Brothers in arms

When Gerry Martin told his brother, Tim, he was planning to set up his own pub company, the response he got was: "The pavements are littered with failed brewery executives."

Undeterred by this advice from the man who sits at the helm of JD Wetherspoon, Martin started the Old Monk Pub Company in May 1994. Last year, it recorded pre-tax profits of £488,000 on a turnover of £6m and increased its number of sites from 12 to 23 across three types of operation.

"I worked with Tim as development manager at Wetherspoon's from 1990 to 1994 and then decided to make a bolt for freedom," says Martin.

The company, which was founded in the City of London, expanded nationwide this year, and is aiming for a total of 50 pubs within the next three years.

But Martin will not be worried if the target is not achieved. "It is not a numbers game," he says. " I would rather open five good pubs a year than 10 not-so-good ones. When you open a pub that performs below expectations, it takes a disproportionate amount of management time."

He is equally philosophical about the company's flotation on the Alternative Investment Market last October, which raised £900,000, rather than the £3m expected.

"It was perceived as not having been successful but that was because of circumstances beyond our control - problems globally and within the sector," he explains.

Martin acknowledges the flotation could have been postponed until the markets were performing better, but he is convinced it was the right decision to go ahead as planned.

"We could have put it off, but we had put three months' preparation into it and getting a listing was important to raise the profile of the company," he explains. "It just means we can't develop as quickly as we had set out to do and we must be more prudent in our programme."

Expansion in the Home Counties

Recent developments in the expansion programme have included the acquisition of three pub-restaurants in the Surrey/Berkshire area. The Thatched Tavern in Ascot, the Fox & Hounds at Englefield Green and the Brickmakers Arms in Windlesham were bought as going concerns and add a new dimension to the Old Monk portfolio. Martin describes their purchase as opportunistic.

"We weren't planning to expand into pub-restaurants but I saw the Thatched Tavern and Fox & Hounds advertised in Caterer & Hotelkeeper and paid £1.25m for the two, then the Brickmakers followed at just over £300,000 in December," he says. "We want to develop more in the southern Home Counties."

While the purchase of the Thatched Tavern included the freehold, Martin arranged a sale-and-lease-back agreement with a property company to free up capital.

Food sales account for 60% of the takings at the pub-restaurants, compared with 20% in the Old Monk pubs, and the average spend per head is much higher, at £35.

"The average spend per head on food at the Old Monk pubs is about £5 and it is largely on food such as baked potatoes, pies, and fish and chips," explains Martin. "The biggest seller is a bowl of chips, whereas chips are not sold at all in the pub-restaurants. It's good fun having different sorts of business."

The Old Monk pubs make up the bulk of the estate, all of which is managed. "They are the core of what we do and are spacious and traditional in style, with lots of good ale," says Martin.

Ten are located in London but last year saw rapid expansion outside the capital into towns and cities, including Peterborough, Winchester, Doncaster, Birmingham, Windsor and Newport. Martin describes it as "a natural progression".

While retaining the same features as their London counterparts, the provincial pubs in high-street locations do differ in that they serve a very different market. "We have had to adapt to the north: for instance, prices have to be lower," explains Martin. "And it's much more of a circuit mentality there." Consequently, there is music in the evenings, local ales are available and late licences are held.

The size of the pubs varies but the average is 2,500sq ft to 3,000sq ft of customer area, with about £600,000 being spent on refitting each site. Just over half have been refurbishments of existing licensed premises, while the remainder are converted showrooms or ground-floor or basement areas of office blocks. All are held on leases of between 25 and 35 years.

Currently in development is a £1m refurbishment of an old Halfords store in the Crane Building in Liverpool's Hanover Street. The pub will be one of the company's largest, at 5,000sq ft, and is due to open in April.

In addition to the pub-restaurants and Old Monk pubs, the company has a third type of operation in the Antipodean-style Springbok Bars, of which there are two.

Both located in London - one in Covent Garden and another in Shepherd's Bush - the bars opened in July 1996 and August 1997 respectively. Sales are predominantly wet - food accounts for about 2% - and entertainment is provided in the form of live bands and on-screen sport, such as rugby.

"The idea came when I realised I had lots of South Africans working for me on two-year working visas," explainsMartin. "They've been a roaring success."

People power

Martin attributes the success of the company's pubs and bars to the people working in them and is committed to investing in his staff - 18% of net turnover goes on wages of operational staff.

"Our average managers are streets ahead of any other company and we have a very low turnover of management," he says. "We have attracted young, dynamic, successful people and they get more attention and recognition here because we are a small company; in a large company they would be small cogs in a big wheel. It is important to maintain that personal feel."

Between 10 and 35 staff are employed at each site and there is now a structured training programme in place for managers, including subjects such as food handling and cellar management. This year he is expecting to spend £50,000 on training.

Licensees are encouraged to progress within the company and two have become area managers. When recruiting, Martin places great importance on practical experience. "In my mind, education is not half as important as experience," he says. "It is a hands-on business and people have to understand what it is like in the arena." n