Punch: time to pull together in partnership

Roger Whiteside took over as boss of Punch's leased division a year ago. He talks about what he has discovered — and the way forward.

I joined Punch nearly a year ago seeing an industry and company under challenge, yet with clear opportunities for the future. I joined to lead business change, to review the people, the model and the way forward, with no preconceptions, but with a real desire to understand the business and the issues it faced. 

So, one year on, what have I found? 

Firstly, the people — specifically the team at Punch. Normally when leading business change it means changing people, yet what I found was a team of the highest calibre, open to challenge and motivated to succeed. This quality runs throughout the business in all of the teams that work to support our lessees and tenants; there is a real desire to make a difference, to genuinely develop a partnership and jointly grow the overall business to the benefit of all, particularly in our business relationship manager population. I have had to change no one and I am confident this team can work with me to deliver the changes needed for the future.

Secondly, our lessees, tenants and pubs — we have some truly entrepreneurial people running some fantastic businesses and I fervently believe the best pubs will always be owner operated. However, we also have some pubs that have not responded quickly enough to the changing market. I recognise this is a partnership and it is up to us to engage with our partners to address the challenges and opportunities presented by changing consumer needs. It takes two to partner successfully and the harsh reality is that some of our partners may not have the skills or motivation to succeed in a more demanding world where only the highest retail leisure standards can prevail.    

Finally, the model — the past 12 months have shown me that the model is not broken, but that it does need to evolve. It still offers a low-cost entry into the industry and can be really attractive to anyone looking to be their own boss, but its operation needs to be reviewed and overhauled.  

All of which brings me to the compelling need for change; doing business in the future will be harder for everyone. The leased model is under pressure from a number of areas, most notably the market and Government. The past two years have seen the smoking ban, the recession and continuing beer decline, all of which have squeezed turnover and margins for both those owning pubs and those running them. 

BEC Inquiry​

At the same time, we have seen increased Government interest in our sector, particularly through the recent Business & Enterprise Committee inquiry and report and the ongoing Office of Fair Trading inquiry. They are right that our model lacks transparency and we need to do something about it; the model needs to evolve and we need to involve our lessees and tenants in that evolution. This is a tied partnership, so these challenges need to be shared.

And the reason why we should work together is because the future outlook has many positives if embraced. Whether that be the trend towards eating and drinking out, the opportunities from the smoking ban attracting more females and ABC1s to pubs, the underlying growth in cask ale, the versatility pubs offer in food and entertainment or the undoubted opportunity for improvement in retail standards. All of these indicate a brighter future, but a future with fewer, better pubs overall. To make the most of these opportunities, however, everyone will need training and support.

My first priority at Punch was to work with the team to stabilise the existing business, to support those licensees who were struggling, and to begin the cultural and behavioural changes that everyone recognised were needed within the business. This can be seen through the lessee support we are putting into the business, over £1.6m per month helping over 3,000 partners so far, the move to stop rentalising the lessee share of machine income, the agreement to match insurance premiums on a like-for-like basis, the agreement to the removal of upward-only rent reviews, volunteering reductions in rent linked to RPI and the removal of restrictive covenants. We also created our Turnaround division to help focus attention on those pubs facing the toughest conditions and took advantage of a window of discount available on our debt to sell pubs to hundreds of our partners at very attractive prices 

Pathway to partnership​

While all this has been going on my team and I have been planning for the future and we have set ourselves an ambitious aim for the business; that is to become the most trusted and best value pub partnership in the UK. We all recognise that is not where we are now and that it is an ambitious aim, which will need to be earned. To achieve it means a fundamental change, both in what we do and the way in which we do it and that means reviewing every aspect of our model and our relationship with our partners. We have embarked on a major cultural change programme, Pathway to Partnership, which will fundamentally alter the way we work with our partners, so that:

• We have the right pubs with a clear consumer vision

• We can attract top-quality applicants for any pub that comes on the market and we support our partners to deliver retail excellence

• We set up pubs for success in terms of property, category management and partner training

• We turn the existing model around and offer unbeatable value on everything needed to run a pub    

• Our BRMs are equipped and focused to do nothing but add value to our partners' pubs

• We measure our BRMs on a broader set of criteria than just financial objectives

• We create a lease agreement that provides genuine incentive for growth and puts partnership profit at the heart of our relationship.

If we have a clear consumer vision for every pub, recruit the right partner to run every pub, provide the best value in everything needed to operate pubs successfully, drive a cultural shift to build a reputation for transparent, open and fair relations and put partnership profit at the heart of our business, then we will create sustainable value for all involved.

As well as our internal changes, we have been working hard with the industry generally to demonstrate to Government that we can make progress ourselves without its interference. 

Rent review scheme​

We all accept that sometimes it will go wrong or we won't agree, so as an industry we have put in place the Pub Independent Rent Review Scheme and are in the process of trying to produce an improved industry code on the operation of the tie through mediation. In my view this will set a new, higher bar, which all companies will strive to beat. 

How will our partners know if we are keeping to our side of that bargain? We will have our code BII accredited and would expect them to hold us to account for our performance and publish our results, openness and transparency. And it won't end there; we are open to discussions on how the lease can continue to evolve; we welcome input and debate from the key licensee representative bodies and will maintain a dialogue with them as long as they recognise our right to occasionally disagree with them and to run our business professionally and profitably for all.