Franchising to be core driver of Marston’s growth

26-May-2022 - Last updated on 26-May-2022 at 10:19 GMT

Pillar of communities: Under the franchise agreement, operators can develop their own food offer

The continued evolution of Marston’s franchise operations is “in our view, a core driver of future growth”, chief executive Andrew Andrea, has said.

The business began franchising in 2009, with the model now operating in more than 600 of its pubs.

Marston’s recently trialled it in four of its new-build pubs, introducing the community wet menu, which produced encouraging early results, with double-digit sales growth.

Speaking during an investor conference, Andrea the business was looking to expand its evolved franchise model – called Pillar – into 60 sites by the end of this year, and would then evaluate how it could be evolved further.

Its Pillar agreement enables franchisees to develop their own food offer, which is then put onto Marston’s EPoS system.

Marston’s has also been converting some of the franchise pubs it took up from SA Brains into franchise.

Converting to franchise

The business agreed a deal with Brains, in December 2020, that would see Marston’s take over the running of its circa 150 pubs under a combination of leased and management contracts.

Andrea described the “capex light acquisition” as performing well – with Brains’ pubs actually outperforming Marston’s own core Welsh estate.

“We are converting to franchise and seeing growth,” he said. “One of the biggest challenges was the kitchens. We are in the process of rolling out the Marston’s menu which represents further margin opportunity.”

It converted several Brains site to the franchise model in the first half of this year, with four conversions planned for next year, “and we have identified further opportunities looking forward”.

He added that there were a couple of sites that Marston’s was originally only going to manage on Brains’ behalf for a couple of years, but it has now decided to take them on permanently.

“They will come across to Marston’s over the course of the next couple of months or so,” Andrea said.

“As a framework for future M&A therefore, we have got a platform where we have property partners that want to own the freehold and we’ll simply be the pub operator driving EBIDTA (earnings before interest, depreciation, taxation and amortisation) growth in that regard.

Challenged on the numbers

Andrea said that following its last results update, Marston’s was challenged about its roadmap to getting to £200m sales growth (£1bn overall sales) and how it would be achieved.

“In essence about a half of that growth will come from the repositioning of the pub estate, about a quarter will come from opportunities within franchise expansion and Brains, with those direct interventions, what’s left is a sales task which requires around 2% like-for-like (lfl) sales growth.”

While Andrea said he accepted that the current consumer environment was challenging, he noted many pubs emerged from the last financial crisis seeing 3% lfl sales, therefore “I don’t think it’s an overdemanding lfl target.”

He also reiterated that Marston’s is focused on longer term lfl growth, rather than short term gains. “Our strategy is focused on creating a simpler, more efficient business.”

Following its half year results last week, Andrea told sister publication MCA why the business is ditching its Two for One format and about revamping its food menus after receiving poor feedback from customers.