Marston's: bottom-end pubs show encouraging results

Marston's has reported "encouraging signs" from trials of new lease agreements in its tenanted division.

The company is involved in "intensive management" of the 20% of pubs at its bottom-end suffering from low tenant stability, the cost of agency management and a weak consumer position.

Chief Exceutive Ralph Findlay said the "vast majority" of these are capable of satisfactory results and were responding well to its plan to improve profitability.

He told the Morning Advertiser​: "We don't regard the 20% as a tail. We think these pubs are viable but need more support and a more structured approach."

The company has launched an "Apollo agreement" similar to a franchise.

Marston's invests up to £50,000 on re-launching an individual pub — previously closed or run under management — and pays all bills apart from staff costs.

The company also takes responsibility for retail offer, food menu and pricing. Licensees earn 20p out of every pound taken over the bar and pay staff.

Marston's has 24 pubs operating on the agreement at the moment and plans to move to 40 by Christmas and then have 90 under the agreement in 2010.

Findlay said: "On average, each pub is producing around £3,600 more profit for Marston's each month."

The company also has 100 pubs let on a Tracker Agreement — up from 50 in March this year — whereby rent is linked to pub beer volumes — rent flexes according to level of trade in the pub but is capped at £15,000. 

The Tracker plan reduces the amount of risk for licensees. On average each pub is making an extra £500 of profit per month for Marston's.

In addition, Marston's will invest around £5m of extra capital on these pubs in 2010 to "ensure (they) are better able to meet the expectations of customers".

Marston's reported that 80% of its tenanted pubs let on formal agreements are trading in line with last year — rents increased by 2% in 2009 and stands at an average of £25,500 per year.

A total of around £3m was spent during the year to 3 October on rent alleviation and additional discounts.

A similar level of support is planned for 2010 but Marston's said it hoped this level of support would reduce as its makes capital investments and extends the new agreements.