Oakman: ‘We never cut back, we always double down on’

MCA: Oakman’s FCA Regulated Share issue has seen more than 300 new shareholders join the company since it was launched on 17 December 2021

Stephen Kenee, chief information officer at Oakman Group: The idea of being owned by our customers is a simple one. Our customers are generally located in affluent locations. We convince them to invest because they use us and they like what they do.

It’s mutually beneficial. For them, they should get a return on their investment, and they should get dividends, they should get capital growth - but they also get discounts at various different levels.

They get something out of it, while we get closer engagement with our customers. We talk to them more regularly and have more direct communication. Most of the discounts are mid-week, and though we’re not a discounter, people are paying for this discount, which is driving mid-week trade and that’s not a bad business model.

These guys are now brand advocates, they are brand ambassadors. They drive past our pubs and tell their friends to come - not just for the discount, but also because they think it helps the share price.

How does this share offering compare to other forms of crowdfunding we’ve seen in the market?

It’s not a new model. It is crowdfunding, but we’re not doing it via a platform, we’re doing it directly.

If you are going to compare it to something, the closest comparison is probably BrewDog. We are a very, very different business to BrewDog. We have a very different customer base and people have very different reasons for investing.

Some people invest in us for pure financial reasons, but for others it’s a lifestyle investment. They’re affluent people who want to be part of the pub. They like the idea of owning part of their local. Some people email me and talk to me about even very small investments. Others complete the application without even reading the prospectus. There’s a whole range.

The majority are our customers, they get discount, they get capital. But for us that closer engagement is really powerful. I get letters customers thanking us for letting them be part of this journey, saying ’it’s so exciting, we love what you do. We love the way you treat your staff.’

How did you promote the scheme?

We’re not pushing it hard – though we have it signposted in our menus. The best promotion is, people come to our units and see they’re well-invested, nice looking buildings, serving good quality food, with really really good service.

It’s our people training and development which is what we believe makes us stand apart from to our peers. I’m not saying others don’t do well, but we do it exceptionally - and our customers see that.

The best selling point to get people investing is for people to have a bloody good experience. Our staff are encouraged to talk to customers about the business, they tell customers they love it, the culture’s great. People think, I want to be a part of this. It feels good.

If you go wrong with culture, it can backfire very quickly, because investors don’t want to be a part of it anymore.

So you’ve turned your customers into brand ambassadors

We introduced a box on the application form, asking investors to name an individual who referred them to business. It was designed to reward staff, so we can pay them a bit of commission or a bonus.

But the names that have come up most in those boxes have been existing investors. It shows most people are investing because other customers have become investors and said, ‘you should do this’.

That’s the best validation for our business model - it shows we must be doing something right, because people are so pleased to have an opportunity to invest, they’re telling their friends they should do it.

We are building more goodwill and more connection with our customers, as well as raising capital. If we got to the stage where we didn’t need any new capital at all, we would still continue to do this.

Once your current pipeline is built, Oakman’s turnover most be approaching £100m

We have another 10 sites in our pipeline, and most of our sites are very large. Certainly pre-pandemic, from all the data that I saw, we had the highest sales per site in the pub-restaurant industry.

Looking at our business, once we build our pipeline out, we are not far off £100m turnover.

How do you assess inflationary pressures – will you have to raise prices?

People would be mad to say there won’t be an impact on discretionary spending. Inflation is here. Every business in every sector is seeing inflation and it only goes one way.

We are going to try to absorb as much of that cost as possible, although some of it will be passed on to our customers.

What we’re not going to do is offset increases in our cost base by cutting investment in property, marketing, training, development, etc. We’re going to double down on our investment, we’re going to really push it. We’re going to have to put our prices up to a certain degree. And we need to make sure that the we continue to represent value, by justifying price increased with continuing excellence in everything we do

We believe we will take market share, and that will pay for it properly. The companies that cut back, will lose. This isn’t a recession, but it’s a very similar set of circumstances. When there’s a squeeze on consumer spending, whether its inflation or a recession, it comes back to the same thing.

Having an affluent customer base must be helpful during a time like this

Our strategy is to double down on quality, but we do have the advantage of being located in affluent locations, which are less affected by inflationary pressures. If you are in a working-class area, where most of your customers are spending their pay check each weekend, then discretionary spending goes down.

For most of our customers, their propensity to spend tends to be affected by the perception of wealth rather than their bank balance. Things like house prices. Even they’ll probably come out slightly less, which is why market share is important. But they will still come out. And if they are going to come out, they’re going to want value. That’s why we’re doubling down on quality, to make sure people get that perception of value.

Even our customers who clearly aren’t affected – we know there are millionaires in our units – they will still come out, but rather than choose the £100 bottle of wine, they might have the £30 bottle. It’s not that they can’t afford it, it’s just not seen as the right thing to do to be splashing the cash when people are feeling the pinch.

We’re expecting challenges, we’re expecting headwinds – but there’s always challenges and headwinds. We will win that battle by focusing on quality, and constantly being the best we can be – that’s the only way you can win any battle.

Every time someone throws a problem at us, we never ever approach it through cutting back, we always approach it through doubling down.