Thu 24th Apr 2014 - Breaking News - Spirit aims to add 400 branded pubs Spirit aims to add 400 branded pubs: Spirit Pub Company is determined to grow the scale of its managed pub business, adding up to 400 more branded outlets, “focused on proven, successful and high-returning brands”, the company’s chief executive, Mike Tye, said this morning. Of the brands slated for growth, Spirit sees potential for Flaming Grill of another 160 to 185 on top of the current 92; another 65 to 90 Fayre & Square outlets from the current 158; another 50 to 75 Wacky Warehouses from the current 75; another 25 to 50 more Taylor Walker upmarket outlets from the current 123; and another 35 to 60 Chef and Brewer outlets from the current 138. “That’s between 300 and 400 additional sites,” Tye said. “But we also expect to migrate a number of the current locals pubs into other brands, particularly Flaming Grill, up to 50 sites, but also into some new concepts that are in trial.” Tye was speaking to City analysts after reporting a “strong” performance in the 28 weeks to 1 March, with like-for-like sales in the company’s managed division up 4.8%. The company was in good health, Tye said, with improvements in all of its key metrics, and the concentration now was how to grow the estate to leverage the company’s skills and cost-base even harder. Spirit believes it has a “unique” brand portfolio covering the four quadrants defined by drink focus, food focus, price focus and quality focus, “that allows us to cover each market segment efficiently, shifting outlets between brands as markets and demographics change. Put simply the better the brand and fit, the better the returns. It is this approach which distinguishes us from out competitors,” he said. “Average Ebitda was now around £200,000 per pub: these are first-class assets”, he said. The estate is now “of undeniably high quality”, Tye said, with 87% now invested in one of Spirit’s brands, and the refreshment cycle now underway in pubs first invested in three to five years ago. “We’re still uncovering jewels in our leased estate to convert”, Tye said, pointing to the Windsor, near Aintree, “a run-down old boozer” that had been given a £100,000 investment, “great new licensees who we fully trained and provided with a new menu.” The pub has grown sales from £4,000 a week to over £10,000 a week, Tye said, and more than doubled Spirit’s earnings from the site to around £110,000 a year. Tye also pointed to “the best example of all”, the conversion of “well-located” neighbourhood pubs into Flaming Grills, through relatively low-cost conversions delivering high returns. Around 70% of all pub manager appointments are now internal succession, he said, and the company had more than 1,300 apprentices, with nearly 80% retention. Team turnover was now down to 83%, “evidencing the improved stability and engagement of our 16,000 people”. There were now hospitality coaches appointed in every managed pub. In the leased division, every BDM performance meeting reviews each licensee on their concept delivery against nine criteria, with regular mystery guest visits to every site. “Our mystery guest scores are extremely strong, with both managed and leased guests rating their experience at an average of over 85%,” Tye said. The company now has a new bonus scheme for all front-line team members based on mystery guest visits. On the customer side, Tye said Flaming Grill had created “huge” social media interest, reaching 200,000 people with the latest “Trash Can Challenge” menu promotion. The new Fayre & Square loyalty scheme already has 120,000 registered users “and we’re learning about frequency and send habits with real granularity now. We know the 20-odd per cent of these guests who account for nearly 70% of the sales, allowing us, therefore, to focus our activity.” The leased business, Tye said, had put in some solid growth, completing a turn-around from steep decline just two years ago. Net income per pub was now £101,000 a year and two thirds now fitted the “top box” category of “right licensee, right concept, right execution”. Spirit has now invested in over 40% of the leased estate, and made 96 lower-end disposals. Spirit was now concentrating on two models for its leased pubs, Tye said, one branded and franchised and the other unbranded, but both based on a combination of fixed and variable rent. “There is considerable upside still in our leased business,” Tye said. For the future, Tye said, Spirit was “cautiously optimistic”, and “when the uptick does come, we are ready to capitalise on it. However, even with more cash in hand, consumers will remain fixated with value for money. This is the new norm.”