M&C spoke to Fuller’s chief executive Simon Emeny to discuss the company’s approach to the National Living Wage, why hotels cannot compete with Fuller’s accommodation offer, reaching the milestone of 2 million cups of coffee sold a year and the evolution of the tenanted estate under the guidance of the latest generation of the Turner family.
Fuller’s results for the six months to 26 September showed a strong performance across each area of the business with the managed estate showing like-for-like sales rises of 5.6% and like-for-like profits in the tenanted arm rising 3%.
Emeny said: “It’s been a strong period but it is also building on some very strong comparatives. Through the investment in our pubs, the focus on developing our people and the focus we have put on our food offer, we have built a real platform for success. That sustained period of investment across those three core areas has been what has set us apart from many others.
Tenanted estate
“Our tenants continue to pick up the benefits of us running a successful managed business. Things that are successful in that side of the business are often brought across.
“In the last six months we have extended the range of Fuller’s beers that are available to our tenants. That has helped make their pubs stand out and deliver a higher margin.
“I would like to congratulate Mike (Clist, who retired at the start of this month) on what he has achieved both within the company and in the industry. He has been a wonderful sounding board for all the trade organisations during a very challenging period.
“He leaves our tenanted business in absolutely outstanding health. Fred Turner (the new tenanted director) has had a very valuable handover period with Mike and will obviously have his own ideas and we look forward to working with him to implement those. It’s very much evolution not revolution.”
Accommodation
Fuller’s currently has 651 rooms across its estate and is keen to expand on this.
Emeny said: “We have completed the first wave of conversions of hotel bedrooms. We have identified further opportunities which we will be working up over the next 12 months.
“The booking journey for a customer is becoming ever more important. The standard of hotel rooms in general is of a very high quality but we have the advantage of having our hotel rooms in really beautiful and characterful buildings. That’s something that hotel chains cannot match and we will be working on that in our marketing. “
Investments
The estate is currently comprised of 189 managed pubs and hotels and 203 tenanted pubs, with a continual refurbishment programme.
Emeny said: “In the first six months of the year we acquired two new properties – the King’s Head, Earl’s Court Village and the Queen’s Head just outside Kingston and both of those will get significant investment over the next year. The Great Northern Railway in Hornsey and The Sutton Arms in the City, both of which we have taken on in the last eight weeks, will also get significant investment. We have got a new riverside site in Greenwich which is coming on line in January called the Sail Loft. We are also in negotiation on a few other sites.
“A big reason for our success in recent years has been taking on sites that we can improve and reposition and that strategy will continue.”
In the past six months the company has also bought the freeholds of three of its pubs.
When asked if he would look to add more, Emeny said: “As and when opportunities arise we will pursue them because it gives us development options for the rest of the property.
“We have about 50 leases in the business. When strategic opportunities arise we’ll have a look at them.”
Coffee offer
Emeny said the company’s coffee” gets stronger and stronger every year”.
He said: “We would expect at some stage over the next 12 months we will reach 2 million cups of coffee being sold every year in our pubs. Broadening the reach of our pubs is a key challenge and a great coffee offer is an important part of that. It’s never going to over-take beer but a quality cup of coffee is the reason some people use a pub now.
“Pubs will always be a place people relax and gather socially. Pubs are increasingly all-day venues and they fulfil different needs to different people.”
National Living Wage
Fuller’s has stressed that the success of the company is down to the talent and dedication of the staff and has introduced numerous improvements to its remuneration and training offer.
Emeny said: “We want to make ourselves the employer of choice for chefs, hospitality graduates and for staff. We have radically changed our recruitment process and reward structure as well as our training and development programmes. That is really contributing to improving service in our pubs as well as internal succession and engagement and spirit in our business. We have seen that in terms of improved market share and our like-for-like performances.
“We have taken the decision that, as of 1 November, we are paying all staff in development the National Living Wage, regardless of age.
“That decision, which obviously has a cost, is very important for us to differentiate ourselves from the companies that will be forced to implement NLW from April 1. We voluntarily took the decision to implement that early and reward motivated and engaged staff who want to be part of our development programme.”
Rugby World Cup
“It was absolutely the success that we thought it would be and we were in a great position to capitalise on it. The key areas were always going to be in and around London and specifically the Richmond and Twickenham area and that was where we saw the biggest uplifts.
“We operate the most iconic rugby pub in the world – The Cabbage Patch in Twickenham and that had a record week.
“Outside London it’s fair to say interest waned after England’s exit.”
Approach to the pubs code
“Our strategy is very clearly defined and will not alter because Enterprise is suddenly going into managed houses. We are going through a period of change and it will be interesting to see how that plays out over the next few years.”
On whether he would consider exploring alternative retail agreements, as other large tenanted operators have started to do, Emeny said: “We rent properties ourselves on turnover agreements. Clearly if you operate a very large number of pubs which you are leasing out then you will want a wide variety of agreements. We have a relatively small tenanted estate and so have never felt the need to overcomplicate things. We think the model we operate works well for everyone. It gives us the incentive to invest in our properties and gives our tenants a low-cost route to market and access to our support and expertise. “
The Stable
“The Stable sites have been like-for-like positive for the first part of the year. Every new site we have opened so far has achieved beyond our expectations.
“We have been able to share learnings and experiences from both sides. We work very closely with Richard and Nikki Cooper and have been able to share the fruits of 170 years of running pubs. Our IT and finance systems are consistent across the estate, along with many other shared systems.
“Interestingly the two best-selling brand in the Stable, considering they have over 60 different ciders, are Cornish Orchard and Frontier. Frontier in particular is a great fit for the customer base of The Stable and the ethos of the company.”
