Coaching Inn Group checks out potential in market towns

As the founder and owner of The Coaching Inn Group, Kevin Charity owns a profitable and expanding food, beverage and accommodation business, which last year turned over just north of £20million. Yet there’s nothing he likes more than mucking in and getting his hands dirty. Rodding drains? – He loves it. Cleaning windows? – Bring it on. Washing up? – Fantastic.

“Deep down I am an operator and I used to love doing all that hands-on stuff; I miss it,” he explains.

It’s understandable. He has literally been in the hospitality industry man and boy. His father ran a pub in Boston, Lincolnshire, the town where Charity’s business has its head office today. At 18 he was a prodigiously young licensee and went onto set up Bulldog Group, a multiple licensed operator, with his father and brother, both of whom he bought out of the business in 2001. The group went onto sell its, as Charity recognises with hindsight, too diverse leasehold interests and from 2007 focused on growing the inns and so the current Group was born.

Charity now spends about 50% of his working hours in his sites and often can’t resist tackling some of those more practical tasks. While he says it’s important that the managers see he is prepared to do all the things he would expect them to, he is aware that his time is better spent ensuring the group adheres to its clear growth strategy. He seems to be getting the balance right. All the figures look very healthy – gross site Ebitda for the year to end of March 2018 was £5.5m with group Ebitda at £3.5m and the estate does not have a tail; all the inns are performing well.

The group acquired its 15^th pub at the end of last month, after taking on the The Swan, Stafford, for an undisclosed sum in an off-market transaction from the Lewis Partnership, and Charity is reasonably confident he will secure another two this year.

“We have built this great, strong head office team and can take on quite a few more sites without pressure,” he says.

In December 2016, BGF, the investment firm, provided an additional £10million of funding for the group, following its initial £4.5million backing in March 2015. Charity won’t be drawn on future funding options but says BGF remains very supportive of the business.

“We are just enjoying the model. It is so robust and is an incredibly reliable, low-risk investment.”

There is no target number of sites the group has in mind, but Charity says there is also no shortage of potential, pointing out that there are 960 market towns in Britain.

Coaching Inns’ site criteria and the nature of the sector do have a massive bearing on the rate of expansion possible, though.

Charity says he can almost tell if a site will be suitable just from the name. Very traditional pub monikers like The White Hart and The Coach and Horses are a good starting point. Couple that with a High Street or Market Place address and it will pique his interest even more.

“It has got to be the best location in town. If there is a better place, then we won’t do it,” he adds.

A minimum of 20 bedrooms is essential (the average number per site across the estate is 30 but ranges from 20 to 59) as that’s the level it becomes viable to have a full-time receptionist. Good trading floor space is a given, although Charity says the group is not afraid to take on a project and reconfigure to achieve it. Outside space has also become a must while car parking and function rooms are a nice added bonus but not the be all and end all. Crucially, the site must have potential to reach Ebitda of £400,000.

While there is certainly no lack of such properties and competition for them is not as fierce as for other types of high street operation, thanks to the bedroom angle, securing them is usually a lengthy process.

The vast majority of coaching inns are owned by independents and have often been in the same hands for decades.

“We have bought most of our inns off-market,” Charity says. “We have often started things by going and knocking on the door and building relationships – it is definitely a long play.”

Charity adds that quite often the inns are a bit tired and under-invested yet still have a loyal following in their locale: “We have to work hard not to lose that loyalty but normally the town wants to see its historic inn thrive and we have the opportunity to do that.”

With that in mind, the company never changes the name of the inns it acquires, just adding the phrase ‘Eatery and Coffee House’ where relevant, to better reflect what’s on offer. The company works hard to integrate itself in the local community offering free room hire for local businesses, for example, and supporting local charities. The only place the Coaching Inns brand is visible is in the bedrooms on things like the toiletries, in-house magazine and coasters.

Charity says the brand is leveraged throughout the group via economies of scale and consistency of service and operation. The inns are pitched at premium three-star level - with an average room rate currently around £62, accommodation is priced above the budget operators but below the four-star hotels. Food, too, is deliberately just above most pub restaurants in terms of price and quality. Charity’s aim is to over-deliver on expectations and to have revenues split pretty evenly a third each from food, drink and accommodation.

“We are sat quite well,” he says. “Being a premium offer, people are happy to go out once a week and to pay for a quality experience, rather than go out two or three times a week for something average. The fact we do 16 different gin and tonics, which are about £8 a drink, shows that if people want a certain experience, they are happy to pay for it.

“A lot of branded restaurant groups are in the middle so I can see why they are struggling,” he adds.

Afternoon tea is one of the latest ways the group is successfully maximising the opportunity to earn from its approach to offering affordable luxury. Since the Spring, the inns have been selling both a classic and a premium version (which includes a Pimm’s, gin and tonic or glass of fizz), for £12 and £16 per head respectively.

“It has made a huge difference on sales,” Charity beams. “No site is doing less than 100 of these a week – I am chuffed to bits!”

Charity says there are still opportunities to maximise the company’s investment made a couple of years back in a central reservation office. In the two years, there was a 10% increase in bedroom revenues and the team is now taking on other revenue streams. Last Christmas, for example, they did Christmas pre-sales for the first time, with good results. A full-time wedding sales manager joined two years ago and this area of the business is also going from strength to strength, with wedding bookings up 45% this year.

The initiative that has had the biggest impact across the business, according to Charity, is the introduction of a Business Information Tool (BIT), Power BI (which has now been in use for the past 12 months), coupled with the appointment of a full-time analyst at the beginning of this year. Charity says it has empowered every manager to use insights, rather than just information, based on all of its tills and systems, to better understand and therefore forecast for their site.

“The business is in the best shape ever and it has really elevated the management team – they come to us with their observations, whereas before the operations director presented the figures,” Charity enthuses.

There has also been a big emphasis on people in the past three years, which has resulted in staff turnover reducing from 120% to 52% during that period. The firm has implemented a career path strategy to unlock its 600-plus staff’s potential, even if that ultimately means they move out of the industry. The staff member whose work on social media for the company recently resulted in her being poached by a digital media business in Wales is a good example. The head of learning and development for Coaching Inn Group, however, proves how it works both ways – he was originally a waiter at one of the sites who came back and was fast-tracked after completing a law degree and deciding he would prefer a career in hospitality.

The majority of general managers are home-grown and the group actively encourages a sense of community across the business in many ways, such as offering £1 stays for staff during January and February and 50% off accommodation and food all year and 25% off for their visiting family and friends.

Charity and his business are in a very comfortable position right now. He admits it has not all been plain-sailing to get here – back in the Bulldog days, particularly, there were a few squeaky moments – but overall, he feels blessed. His wife Lily has now retired from the business but their grown-up children work in it and have provided four young grandchildren who are, naturally, adored by their grandparents. He is definitely not ready to step back from his work yet though. He is having way too much fun.