Leisure specialists with an Inn-side view of the sector

Financial Times - March 2008

Industry advisers find buying into a pub changes their outlook, writes Glynn Davis

While Jim Fallon was working at HSBC as a banker specialising in the leisure industry he was offered the chance to become part-owner of a new bar, Lowlander, specialising in Belgian beers. He took the plunge, rationalising the risky investment by regarding it as a vocational MBA to help his banking career.

Once the first outlet opened on Drury Lane in London’s Convent Garden in 2001, Mr Fallon found the bar gave him an immediate empathy with his existing and prospective clients. “I understand what they go through. I have a pub and I have to deal with things like margins, which most bankers never come across in a million years. I live and breathe this, “ he says.

Mr Fallon is one of a number of leisure industry advisers and specialists who believe that taking a stake in a pub gets them as close as possible to the customer and gives them an inside track on trends in the sector.

Others include James Wheatcroft, a former restaurants and leisure analyst at Investec who is about to join financial services group Evolution, and also co-owns The Fulham Mitre and Blue Anchor in the capital; and Andrew Lawton Smith, partner in the Birmingham office at law firm Wragge & Co, who is part-owner of the Clear Pub Company.

Jonathan Hick, co-founder and leisure industry specialist at recruitment company Directorbank, became a co-owner at the Spencer Arms in Cawthorne, South Yorkshire, in 2004. He agrees that being close to the coalface has benefits for the day job.

“We carry over 150 senior directors from the leisure industry [on our books] and my knowledge as a small publican helps me converse with them about issues in their estate,� he says.

These range from the impact of the smoking ban – and creative ways round it – to making the most of staff on the minimum wage or using great food to persuade people to drive out to rural destinations. “Being close to the shop floor gives you a different perspective, “ he adds.

While such inside knowledge is a boon to Mr Fallon and Mr Hick in their advisory roles, they also bring much to the pub businesses they part-own. Mr Hick, for example, used his experience of recruitment to solve a staffing problem at the Spencer Arms: he brought in hard-working Australians.

“I knew we could access a wider pool of talent than just advertising in the Barnsley Chronicle. People are not paid to do more than the minimum in pubs but the Australians brought a different attitude and provided a good example to others because they just like working,� he says.

Mr Lawton Smith’s merger and acquisitions skills in the leisure industry were crucial to the acquisition of 25 leasehold sites from Punch Taverns last July that created the Clear Pub Company, which he now co-owns.

“I helped with negotiations with the seller and put the finance team together, and also worked very closely with another law firm where I became the client as Wragge & Co did not act. I managed the whole exercise,� he says.

Mr Fallon’s investment in Lowlander had a more far-reaching impact on his day job than he had anticipated: soon after the bar opened he left HSBC to co-found McQueen, a company providing financial advice to the leisure industry.

“Although McQueen is a very different business the start-up stuff was just the same. So whereas at Lowlander I’d been in the background, I drove it at McQueen,� he recalls.

Contacts from the industry have also proved useful in building up his pub business. When he was looking for a second site, says Mr Fallon, “it was amazing how many people contacted us. It was a property agent I knew that rang me up about Creechurch Lane and we moved quickly and secured the site.�

While taking clients and senior pub industry figures for lunch at Lowlander, Mr Fallon has also sought their advice on the business. He took some of their suggestions on board, such as reducing the size of the beer list.

However, having high-level contacts can sometimes work against you, as Mr Fallon found to his cost. He recalls one chief executive who was so impressed with Lowlander’s bespoke tables – much thinner than the average, so they took up less space and made it easier for people to talk across them – that he went out straightaway and copied the idea.