It’s been well covered in the national press that pubs are going out of business at an alarming rate. Figures from CAMRA for the second half of 2018 indicate that 378 pubs closed their doors permanently over the period from July to December. Reduce your running costs!
That’s one pub every 12 hours.
Small pubs – defined as having less than 10 employees – seem to be bearing the brunt. Office of National Statistics (ONS) sources show their numbers have fallen from a high of over 40,000 in 2002 to a figure of just under 23,000 in 2018.
Why are pubs closing?
Pressures on profits continue to bite, with costs rising across the board, a weaker pound and seemingly fewer regular pub drinkers. Whilst the overall closure numbers have slowed from 2017, there are now only around 40,000 pubs in England, Wales and Scotland.
CAMRA point to their efforts to gain planning protection for pubs as a contributing factor in the slow down. Indeed, there are many examples highlighted by the twitter hashtag #saveourpubs that point to Pub Cos, Property Developers and even convenience store chains buying-up local pubs to convert the buildings’ use.
Combined with a triple tax threat of high beer duty, rising business rates, and VAT, the planning pressures create a perfect storm and many communities are losing their hub.
“Approximately one-third of the cost of a pint in a pub is made up of various taxes.”
What is being done to save pubs?
Campaigners are trying to raise awareness and pressurise the Government to alleviate the strains, but examples such as The Three Crowns at Wisborough Green in West Sussex spotlight the issues. As covered in The Morning Advertiser, the landlord at The Three Crowns faced an increase of almost 200% in Business Rates from 2017 onwards, plus rent increases from the Pub Co and ever-tighter margins on his products. Profits suffered and the pub eventually closed for good in June 2019.
Activities, such as the ‘More Than A Pub’ fund, which is coordinated by the Plunkett Foundation, aim to support the growing number of Community Pub campaigns taking root across the UK. This is a fantastic scheme, but £2.2 million in funding through to September 2020 can only have a limited impact.
Will Brexit Save Our Pubs?
Whilst all of the efforts to highlight issues and support the pub sector are hugely commendable, the sheer vastness of the problems faced indicates that it will take a long time to resolve. Some point to Brexit and the opportunity it creates to adjust the beer duty payable in pubs as a potential saviour, but negotiations with Europe have been ongoing for more than 2 years and still seem no closer to a satisfactory conclusion.
And as time marches on, pubs continue to go out of business.
Save Your Own Pub?
All of this leaves landlords having to help themselves by identifying areas where they can increase their profits through making savings on the operating costs of their business. The Association of Licensed Multiple Retailers (ALMR) Christie and Co Benchmarking Report 2017 identified the three largest operating costs in the hospitality sector as energy bills, business rates, and staffing.
Save (Y)our Pub: Energy Cost Savings
Keeping on top of your energy consumption and bills is nobody’s idea of fun, but as one of the largest outgoings for a pub business, it is definitely worth the time to send your meter readings regularly and shop-around the comparison websites to see if there is a better deal available.
The ultimate goal is to pay less for your supply and reduce usage at the same time. This can be achieved by switching off lights and equipment that is not in use, ensuring windows and doors are closed when the heating is running, using thermostats to control temperature, installing low-energy lighting and improving insulation – which can make a huge difference in older buildings.
Sending in regular meter readings will help you avoid unpleasant surprises in the post and you may even want to consider a smart meter – although reports of inaccurate readings and huge bills have dented some people’s confidence.
Another option is to consider using an energy broker, who will seek the best deals on your behalf and may be able to get offers that you cannot access.
Save (Y)our Pub: Business Rate Valuations
Everyone felt the pinch of the business rate rises in April 2017 – with examples such as The Three Crowns mentioned above becoming disturbingly common.
Whilst everyone believes their rates should be less, if the cost is genuinely impacting your ability to trade, it may be worth investigating your options for a re-valuation. However, experts in the field warn against an automatic challenge of your rates and suggest consulting a specialist before diving into the Valuations Office Agency (VOA) forms, as you may end up increasing your rates even more.
RICS (Royal Institute of Chartered Surveyors) may offer a small amount of free consultancy and specialist property agents with experience in this area can also be found.
The VOA website also contains details of rate reliefs that are applicable to the pub sector. It’s definitely worthwhile taking some time to familiarise yourself with the entitlements relevant to your business and ensure you are claiming whatever breaks are available. Every penny you can save with increase your profits.
Save (Y)our Pub: Staffing
Most pubs, particularly those in the Small Pub category, run fairly tight ships in terms of staffing numbers and reductions to the team are almost always the final option when it comes to close-knit small businesses. In many cases, the owner and landlord take on many hours of unpaid work in order to keep the pub running.
However, staff churn – the constant replacement of team members – can be an expensive process. With the relatively low levels of unemployment in the UK at present, it can also be difficult to attract good employees. So, whilst it may seem counter-intuitive, if you have a good team and you want to keep them all happy, it may be worth considering increased rates of pay and/or bonuses for good performance. These efforts will pay dividends in recruitment savings, as well as improving morale and also customer service.
It is also essential to ensure that your staff are all being paid at least the statutory hourly rates that their age demands, as failure to do so can result in significant fines.
Save (Y)our Pub: Waste not want not?
Reducing waste across the business – wherever it occurs – is the key to increasing profits for the business. Whilst we’ve already looked at minimising wasted energy, there are other areas in the pub where reducing orders, changing processes and looking for new suppliers could turn small investments of time and money into significant savings for the pub.
Save (Y)our Pub: The Cellar
The primary asset in the cellar is the beer. So, how much beer do you waste? How many pints are you pulling and throwing away during your line cleaning process? How much could you save if you cleaned the lines less often, without compromising the flavour, quality or pour of your beers? How much would this increase your profits?
Devices such as our StayClean DS6 are designed to help landlords and bar managers to reduce the beer they waste cleaning their lines by reducing the frequency that their lines need cleaning. By changing your line cleaning schedule to once every 4 weeks, instead of once a week, you can save 75% of the beer that you currently waste. This means you sell more of every keg at a retail price and therefore increase your profits on each keg. In addition, you save money on cleaning chemicals, reduce your water consumption and save the time it takes to do 3 cleans per month.
Even a small pub with 8 beers and ciders and 2-pint lines could be selling over £160 of beer that would have been thrown away each month – that’s an extra £2000 of sellable beer per year, plus a water-saving of 500 litres. And with the best cellar conditions, they may be able to go 6 weeks between cleans without affecting the quality of their beer.
Operating with high cellar-standards is also vital to minimising beer wastage. Cellars are ideally kept at around 12 degrees celsius, with fans for general room cooling and a specific cooler for the beer, as it is drawn to the bar. Maintaining this equipment helps the landlord achieve ideal cellar conditions for beer preservation and a great pint. Savings can be made by ensuring that the cool air from the cellar does not escape easily – consider insulating internal walls, close doors and windows, use curtained-off areas to trap the cool air and reduce the need to run the fans. If equipment does need replacing, look at the energy ratings and consider the savings over the lifespan of the device.
Save (Y)our Pub: The Kitchen
Food-led pubs can also look to the kitchen, where efficiency in the use of produce, equipment and storage can deliver immediate savings without the need to compromise standards.
The next area to review is suppliers. The kitchen is a competitive hotbed across the board, from equipment suppliers to produce suppliers, the choice available is almost too much to comprehend.
However, investing some time to call around or trawl the web can deliver savings on everything from fruit, veg and meat to ovens, extractors and dishwashers. Even if you’ve already developed a good reputation for your food, new suppliers may offer options that you can premiumise to increase your profits.
Another great idea that we have seen in rural pubs is the ‘grow your own’ approach, where part of the garden is turned over to producing fruit and veg for the kitchen – fresh tasty food and another great saving.
Save (Y)our Pub: The Bar
Variety is the spice of life and everyone likes a good selection of beers and ciders in their local pub. Unfortunately, unless you’ve got the drinkers to support it, a bar full of fonts will likely result in a cellar full of wasted beer. Much like the kitchen, the bar requires you to understand what your customers like and how much they will consume. If they like an occasional nutty ale, broody stout or quality porter, perhaps look at having a couple of dedicated guest taps that you rotate regularly. Rather than trying to keep lots of beers on at once, regularly refreshed guest taps keep your options interesting and avoid hammering your profits when you have to throw half a cask away.
Save (Y)our Pub: Front of House
Whether its waiting staff or bar staff – the standard of customer service you provide is ultimately just as important as the quality of your food and beer – it can make the difference between a one-off visit and a regular customer. And every pub needs regulars.
The fate of pubs across the UK remains perilous, with costs rising and profit margins tightening. Until the Government truly looks to protect the Great British Pub, it’s up to the Great British Publicans to find their own ways of saving and diversifying their businesses.
Hopefully, the Great British Public will lend their support.