial exercise.

A former president of InBev's UK and Ireland operation, Pedrick joined the pubco from the brewing giant two years ago and says the importance of developing the relationship became obvious on his arrival.

"We depend on having successful retailers," he says. "Without them making money we can't make money. We want to build the capabilities of the group to develop strategies that enable our people, our regional managers, to be more interventionist with regard to retailers."

Focusing the efforts of regional managers - who oversee around 55 pubs each - on understanding things such as an outlet's profit and loss account is crucial, Pedrick says.

"But it's not just about a pub's profitability. It's being able to look at marketing packages, consumer awareness, category management," he adds.

"For example, with wet-led pubs that are doing OK but have no food offer, we want to help drive trade up in that business through the use of experts in food. If we can help drive trade up the retailer becomes more profitable and we ultimately benefit. Three or four years ago we wouldn't have done that."

Helping pubs help themselves​There are those who argue that part of the inequity in the relationship lies in the pubco creaming off its share of any increase in profitability in the form of rent rises. This view, naturally, is rebutted by those pursuing the current model, but in the current environment there is more focus than ever on the viability of rental income.

While the debate over rents and the tie rages, licensees can play their part by helping themselves, Pedrick says: "Take pricing. You'd be surprised how many retailers are uncertain about what to charge for their products.

"Some have a good idea of what their takings will be but have no idea where their break-even point is."

If a licensee doesn't know what their break-even point is, they should ask their manager, he says.

"Besides, we don't have all the answers," he adds. "Some retailers might have better ideas than us. We are committed to improving the planning skills of our regional managers when it comes to working with our retailers."

As for initiatives, Pedrick points to a business recovery scheme in the north of England where Enterprise identifies potentially failing pubs with modest barrelage where wet sales have gone down while costs have gone up. "We sit down and talk to them about how we can turn things around," he says. "We assess whether we need to change the dynamic of the pub, introduce food or raise the overall retail standard of the place. We'll also talk to people about an exit strategy if we conclude they aren't the right person for the pub."

Not everyone in the 200 pubs currently covered by the scheme appreciates such intervention, however.

"Some people are reluctant to get involved," says Pedrick.

"They think we'll immediately hike up the rent. That's not our intention. This is an action plan for both the licensee and us to see what impact we can have on trade."

Another scheme is called Invest To Let, where Enterprise has been looking for people to run shuttered pubs in the North East: areas such as Hull, Grimsby and Scunthorpe, "where we adjust the agreement to get the right people into the pub".

Pedrick says: "We've some great retailers working with us who are open to ideas. Some are more reticent. We want to attract the first sort to run our pubs. There is no point putting the wrong person into one of our pubs, underfunded."

Then there's 'A Breath of Fresh Air', another north of England initiative where the pubco works with what it describes as "good retailers" who are only just managing "or are on the brink of suffering. We work with suppliers to send out pub-specific promotional materials to build on what is already a good set-up."

The North isn't alone in suffering, Pedrick points out, and he stresses that contrary to market speculation Enterprise has no plans to leave the region, as it did Scotland prior to that country's smoking ban.

"Marginal businesses across the country have really been hit by government legislation and yet they have a go at us," he says.

Tough on the tie​Finally, there are plans later this year to introduce new rental agreements in parts of the estate that are more akin to traditional tenancies. Pedrick again argues that getting the right person for the pub is key: "People with money aren't always the best ones to run a pub. Our new agreements will be designed to help people with a low level of funding, who have other skills and a great work ethic but not much money."

Meanwhile, day-to-day operations have been boosted by a database made available to each regional manager, which assesses the competitive, demographic and socio-economic situation of their pubs.

"We can engage with our retailers and share this data to look at opportunities it might throw up, for example the casual dining market," says Pedrick. "This is a big investment in software and training for the regional guys. But at the end of the day it's providing data that's designed to be shared with the retailer."

On the vexed question of the pubco's tough attitude in dealing with those who breach their agreements by buying out of the tie - sometimes through desperation - Pedrick is sympathetic but makes no bones about the group's approach. "We know it's tough out there but we have to police our estate and be robust about our business. In the recovery process, those who want to succeed are easier to deal with than those who are resistant to what we're offering.

"Sometimes you have to sit down with a retailer and go through a list of issues and point out where their pub is falling behind. If they are still reluctant we have to ask them, is this the pub for you? I would say 15 per cent of our pubs are at the really challenged end. But we have a plan for each one of our pubs."

After a long period of growth through acquisition, developing the businesses Enterprise now has on its books is the route forward, Pedrick believes. "There'll always be a bit of an edge in the landlord and tenant relationship, but it should be more symbiotic," he says.

"What we've been doing won't bring us much of a gain in the short term, but in the long term we will benefit, because our pubs will be better." n

• Tell us about your experiences of working with Enterprise Inns. Email news@thepublican.com