Punch has revealed plans for the future of its retail contract operating model, as part of the half year Chief Executive’s review.
With 50 pubs open and functioning extremely well under this model, it will be extended to approximately 100 pubs by August 2016 with a further 21 also identified as suitable for moving on to a retail contract in the near future. Moving forward, Punch intends for approximately one in three new lettings to operate under this model.
The increase in sales from these first pub conversions is expected to be between 20 per cent and 30 per cent, with an anticipated pub EBITDA of between £90,000 and £110,000, which would represent an uplift of between £15,000 and £25,000 as compared to historic pub EBITDA under the tied tenanted and leased model.
Under the retail contract, Punch retains 100 per cent of the sales and cost of sales (akin to a traditional managed house operation) and pub costs (excluding staff costs) and pays the publican a percentage of the retail sales, out of which they in turn pay their staff costs.
Duncan Garrood, CEO of Punch, commented: “The retail contract has proven to be extremely popular with prospective and new publicans. Sales and profit uplifts are currently running ahead of our initial expectations and, thanks to this success, the model forms a key part of our ongoing strategy to offer variable turnover linked agreements that meet the changing dynamics of the pub market. In recent years we have seen a significant shift away from long-term fully repairing leases towards shorter-term tenancy agreements where the external building repair obligations remain the responsibility of the pub company. The success of our retail contract so far demonstrates the strength of our strategy and we look forward to developing this model further in future.”
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