When Chris Welham got the call from Spirit Group chief executive Mike Tye to run the firm’s leased estate it was a call he could not refuse.
“Mike said to me, ‘we have no strategy or structure to this part of the business and we need you’,” he says. “I arrived in February 2012 and we cut the umbilical cord with Punch in March — so then we became a truly stand-alone business.
“This is still one of our challenges, for people to see us in the wider marketplace as a different business.”
Welham was an obvious choice for the role as managing director of Spirit Leased after a great deal of experience in the leased sector. He really got his “thirst for the business”, as he calls it, working for Brewers Fayre site the Ship Inn in Lymington, Hampshire, during the holidays from university.
However, after graduating he worked for an insurance company in marketing. “It was really dull. I was there for three years and really wanted to
get back to pubs. I applied for a trainee business development manager [BDM] job at Greenalls.”
Opportunity
The market was consolidating and, after a range of roles at Greenalls, Inn Partnership and Pubmaster, he ended up at Punch.
“At that point there was no senior operations role, so it was a redundancy situation, or did I want to apply for one of two jobs? One was a regional operations director role and the other was in regional estates. I went through the assessment process and got the regional operations director role and then relocated to the north-east.
“I ended up running Scotland and the north-west. Punch then went down from 16 regions to four and I was one of the final four.”
It was at this point that he received a couple of approaches from Greene King. He decided to go along and meet chief executive Rooney Anand and says he was “gripped” by the whole heritage of brewing and realised it was a great opportunity.
“I would probably still be at Greene King if I had not received the call from Mike Tye to say ‘we are keeping these pubs, we need someone to
run them’, but I said to Rooney when I left that I was sure I would not have got the role if I had not worked at Greene King.”
Difficult
Almost two years later, the Spirit Group leased business has gone from strength to strength with recent results showing a like-for-like net turnover up 2.2%, with like-for-like net income up 1.2% for the leased estate.
Welham says: “When I joined, everyone thought these businesses were going to be sold. It became very apparent that they were cracking sites that were under-performing. Why sell something nowhere near its full potential?
“Our net income was declining by 8% and it was shocking. I remember standing in the atrium of the office. We do a quarterly update and I remember thinking, ‘I have only just joined and these are my numbers, and they are not very good’. So that was a difficult moment for me.”
A major strategy for the business is to leverage the experience from the managed division into leased, to make sure that the property is suitable for the company, and then decide whether it should be managed, leased or franchised.
The leased estate now stands at 450, which is 100 fewer than when Welham joined.
To make those decisions on divesting pubs, one of the first things he did was “go into a darkened room and look at all of the pubs on a demographic basis”, he says.
Spirit started to analyse its pubs, realising that most of them occupy the value-drink area of the market, with about one-third of the business that is considered premium sitting in the leased division.
“We looked at the estate review, demographic data, competition and then got the BDMs to tell us about the local area and formed an estate plan,” he says.
“After this we were able to match the type of licensee that we thought could unlock that opportunity, if it was going to be run really well. The good news is, when we looked at the estate, we did not have to change loads of licensees.”
Culture change
He admits that one of the biggest challenges was the cultural shift that was needed by the business at this time.
To achieve culture change on operations, he took the team on a bus and went around all of Spirit’s managed brands to get a greater understanding of the retailing side.
“It just gave us an idea of where we should be going to get the offer right. This is not about letting pubs and being a property company, this is about really making sure we can unlock the offer.
“This is not to say that where the pubs had come from was wrong, as Punch had done a pretty good job. But, from my experience of working at Greene King, it was around the delivery of the retail experience and leveraging the scale of the managed business — that mixed model was the bit that really switched me on.”
Spirit is not interested in recruiting inexperienced businessmen or women for its leased business. This is reflected in the make-up of the estate, as almost one in three Spirit Leased pubs is run by 83 multi-unit operators.
Spirit has looked closely at the earning capability of both parties. “We are interested in the experienced operator. What I want is commercial acumen in running a business, I don’t really want people that don’t have any experience at all, that is not the market we are in.
“I want to move away from the cycle of boom and bust and business failure. You often get that where cash becomes tighter and you have a lower level of weekly sales — that is a much more difficult job to manage.”
New agreement
A range of other initiatives have changed the business over the past few years. Rent reviews have been taken back in-house and are carried out by BDMs. This is overseen by a rent panel “so no-one is setting rent in isolation”, he says.
Training has also been a key focus for the business. Last year 97 pubs received a four-day course from Spirit Leased’s dedicated training team.
Spirit has recently introduced some innovation into its business model with the trialling of a new agreement, whereby the licensee pays a percentage of turnover to Spirit instead of rent. A similar model is also being used at its franchise sites, which are based on the John Barras format.
It is also trialling a food package that includes items from the firm’s managed pub brands. Under the scheme, items from Spirit’s managed brands, such as John Barras and Chef & Brewer, can be added to the menus of its leased pubs.
Spirit has also introduced a deal called ‘Super 6’, where they get discounted rates on up to six drinks products with the aim of helping them compete in local markets.
“One of the things I am most proud of is getting to the point where we are one business. The more I can leverage from managed for the benefit of our licensees the better.”
Key dates
1993
Chris Welham is a marketing executive at Refuge Assurance
1996
He has various roles at Greenalls, including business development manager and associate business development manager
1999
Welham becomes concept business development manager at Inn Partnership, with the responsibility for the growth of 45 branded concept pubs in Greater Manchester
2000
Becomes operations manager at Inn Partnership. Responsible for the rollout of the new 10-year pub franchise agreement in Cheshire, Greater Manchester and Liverpool
2002
He is made senior operations manager at Pubmaster
2004
He is promoted to the role of regional operations director with Punch Taverns in May, after the company acquired the Pubmaster business in Nov 2003
2009
Welham becomes operations director at Greene King. Responsible for the retail performance and £36m profit delivery of 500 pubs within the Pub Partners division
2012
He takes on the role of managing director for the Spirit Leased arm