Enterprise Inns chief operating officer Simon Townsend explains the company's long-term view of the pub retailing market.
In the 10 years I have been part of the Enterprise team, during which time we've seen an immense amount of change within the industry and within our own business, I don't think I've ever known anything quite like the last year.
This market has tested our pubs, our retailers and ourselves more than ever, and I believe we've witnessed an accelerated polarisation of consumers, licensees, pubs and pub companies where quality really is everything. Anything less than the best is simply not good enough any more, and that goes for the retail proposition offered by the pub, the level of customer satisfaction experienced by the consumer, the business skills of our pub retailers and the skills and capacity of my own team.
Every aspect of the business model has to be better than ever before, and I have seen many, many examples of what can be achieved, despite the plethora of external impacts, by fantastic pub retailers who just keep raising the bar. This is why I believe that the best pubs in the country, including the ones owned by Enterprise, will always be run by individual entrepreneurs.
Unfortunately, I've also seen too many examples where this market has exposed, sometimes brutally, the inadequacies of some pubs that are simply no longer sustainable and also the inadequacies of some licensees who are simply incapable of trading through this downturn. Consumers are more demanding and have more choices than ever, and, in the current environment, quality and value for money are even more critical. Pubs don't have to be cheap, but they must be good value.
Award-winning retailers
The greatest thrill I get from my job is seeing the extraordinary achievements of pub retailers who just continually improve their business, regardless of the challenges they face from competitors, cost increases or declining consumer confidence. Sometimes this occurs in the recovery of a business that has failed, or in a pub that just needed reigniting, but most often it's just a steadfast and gradual improvement, year on year. And I think this is reflected in the fact that the average length of occupation of pub retailers in more than 6,000 Enterprise pubs — currently just over five years — means that, in the main, there is a profound long-term commitment from these entrepreneurs to their pubs and their local communities.
This year, licensees in Enterprise pubs have won even more awards for their skill, innovation and perseverance, which just goes to show that nothing can stop great retailers from exceeding their customers' expectations, regardless of what's going on around them.
Reassuringly, and despite the constant stream of negative publicity promoted by some campaign groups, it's the quality of our pubs, the flexibility of our agreements and the example set by so many successful licensees that means we have still been able to attract large numbers of high-quality applicants to consider a life in the pub industry.
Business support
Of course, the challenges of this marketplace also mean that we have needed to provide real and meaningful assistance to more licensees than ever before, deserving individuals who are struggling despite their best efforts, and who are prepared to work with us to improve their business to compete more effectively or perhaps to control costs more efficiently.
It's been heartening to see how many people have been prepared to retrain in order to improve existing skills, or perhaps learn new ones, in order to compete. We've introduced more training modules, including our Winning in Local Market Areas and Food Retailing courses, which, alongside our Business Foundation programme and range of other training courses, means we've delivered more than 4,000 training days in the past year alone.
We've launched a number of new support packages during 2009, including a service to take all of the effort and complexity out of statutory compliance for our licensees. More than 2,000 have now signed up to this package, which saves them both time and money.
The Valuation Office has recently issued new ratings assessments for pubs, for the April 2010 valuation. Since the last valuation in 2005, our ratings appeals service, available exclusively to Enterprise licensees, has saved them more than £4m in rates costs, so I anticipate that the service will be in much demand over the next few months.
One of my greatest sadnesses of the past couple of years has been the often unfair, unproven and therefore, I believe, incorrect criticism of the role of the regional manager by parties who are largely unqualified to comment.
The regional manager is the most important role in an organisation like ours, and we have invested huge sums in order to attract, train and retain a highly competent and committed team who have worked tirelessly in sometimes extraordinarily difficult circumstances.
We do, however, recognise that not all regional managers will have all the right skills or execute them on all the right occasions to deliver the right result every time. So we are working alongside the BII to produce a series of qualification standards to ensure that Enterprise regional managers can provide genuinely added-value support to every licensee who chooses to take advantage of it.
Future developments
We've also been accelerating the development of our business model and working practices, first and foremost to compete effectively and to reflect the constantly-evolving market in which we operate, but also in order to respond to the concerns that have been raised by a number of observers.
Given the recent criticisms of leased and tenanted pub companies by the select committee of MPs, no matter how much I may feel they are unwarranted, I recognise that we have to address these concerns in a constructive manner, and that we have to do even more to demonstrate our commitment to fairness, sustainability and mutually beneficial business relationships with our licensees.
On the majority of occasions, I believe we get it about right, and of course you will always hear about the ones we get wrong, even more so where we are in a dispute with someone. However, there is always more that can be done, and we have made good progress over recent months.
Every Enterprise (ETI) licensee has now received written confirmation of our long-standing policy that, at rent review, we ignore upwards-only rent-review clauses in all agreements, and that RPI indexation may be upwards or downwards as appropriate, regardless of the terminology of an agreement. This has, of course, been ETI custom and practice for years, but it has become particularly pertinent in a period of negative inflation. As a result, ETI licensees on indexed agreements are currently benefiting from automatic rent reductions due to the application of negative RPI since March 2009.
On insurance matters, we have always guaranteed to reduce the recharge to any licensee who demonstrates that they can achieve the same cover at a lower cost. This occurred on only 15 occasions in 2009, which would suggest that our insurance cover is extremely good value, but we are making it even easier for licensees to compare and contrast insurance packages.
We are expanding the level of disclosure provided at the time of new lets and rent reviews, and we are ensuring that no licensee will be able to enter into a binding lease or tenancy agreement without their formal business plan having been signed-off by a qualified trade accountant. In an additional development, we will publish our approach to the sometimes complex issue of the treatment of tenants' improvements.
We are committed to the new Pubs Independent Rent Review Scheme (PIRRS), designed to provide a lowcost, binding resolution to disputes that may arise at rent review, and we are aiming to exceed all aspects of the proposed industry code of practice, well within the agreed time frames.
We are also progressing a whole range of commercial developmen