When smaller is better

Wandering around the smart Belgravia area of London on Father’s Day involved passing some of my favourite pubs including the Fox & Hounds, Nag’s Head and The Grenadier, which I have frequented over many years. One common theme among them is that they are all pretty small, and their cosiness is an attractive characteristic that continues to draw me in.

Cosy: The Fox and Hounds, Belgravia, London

Small proportions might be an appealing aspect to me, and no doubt many other customers, but it is proving to be increasingly problematic one for pub operators. We are at a point when the pub industry has a very serious downer on small venues, and it’s a worrying scenario for their future existence.

In recent weeks, we have had a raft of leading pub operators highlight just how tough it is to profitably run a smaller venue with the rising costs faced today. Timothy Taylor managing director Tim Dewey highlighted the keenly felt issue recently: “If you run a full offer, you’ve got such high costs with kitchen staff, paying employees and rising utility bills that you need a high level of turnover, and some of these pubs just don’t have the space or sufficient local trade to be able to do that. It’s sad, and I worry for the future.”

The decision by Fuller’s to recently sell 37 smaller pubs to Admiral Taverns was part of its shift to focusing on larger outlets, which the company stated was a segment on which it is much happier to focus its investment. The decision of where to commit investment has been uppermost in the mind of Oakman Group founder Peter Borg-Neal, who has concluded that it is firmly on chunky-sized pubs.

Speaking at Propel’s Excellence in Pub & Bar Retailing Conference, he stated: “I like big pubs…I would want to build big, big pubs capable of doing £100,000 a week because I think they can manage these economic ups and downs far better. I think small pubs are quite hard at the moment.”

This very much resonates with the relatively long-standing thinking at JD Wetherspoon, which has an ongoing strategy of pruning its portfolio as it skews the mix to larger venues with hefty potential turnovers. In the previous six months, it has closed 13 smaller, weaker performing outlets and opened two new venues. It also seems to have accelerated its commitment to expanding the size of its existing outlets.

Founder Sir Tim Martin has stated that up to 50 outlets will be scaled up to boost their square footage over the next few years. Scanning through the new issue of the company’s glossy magazine, this activity is clearly well underway: The Prince of Wales in Cardiff has increased in size by 20%; The Six Chimneys in Wakefield had doubled in size; the Wetherspoon unit in London Victoria station has extended into the YO! next door; and The Red Lion in Skegness has expanded into the adjoining betting shop.

Interestingly, this go-big-or-go-home strategy is very much out of kilter with other consumer-facing sectors such as quick service restaurants (QSR) and retail, where there is much evidence of a growing appetite for smaller units. The likes of Pets at Home, B&Q, Screwfix and Majestic Wine are among those brands expanding their smaller store portfolio. It is a similar story with the QSR sector, where pretty much every operator is developing compact formats. Such a trend is also taking place in the US, where real estate firm JLL reported that in the first quarter this year, as many as 68.5% of leasing deals were for spaces of 2,500 square feet or smaller. The demand for 5,000-10,000 square-foot outlets has been decimated.

Smaller Pets At Home format store

These moves highlight how the physical space in QSR and retail is very much regarded as part of a broader multi-channel eco-system. The units are increasingly about the collection of digital orders and returning of unwanted goods, so a pick-up/returns window is of greater value than a large store for browsing or a QSR dine-in area. 

Unfortunately, this scenario is all rather alien to the small pub, where delivery and multi-channel are not in the lexicon. This suggests they will likely face ongoing pressures during these straitened financial times. If ever there was a time to support the small pub, it must be now, and thankfully, they don’t need too many to fill them.

Glynn Davis, editor of Retail Insider 

This piece was originally published on Propel Info where Glynn Davis writes a regular Friday opinion piece. Retail Insider would like to thank Propel for allowing the reproduction of this column.