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Businesses need to analyse how they make money to service slowdown

24 July 2008 by
Businesses need to analyse how they make money to service slowdown

Tenanted pubs have been urged to look at ways of maximising their potential after a City analyst predicted that they could see profits fall by a massive 90% in the next year.

Mark Brumby, leisure analyst at Blue Oar Securities, said increasing costs and falling consumer spend would see the average pub tenant hit by a £30,000 drop in income in the next 12 months, while average profits would be about £3,000.

Deborah Kemp, managing director of the leased division at Punch Taverns, the UK's largest pub company, said that tenants must now evaluate how their business made money. "We are trying to get people to look at the space they have," she said.

"We want them to understand which parts of their business are making money and if they are using their space effectively."

Many licensees are unaccustomed to analysing their business because they have "been through a period of real stability" in recent years, Kemp said. She suggested practical measures such as removing pool tables to introduce more tables as a way of maximising revenues.

Brumby warned that the predicted fall in profits could cost operators such as Punch, Enterprise Inns, Greene King and Marston's £60m, through measures such as rent reductions and supply chain concessions.

But Kemp insisted that while reducing rent could sometimes be on offer as part of a package, it was not a viable solution in itself.

"In the long term you have to realise that no amount of rent concessions will ever save a business," she said.

Kemp added that there was a strong pipeline of people wanting to become a licensee despite the current problems faced by the pub industry.

Read more news on pubs and bars at www.caterersearch.com/pubsandbars

Enterprise feels the pinch

Enterprise Inns, the UK's second-largest pub company, this week revealed it had spent £3.5m providing rent reductions and discounts for licensees struggling in the current climate.

In a trading update, it predicted double-digit volume falls in beer sales from April to June, although food sales were reported to be growing slowly.

Enterprise Inns chief executive Ted Tuppen said: "The majority of our licensees are coping well with the current consumer downturn. Where appropriate, we have the resources to help licensees who are experiencing short-term trading difficulties, thereby demonstrating an essential strength of the leased and tenanted pub model."

Hospitality operators must offer good value to survive the credit crunch >>

Enterprise dishes out £3.5m of support for struggling publicans >>Fall in consumer spending to dent Premium Bars and Restaurants earnings >>

By Christopher Walton

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