If I Want To Refurbish A Pub, Who Pays?
Date added: Mon, 02/10/2017 - 10:00
Refurbishing a pub could provide you with a great site to run your business from. It can help attract new customers to the pub, allow you to improve or expand the pub offer, and increase the amount of trading space you have.
The premium end of the pub market has stiff competition from a range of other hospitality businesses. Coffee shops, hotels, and restaurants have all diversified in recent years, and now provide customers with an alternative to the traditional pub.
So premium pubs also need to diversify, find new customers and win back some of those that have gone to the competition. Many pubs are doing this very successfully. Roasting their own coffee beans and giving the high street chains a run for their money. Gaining a reputation for fantastic food, and competing with restaurants by offering customers something different and unique to their location. Differentiating themselves by specialising in a particular type of product, such as running a craft brewery alongside the pub.
All these innovative ideas are ensuring that UK pubs can compete successfully in the marketplace, and that pub operators can have profitable and exciting businesses. However, for these ideas to be successful you need the right premises.
What Pub Customers Want
Customers at the premium end of the market are looking for many of the qualities they see in the coffee shops, restaurants and hotels they visit; as well as a unique pub experience. They want a great atmosphere, comfortable and stylish furnishings, good lighting, and attractive washrooms. At the same time, they also want somewhere that is unique and has character.
Pub tenants and leaseholders are in a great position to provide customers with an alternative to what the restaurant, hotel and coffee shop chains offer. Every pub is unique, many are already characterful, and as it’s your own business you can do a lot to differentiate it from other businesses in the area.
Benefits Of Refurbishing A Pub
Frequently pubs need updating so that the licensees can improve the customer offer – for example converting upstairs accommodation to provide more trading space, providing a better kitchen to create a fantastic food offer, developing an area for live music, or transforming a room to give space for functions.
As Paul Wigham, landlord of The Crown in St Albans points out, “It’s attention to detail that makes all the difference. Customers appreciate it when the little things are right. For example, in our recent refurbishment I realised that the women’s toilets were not being finished to the level my customers would expect, so I made sure they were upgraded. If it’s important to my customers, then it’s important to me too.”
Refurbishing a pub isn’t a cheap option. Decorating, buying new furniture, improving the garden, creating new facilities costs money. Just repainting the exterior could cost several thousand pounds depending on the scale of the job and where you’re located. Pub refurbishment projects can range from small garden schemes costing around £10,000 to large schemes in excess of £300,000.
However, undertaking a refurbishment can make a tremendous difference to the business. Clive Price, landlord of the Rose & Crown Egham believed that there was scope to improve the pub garden, providing better facilities that would bring in more custom. Considerable investment was necessary to provide a purpose built outside bar and improve the catering facilities, however Clive is confident that he will see a good return on investment (ROI):
“We’ve found an outside bar is great for customers – especially those with small children, as adults can order without ever losing sight of their family. Our outside offer is growing – we are just about to commission a purpose built pizza oven and servery – all built into a shipping container! As a temporary structure, it won’t need planning permission and working with a design company, we have managed to create a solution that has come in at under £40,000 but will provide an amazing experience that customers will enjoy and recommend to others in the area.”
Getting Funding For A Pub Refurbishment
The big question for any pub landlord considering undertaking some form of refurbishment is simple – where to get the funds needed for the project? Who pays?
Under the terms of tenancy agreements, pub operators are responsible for the general maintenance of their pub and so small changes relating to maintenance would generally be their responsibility. Whereas with a lease agreement, lessees are responsible for the structure of the building.
For major refurbishments it is a question of investment in the property. By undertaking refurbishments, a pub licensee is investing in their own business and its future development. Future profits are likely to increase as a result. Unless they have sufficient capital of their own to invest in the refurbishment, loan agreements would be required. Discussing your plans with your Business Development Manager can help highlight possible ways to obtain investment funding.
Martyn Stewart, landlord of the Dining Room in Kirkaldy identified how a very simple change would transform the fortunes of his pub, “the pub had been refurbished recently and was still in good condition” says Martyn, “but we felt that one of the biggest handicaps was the colour of the building. It had been painted a dull brown and simply didn’t stand out to passing traffic and was being overlooked. Belhaven agreed with us and repainted the building – a simple solution that has made a huge difference to trade.”
Greene King can provide capital for investing in our pubs, if they meet certain criteria, in return for a rent increase depending on the type of scheme. Licensees can undertake their own schemes using funding provided by Greene King. Such buy back schemes are normally capped at between £10,000 and £20,000.
All larger investment projects are directly managed by Greene King who take total ownership of the scheme. This involves taking on the project management, design, applications for planning permission, licensing etc.
This reduces the hassle for the pub operator, allowing them to concentrate on running the pub and developing business, rather than being distracted by managing the project and the inevitable problems linked to a major refurbishment.
Joint funding in this way can allow business to expand faster than they might otherwise have done. Licensees can take advantage of new opportunities that present themselves rather than having their ambition and potential for growth capped by lack of funds.
Click here to read our interview with Nigel Williams at the Bell Inn in Bearsted about his experience working with our team on a major investment project.
There is no doubt that investment of this kind can make a tremendous difference to the pub and the landlord. James Morgan at The Antelope added a micro brewery within only a few months of taking over the pub. As he points out, “Without the joint venture with Greene King, we wouldn’t be where we are now so quickly. We wouldn’t have had the finances to grow and invest in the site as quickly as we did. It worked. It has made the pub much busier and brought in more customers for meals.”
When looking at potential pubs to let, look out for those earmarked for investment and those that have recently been refurbished. Visiting pubs that have had some investment is also a great idea to help you identify opportunities in your own pub.
Your Business Development Managers should also be high on your list of people to talk to about refurbishing a pub. They can help you work out what areas will deliver the best ROI, and also help you explore any funding options.
Investment is also available for new pub operators, either taking on sites earmarked for investment or who have identified the potential in an existing pub. If you would like to speak to our Pub Partners team about a particular pub, please get in touch using the number below or request a call back.