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Don't rely on food to rescue pub profits

25 October 2007
Don't rely on food to rescue pub profits

A week after the Good Pub Guide criticised operators for overcharging for meals, Eddy Passey, retail director at pub-with-rooms group St Christopher's Inns, argues that food might not be the answer to falling profits after all

Earlier this month I was approached to take part in a debate at the Association of Licensed Multiple Retailers' (ALMR) annual conference in Brighton, and was asked to argue that "If you want to make a profit, forget about food."

At the time I thought: "I don't believe that, because food is important to my business."

However, although I've been a member of industry body 50/20 for many years and do believe that casual dining is the future, when you take a cold, commercial look at food in pubs, there is a compelling argument to be made that profits on food are hard to come by.

Food has been seen as the panacea to pubs threatened by declining sales from the smoking ban. This pressure comes from outside sources, such as the media, and through business development managers across the UK. It should come with a wealth warning, though: sales don't necessarily mean profits.

There are just over 50,000 pubs in England and Wales, and their average turnover is £5,000 a week with an 80:20 wet-dry split, according to market analysts CGA Strategy and the ALMR. Those figures equate to £1,000 a week on food in an average week. Considering that the big boys, like Mitchells & Butlers, Spirit Group and JD Wetherspoon, take huge sums on food, the normal pub will obviously be taking much less.

When you look at the real costs associated with producing and selling food, I'm pretty convinced that most pubs lose money on their food operations. Yes, every dry sale should generate a wet sale - but is food making you a real profit?

In my own operation, drink accounts for 60% of turnover, accommodation 30% and food is less than 10%. A pub taking £10,000 on drink needs to spend about 10% on staff costs in a food operation, however, you're looking at more than 20%.

There are many pubs which take the easy route and franchise out their catering. It can make commercial sense, as does sticking to what you know best: running a truly great pub, even if it just sells great beer.

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