London pub company Grand Union came top among hospitality operators in the 2010 Sunday Times Fast Track 100 list of fast-growing companies, taking 52nd spot overall. Neil Gerrard talks to co-founder and managing director Adam Marshall about how he grew the business and his plans for the future as the company opens its 11th site
You have grown Grand Union from a standing start to 11 sites in five years. What is your background and what inspired you to run your own business? I did apprenticeships at Rules restaurant in Covent Garden, then La Tante Claire under Pierre Koffmann, before taking on a management training course at Ramada Hotels. After some time working abroad in Asia, I went to work as a pub manager for C-Side in Brighton. When I took the bar on it wasn't making a lot of money but I took it up to quite a lot by understanding what people wanted out of a good night, with properly trained staff. We used to get a profit and loss report on a monthly basis. I kept looking at the profit that I was making for this company and I realised there was no reason why I couldn't do it on my own.
How did you get started? I didn't have any money so I got a £25,000 car loan. I opened up the Rose & Crown pub in Highgate with a business partner. When I left it was a relative success but we over-engineered the menu and it didn't work because the costs were too high. So I went on to another live music venue and cocktail bar on the Old Kent Road, which I ran successfully for two years. But I was very interested in becoming a multiple operator. A redundant Scottish & Newcastle site came up in Camden so I took that on and turned it into the first Grand Union.
What is Grand Union's operating model? The demographic throughout all of our sites is the same - it is young professional people. We operate in urban and suburban areas, Zone 2 generally speaking, where city workers live and go out at weekends. All of our sites have late licences so we are a bit of a one-stop shop. You can come at 7pm and leave at 2am, having had a fantastic time. A lot of people eat and we reserve out all the spaces for free. That means that 80% of our business is already guaranteed before the weekend. Customers might have some drinks, listen to the DJ, get up and have a dance. It is different to what it was 10 years ago. You used to go to a pub and then go to a club. People don't do that any more. It is all about retention of people for the longest time possible.
You are growing rapidly. Do you have any financial backers to help you do this? None. It's just me and my business partner Adam Saword. He looks after the operational activity throughout the company - training, recruitment, project managers for the new sites when they open up. I look after marketing, finance, strategy. We can get to 20 sites on this profile. I don't want to take on backers and I am not interested in private equity. It is my and Adam's company.
Are the sites leasehold or freehold? They are all leasehold. We haven't paid a premium yet so as a company we are debt-free. We are tied on nine out of the 10 we have [three with Young's] but we are moving away from tied leasehold as a strategy. The Farringdon site and Paddington [due to open later this year] are both with non-brewery landlords. Farringdon is with the Corporation of London and Paddington is a private landlord.
We have a strong relationship with the breweries and they have been supportive of what we have been doing. We are still talking to Young's and Punch about future sites this year but it just makes sense for us to diversify a little bit and look at getting a better margin out of a free trade site.
What's the split between food and wet sales? Across the group it is 75% wet sales and 25% food. It depends on which site it is.
Do you find you make enough of a margin on predominantly wet sales in tied sites? It depends. It is a scaleable activity. At our Brixton site we turn over £60,000-£70,000 a week and a lot of that comes from beer and cider. Money also comes from our spirits. It was important for me from day one to navigate ourselves slightly away from beer because the margins are tight. It would be a disastrous business if we just sold beer. So we created an environment that is conducive to drinking cocktails and we train our staff to make them well.
The look of your sites is the same throughout, even though they are housed in different Victorian pubs. Why did you decide to do that, rather than make them look like independent businesses? It's important to create a consumer link with all sites. The fashion has been to have independent identities over the past 10 years or so, but it is not the case any more. That has been a phenomenon of the recession, and creating a brand has helped us during the recession. People want to spend their money in tried and tested places. There are other huge benefits like centralised buying, simplicity of training and so on. We can take on a site and start trading within 10 days. I don't know any other operator that can do that.
Are the menus the same too? Yes. For us it is all about the scaleability of Grand Union and making things as simple as possible so we can grow aggressively. You can't do that by having different à la carte menus and different head chefs - I used to be a head chef and we are nightmare people. I don't know why anybody would want to do it.
What drives you to keep expanding? My personality. I'm a dyslexic idiot from Teddington School. I hated school, did terribly at it, and a lot of people thought I wasn't going to achieve very much. That is one of my driving forces - I want to be proud of my operations team, what Adam [Saword] does and the fact that we have created a brand and a £10m-turnover business out of nothing with no debt.
How are you coping with the recent rise in VAT? The VAT rise and potential alcohol duty rises are all a bit of a red herring to be honest. We haven't noticed it so far. We are quite strategic about all the decisions we are making. We put our prices up in November. We are hoping that we are, therefore, one of the only operators that haven't put up their prices in the first quarter of 2011, but we also capitalised on better margins during the Christmas period.
Do you want to open sites outside of London? We want to hit 20 sites in London first. After that I can see Grand Unions in Bath, Bristol, Manchester and Leeds. But I want to make sure that we don't go outside London until we have cracked it and we are nowhere near that yet.
What do you attribute your success so far to?
top tips for making a late licence work
â- Offer a good range of food at good prices to get customers in early
â- Make sure you have an outside space for summer trade and smokers
â- Hire good DJs to create a good vibe
â- Be strict on the door. Don't let in people who will ruin the atmosphere for everyone else
â- Target women through the interior design and a comfortable, unthreatening atmosphere
grand union in numbers
Annual turnover £8.5m over eight sites
Projected annual turnover £12.5m for 2011-12
Projected net profit £1.1m for 2011-12
brixton grand union's most successful site
Annual turnover £2.5m
Net profit £450,000
Average weekly turnover £60,000-£70,000
Record weekly turnover £94,000
Record turnover in one day £36,000