David Elliott: a quarter century in the pub industry

David Elliott retired from running Greene King's tenanted division at the start of this month. Below, he looks back on 25 years in the trade and gives his views on the current state of play in the sector.

There have been major changes in the structure of pub operating companies over the past 20 years and up until the start of this last recession relationships were reasonable throughout the industry and profits were being made on both sides of the counter.

Unfortunately, today, the leased and tenanted sector is in turmoil and relationships between pub companies and their tenants and lessees are at an all-time low. These relationships have been influenced by minority interest groups, who have been antagonising and stoking up unnecessary, and at times fictitious, propaganda.

This has been compounded still further by the recent entry into the debate from the GMB union, which really has no place in the leased and tenanted sector and certainly has no knowledge whatsoever of the tie and how the tenanted agreement is made. It keeps droning on about the difference between a free and tied pub estate. The simple fact and the one that it obviously fails to grasp is that a self-employed licensee signed an agreement quite voluntarily knowing the full facts of the rent that they would be charged and the price they would pay for their beer.

Sadly, the reality is that there are just too many pubs. In my view there are still 10,000 pubs too many in England and Wales. These should be de-licensed over the next few years. Therefore the policy of the Campaign for Real Ale (CAMRA) and local authorities to oppose any pub closures is unhelpful — excepting that where possible, it is important to keep the last pub in the village.

Regarding CAMRA, I have a huge respect for the work that it has done over the last 30 years to promote and encourage cask ale. I have always been a cask-ale drinker. However, in my view, CAMRA should stick to what it is good at and not cross over into boundaries for which it has only limited knowledge or no expertise.

Standards​

The simple unequivocal fact is that a tenancy is still a very low cost form of entry into the industry. In what other business can you get a return on your original capital investment of 50% to 100% in one year? You can often take over a pub with an ingoing of as little as £20k, pay no goodwill and set about building a reasonable business.

I accept, of course, that this last recession has created difficult trading for a number of licensees, especially those that have not improved or changed their offer.

All too often as I travel up and down the country, I drive past or visit many competitor pubs that have blank external A-boards, or one still advertising last week's match, windows covered in net curtains, overgrown hanging baskets or no baskets at all, grass that needs cutting, garden benches that have not been rubbed down or treated, staff that have not been trained, back fittings that are full of glasses and telephone directories, menus that are well thumbed and stained, baskets of sauce/sachets, toilets that have not been cleaned properly. When you consider this list, why on earth would you think that anyone new to an area would want to enter a pub that is operated like this?

Of course the reverse is true, I have met many excellent licensees who are passionate about their business, who have fantastic standards, who care for their staff and the offer and more importantly, care about the customers.

A further concern I have is the lack of influence that the industry has with this current Government. This was really brought into focus when Alan Johnson was recently interviewed following the announcement of the ill-thought-through mandatory code. Mr Johnson followed on from an interview that Brigid Simmons, the chief executive of the British Beer & Pub Association, had given just a few minutes earlier and he obviously had no knowledge of her as he referred to her as "that lady from the industry".

The continual reference to 24-hour drinking by politicians and particularly local authorities is absolute rubbish — a very small percentage have actually obtained a 24-hour licence and less than 1% actually use it. The existing Licensing Act has enough powers for local authorities and police to take action against pubs and clubs that allow underage drinking and encourage crime and disorder.

The recent BEC report and subsequent follow-up has highlighted the need to improve the relationship between pub companies and individual licensees. Peter Luff and his fellow MPs are keen to ensure that future agreements are both transparent and enforceable under law. The one fundamental area other than transparency of rent setting/arbitration that needs to be agreed is that pub companies will not penalise success going forward, ie, the licensee who has doubled the trade will not see their rent increased at the first opportunity. This change, I believe will encourage additional entrepreneurs into the business and will help to strengthen relationships.

Pub companies​

One of my main criticisms of pub companies in the past has been that they have not always vetted potential licensees sufficiently or ensured that they are trained prior to taking over a pub. This, in my view, should be made mandatory and BDMs should pay the consequences if they do not enforce this. There is, of course, an onus on the individual applicants, who are in fact self-employed, to ensure that they have completed their own check list. My recommendations are as follows:

• Research the pub and pub company thoroughly

• Obtain all relevant information from the outgoing licensee and pub company

• Compose a realistic and robust business plan, including a full appraisal of all competitors

• Ensure you have sufficient cash to cover the ingoings and initial cash flow. Do not borrow under any circumstances. Breaking even in your first year is an absolute must

• Re-train all staff

• Take a minimum one day off per week

• Introduce or improve the food offer; no pub will survive without food

• Do not sign your agreement until you are 100% satisfied and have taken independent advice.

If you cannot meet any of these minimum standards then you should not under any circumstances take on the pub.

The pub is still the very best place to go in times of crisis, to celebrate and at times commiserate. Pubs themselves are quite unique in British culture and I would implore everyone involved to finally resolve the differences about the inevitable closures that are to come, support all those licensees that remain to allow them to take business back from the leisure parks, cinemas, and supermarkets.

Finally, when I was writing this article I was thinking of the "serial bloggers" on morningadvertiser.co.uk who appear to have lots of time on their hands. They should spend more time on their own businesses than continually challenging those with a different view to their own. I am certain that I could find a minimum four to five areas of improvement in each of their businesses and I would even do that for free!

My career in the pub industry​

I joined Imperial Inns and Taverns (ITT) in 1984, as district manager for 20 managed pubs in Bristol, although I started in the industry at the age of 10 working as "bottler up" three evenings a week after school.

IIT was a division of the Imperial Group that was subsequently taken over by Hanson Trust and was quickly sold onto an Australian businessman, John Elliott (no relation!) from Elders IXL.

The business was sold again in the pubs for breweries swap with Grand Met and I was appointed regional director for Chef and Brewer based in Halifax, responsible for the north of England.

In 1996 I was appointed senior operations director responsible for managed pubs in Scotland, based in Edinburgh, which included 14 nightclubs. In 1998 I joined Greene King, which at that time operated 620 tenanted pubs mainly in the south-east.

In the past 11 years we acquired a number of businesses and the e