Increasing profits - Why pub tenants are taking on multi-sites
Do you want to increase profits in your pub business but there’s not enough scope to do more with your current pub? It happens. You can only open for the hours agreed in your licence, and you can only fit a certain number of people into your pub at any one time! While there may be opportunities to increase profit margins by selling more premium products, add new revenue streams or develop your pub to accommodate more people, if you’ve done all of these things what next?
Many pub tenants are happy to enjoy the profit they’re getting out of their business and the satisfaction of running a great pub. But some people have ambitions to make more money and so the next step is to scale up and take on another pub.
Do You Want To Run A Pub Empire?
If you’ve been in the business for a while you probably know of a few pub licensees who are cashing in with multi-site businesses. You might think that to do this they’ve had large amounts of investment from backers to take on several sites, but often that’s not the case. They’ve built their pub empires by taking on one site at a time, developing the business to a point where it’s possible to invest profits in a new pub. Of course having a successful and profitable business does mean it’s easier to get financing, so with a good track record and healthy cash flow you too should be able attract investment if needed.
Having a great track record also goes a long way with pub companies. We want to attract licensees who have proven skills in developing their pubs and making them profitable for all parties involved. Therefore, multi-site operators will often find that pub companies are open to discussing favourable terms or perhaps making capital investment available to develop the site.
The Scale of Economies
Successful multi-site operators also know that as well as banks or pub companies, they’re also in a position to negotiate good deals with suppliers. Higher volumes of sales attract larger discounts on all sorts of goods and services, so there are opportunities to reduce costs and increase profit margins across all your sites.
The scale of economies also works for services like IT software, you can scale up the services you require instead of starting from scratch with a new product or account. Costs don’t automatically double just because you have a new pub.
How To Increase Profits Across Multiple Sites
In summary, the driving factor for most multi-site licensees is to increase profits by scaling up with a new site. This is achieved in the following ways:
- A new pub means more customers and more sales,
- The ability to negotiate better deals with suppliers allows you to increase profit margins across the business overall
- The opportunity to share some operational costs across the business, such as accountancy and payroll systems, reduces individual costs for each site and therefore increases profits.
Of course, there are the usual costs associated with launching and running a new pub site, but if you’ve successfully done it with one site you’re in a really strong position to do it with another.
If you’re interested in taking on a new site and becoming a multi-site pub operator register with us to start exploring potential sites.
You may also like to sign up for our email series offering more advice for pub operators planning a new business – click on the link below to get this series.