Punch Pubs is seeing success in rolling out its management partnerships model, with potential to add another “couple of hundred” to its current 350-pub estate, CEO Clive Chesser told MCA’s Pub Conference.

“It’s not a particularly new model. The likes of Amber and Marston’s have been using this sort of ‘turnover share’ model for a few years, and it’s not dissimilar to the franchise world,” he told delegates, in a panel alongside Admiral Taverns CEO Chris Jowsey and Shepherd Neame managing director Jonathan Swaine. 

The managed partnership model means each pub is generally operated by a limited company and by a self-employed management partner, who receives a share of the pub’s sales.

This model enables entrepreneurial pub operators to enter the trade without a meaningful upfront capital commitment and no ongoing capital expenditure requirements. The operator then takes responsibility for running the pub on a day-to-day basis, including employing staff, while the pub company generally determines the retail proposition, control of product mix and pricing.

Chesser emphasised the benefits of this approach for certain types of pubs within its portfolio: “These are businesses that benefit from the scale and centralised offer, but delivered in an entrepreneurial way, with passion and localism by publicans - so it’s a very aligned interest.”

The low cost of entry is a significant advantage, he added. “It’s a very low cost of entry, so we’re really looking for talent, rather than bank balances, which helps us, and it brings all the great things that independent style pubs bring,” Chesser said.

“The pub looks and feels independent, there’s local operators who are driving it hard at the local level and delivering really passionate service. It’s a model that we love, and we’re having a lot of success in rolling those out.”

Jonathan Swaine, commenting on Shepherd Neame’s own pub partnerships, said that the success of the L&T model, even in a changing modern environment was “about the philosophy you bring to the relationship and the shared approach to driving an entrepreneur’s business.

“It’s not to say that I look at my colleagues and think we should be doing some other things around that model. The turnover model is interesting and we can certainly work harder on our ability to evolve the offer,” he added. 

With 1,300 pubs in total, Chesser said he sees 800 of Punch’s pubs always following the more traditional leased & tenanted model (L&T). “The more niche the pub, the better it’s suited to an L&T, independent style offer,” he explained.

“It does need scale to bring that managed style offer and convert the P&L, so we’ll probably always have more L&T pubs. But in terms of turnover we’re pretty balanced now and in terms of profitability, we’re pretty balanced,” he added.

The CEO also addressed a challenging economic environment and the strategies Punch Pubs is employing to navigate it.

“It’s been a very difficult couple of years and publicans have had to absorb a lot of cost in every line of their P&L.

“There are three things that they need to really think about. One is being bold on price. I think that that’s been essential. But we’ve all got to be very mindful of the cost of a pint in a local pub going forward, so that is not a forever answer.

“The second thing is just being better. We’re investing in our pubs, in our assets the whole time, but also developing skills and service and the quality of the overall offer.

“The third is diversification, so stretching range of products that they sell. Increasingly, we’re seeing no and low becoming important. But also diversification of day parts and food.”

He highlighted the importance of experiential offerings, crediting its Laine Pub division, which operates venues such as Brighton Spiegeltent and circus and event space The Four Thieves, Battersea as pioneers in the space.

“Thinking about the things that get younger people out into pubs and spending money; it’s the experiential offer. But it’s not all about high-energy axe throwing and Boom Battle Bar style stuff.

“Some of that is really low tempo, for example, getting people in the pub during the day working from pub, as opposed to working from home, having offers that stimulate demand and loads of activity going on in communities through the day, whether it’s creches, yoga classes, or painting.”

“The team at Laine have been pioneers in the experiential world for last 30 years or so. So it’s something that we absolutely learn from and put into the Punch business, because these things can be relevant in different ways in community pubs right across the UK.

“Everyone wants fun, interesting things to do, and they want to do it in their local communities more and more.”