An organised and optimistic approach to reopening Oakman Inns, under a newly reshuffled board, has started to bear fruit. Dermot King and Peter Borg-Neal tell Neil Gerrard why, despite a gloomy start to the year, they are optimistic about the future of their Catey-winning premium pub business.
From staring down the barrel of the wholesale closure of the hospitality industry in March, to high-flying sales and the resumption of ambitious growth plans in August, 2020 has so far proven as strange a year for Oakman Inns as anyone else.
After a gloomy start to lockdown, where the business found itself scrambling to deliver food to all of its Mother's Day bookings who suddenly found their reservations forcibly cancelled, summer has been a major improvement. "It's almost embarrassing," says founder and executive chairman Peter Borg-Neal of his firm's rocketing sales figures in August.
"It's staggering – I have never experienced anything like it," he adds, as he runs through the numbers: food and beverage sales have jumped so strongly, that even with a 65% decline in accommodation sales, the business was still 4% up on like-for-like, same-site sales for the 28 days to 2 August.
The dramatic turnaround in performance has been driven to a large extent by chancellor Rishi Sunak's Eat Out to Help Out scheme. But if Oakman has been making hay now that the sun is finally shining, then Borg-Neal thinks it also has something to do with the company's positive outlook.
All 28 of the group's sites reopened as soon as they were allowed to do so on 4 July, but preparations led by Borg-Neal and newly appointed chief executive Dermot King were well under way before that.
"Having been through a few downturns, I have a very clear view that it is a time for opportunity. There is a correction in the market, a number of operators come out of it, property prices become lower, and it is survival of the fittest," says Borg-Neal, who won the Pub and Bar Award at the 2018 Cateys.
Having been through a few downturns, I have a very clear view that it is a time for opportunity
"I always firmly believed that we would trade well when we reopened, but I also had to accept that while I may have been through downturns, I had never been through a pandemic before. Neither of us knew where this was heading, so our strategy wasn't based purely on it being a disaster or purely on it all going right.
"I think a lot of people focused on the risk end and were less ready. They either didn't open or opened more cautiously and have missed opportunities as a result. We didn't. That doesn't mean to say we were gung-ho, but our planning involved opening as soon as possible."
The company has also reaped the benefit from being at the forefront of a campaign to demonstrate that the pub sector could reopen safely, even advising the government on how to do so as one of its designated "hero" companies.
Planning a way forward
Oakman's reopening strategy came about, as some of the best plans do, over a cup of tea. King explains: "One of the things that lockdown gave us was the opportunity to think. I was just sitting on my garden bench writing down in a notebook what we thought the strategy could look like. I took a picture of it and sent it to Peter and that became the plan.
"We felt the message that pubs could reopen safely was not being made in a way that people could envisage and that the way to get over this was to actually show them. We took an early decision to dress up one of our pubs and demonstrate it."
The pub in question was the Betsey Wynne in Swanbourne near Milton Keynes. Oakman made a video of how the pub would look when it reopened, which cheered investors, but also attracted the attention of ministers. Oakman had already been working with UKHospitality to submit ideas to the Cabinet Office, as well as appearing in the media about the efforts it was making to reopen.
"The government produced a super high-quality film [featuring the Betsey Wynne] and put it on prime-time TV at their cost. It was incredible publicity. OK, it was about reopening, but there was no doubt it did us a huge amount of good. Someone calculated that our total exposure in the papers, online, but particularly on the national news, was worth about £2.4m," says Borg-Neal. Between them, he and King were interviewed 12 times on national TV and always ensured they got a subtle plug for the business in somewhere.
"We came from being a relatively small business no one had heard of to pretty much leading government policy on how pubs should reopen. The whole thing took on a life of its own and got a lot bigger than we expected it to be," adds Borg-Neal.
We came from being a relatively small business no one had heard of to pretty much leading government policy on how pubs should reopen
Another initiative Oakman took to drive bookings was to launch an equivalent to the Eat Out to Help Out scheme earlier than the official version, offering free downloadable £10 vouchers at the pub firm's own cost. The decision to launch the scheme came after Sunak announced that VAT on food, accommodation and attractions would be reduced from 20% to 5% until January 2021.
"The debate became ‘how do we pass this back to the customer?' We were already at capacity on a Saturday night, so reducing price was not going to increase capacity. We thought a more targeted approach was better, so we passed the reduction to customers who could come mid-week in July," explains King.
The initiative helped prepare Oakman's customers for the official scheme as well as giving them more confidence to eat out, to the extent that even well-connected walk-ins found themselves disappointed. "I got contacted by a manager who wanted to apologise because they had just turned my wife away for a table on a Wednesday lunchtime. I explained to him that this was the best possible news I could have received," jokes Borg-Neal.
The scheme was so successful for the group that it has decided to fund it throughout September.
Support in tough times
Of course, much of the business's success has relied on goodwill from suppliers and landlords and in that respect, King and Borg-Neal consider themselves fortunate. "We don't have many institutional landlords. Quite a lot of them are either people who are shareholders or with whom we have had long-term relationships. They have been nothing but supportive and we have had none of the pressures that some operators in the cities have had," says King.
Borg-Neal adds: "We have worked hard over the years to be known as an organisation that does what it says it is going to do. All of our suppliers were supportive. It was a matter of picking up the phone and saying: ‘Look, I can't pay, here's a plan, can you support it?' And it was pretty much a ‘yes' across the board and we agreed terms very quickly."
That gave Oakman breathing space to look at a plan for surviving the lockdown and establishing a fundraising process. The company has gone on to raise £1.8m from its shareholders and another £2.1m from Santander through a Coronavirus Business Interruption Loan (CBIL).
Despite the scramble for funding, coronavirus hasn't knocked King and Borg-Neal's confidence in their growth strategy.
In fact, the plan is to raise up to £10m more to bring Oakman to a point where it can fund its own expansion. A further three sites are slated to open in 2021 in Buckingham, Wokingham and Epsom, with another in Hatfield scheduled for 2022.
"If you had asked me earlier in the year how Covid had affected our level of ambition, I would have said we were fairly cautious. Peter, being far more experienced in the premium pub market, was more bullish," says King. "We assumed we would be 25% down on sales for the first three months of opening but the truth is we are in growth territory, even though the hotel business is very flat, so we are hugely optimistic. The premium pub business is characterised by two things that have supported us all the way though: we are in locations that are safe, and of sizes that make us safer to operate."
Oakman has spent somewhere in the region of £50,000 on Covid compliance so far, including glass screens to divide tables indoors, rather than Perspex, as well as disposable paper menus. But the company regards such changes as an investment – the glass screens, while more expensive, are a long-lasting means of creating bubbles that provide an environment for home-workers to use the pubs as an office for the day.
"Apparently, most major inventions are made during or in the run-up to a war because you have to invent things to deal with a problem," says Borg-Neal. "We thought we would really get hit hard because you only have 70% of your seating capacity [due to social distancing measures] and people can't come to the bar, so there is a more complex service style. We expected higher labour costs and lower sales. But we are getting very high spend per head on wet sales, with more people staying for longer. Why didn't we realise this might work? In Europe, that's how most people drink. It could even be that we move away from the service-at-the-bar model on a long-term basis. It's amazing what you can learn and what innovations come through."
Meanwhile, Oakman is working on converting its outdoor areas to accommodate guests all year round by creating covered spaces, in anticipation of many customers preferring to be outside, where they feel safer, at least in the medium term. "That will be the single biggest thing we invest in. We have large outdoor spaces so it makes sense to be able to provide people with a heated and covered environment," adds King.
"We believe there will be a displacement of people from conurbations into different locations. People on average will be working away from an office and that will play into our hands. We can reduce the size and number of our vertical customers and displace our sitting-down customers into a bigger footprint."
There are undoubtedly still more challenges ahead but King, like Borg-Neal, is starting to feel far more bullish. "We think we have found what the reinvented British pub looks like and I think our customers are telling us they trust us more than anyone else. There are loads of opportunities out there for us, particularly when you see the collapse of the casual dining sector. Businesses like ours will take up a lot of that space."
We think we have found what the reinvented British pub looks like
Government support: Peter Borg-Neal and Dermot King's wish list for hospitality
- Root and branch reform of business rates.
- Reform of the Landlord and Tenant Act, outlawing upward-only rent reviews.
- Clarity on how supply chains will work post-Brexit.
- Changes to planning law to make it easier to expand pubs in a post-Covid world.
- More work to address the criticism that hospitality does not create high-net worth jobs.
- A permanent cut to VAT on food, accommodation and attractions.
At the same time that Oakman announced it was reopening all of its sites on 4 July, it also confirmed that Dermot King, recruited from Bourne Leisure in 2019 as chief operating officer, would become chief executive from 1 August. Borg-Neal has moved from the role of chief executive to executive chairman, and Mike Smith, who turns 60 this year, has stepped down as chair, but will remain on the board as a non-executive director.
"From the moment he joined us, Dermot and I considered ourselves business partners," says Borg-Neal. "You can't have two people making day-to-day decisions, so I have immediately held back from putting my hands on certain things."
Summing up the way they will work together, King adds: "It's an oversimplification of the strategy, but we are going to make Oakman Inns the best business in the premium pub sector and by that I mean it will be bigger and better. Peter's responsibility is to make it bigger, and mine is to make it better."
Retaining jobs and skills
As news of the lockdown emerged, King and Borg-Neal made it a priority to protect the jobs, as well as the health, of its 1,000-strong workforce.
"We didn't know how we were going to do it, but as leaders we wanted to say: ‘We are going to deal with this'. Then the furlough scheme came in and that really helped, but our approach still gave us a lot of kudos with our team," says Borg-Neal. The business also committed to fund employees' tronc payments, not covered by the furlough scheme.
The government has also since introduced a Job Retention Bonus, which makes a one-off payment of £1,000 to employers for every employee previously on furlough who remains continuously employed through to 31 January 2021. King and Borg-Neal regard it as welcome, but not essential. "We will probably look to share it in some way with our people. But it didn't affect our strategy," says Borg-Neal.
"We see it more as a reward for having the correct strategy and for working with the government in a positive way to get the economy open. We made full use of the furlough scheme, but the week before opening, we took pretty much 98% of our operational staff off it and we have cracked on."
Portrait photography: Hannah Hardeman
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