Business Profile: The Draft House

I’m waiting for Charlie McVeigh at the Northcote Road site of his three-strong London pub business, The Draft House. It’s 5pm and there’s a handful of drinkers at a table, but no more. It’s not surprising considering the horror stories you hear about being a publican, with dismal closure rates (38 a week) and debt-ridden pubcos off-loading sites.

However, the restaurateur-turned-publican is close to securing a fourth site for his beer-led pub company. He’s either the bravest man in the industry, or the craziest.

“They are not old men’s pubs or CAMRA (Campaign for Real Ale) pubs, but just cool and fun,” says McVeigh, “They hark back to a lot of the ideals of pubs of yore and focus on what a pub should be great at – beer. An international city such as London should have great beers from all around the world.”

McVeigh is not the first person to take this view; towns and cities across the country are littered with the empty shells of like-minded landlords’ dreams. Where his pubs differ is that he has taken his passion to the nth degree, tapping – as it were – into the renascent market for artisan beers, while sticking to areas where he knows it will work.

“The closure of pubs has nothing to do with being food- or beer-led; it’s the pricing differential of the supermarkets on liquor,” he says. “If you can buy a bottle of vodka or 24 cans of lager for £9 in a supermarket and you’re in a non-affluent area – not a poor area but a middle-class or working-class area – and it’s £2-plus for a pint, it’s a no-brainer.

“We only open where we know people can afford to buy our beer. If we fail in the areas in which we are trading, that’s our fault.”

The beer and food mix​

Having had previous success with London restaurants, including Bush Bar & Grill and Grand Union – different from the pub chain of the same name – and a current 15 per cent stakeholder in Rowley Leigh’s Bayswater restaurant Le Café Anglais, McVeigh is now transferring his knowledge of running food-led operations to the pub business.

Each chef, led by group head chef Blair Macann, is encouraged to work up seasonal dishes, so alongside a core menu of classics across all pubs – including fish & chips, hamburgers and sausages & mash – you’ll find ox tongue fritters with beet and horseradish and chicken with bacon and blue cheese dauphinoise.

The Draft House’s treatment of beer is equally notable. All three sites sell ‘beers that aspire to greatness’, with the Tower Bridge site serving more than 100 draught and bottled varieties.

Given the fact that drinks carry less GP than food, this positioning seems to fly in the face of current received wisdom on running a pub, yet its wet/dry split somewhat surprisingly mirrors that of many food-led pubs. “Most gastropubs trade 60 per cent booze. Although they sell food, people go there to drink,” says McVeigh.

“Beer in this country has become a commodity and the whole big brewery push is that all beer is around 5 per cent ABV and sold for £3-£4. It doesn’t conform to that narrow definition. We are trying to change people’s perceptions of beer pricing.”

Many of the draught beers break the £4.50 mark, with bottles ranging from £3.65 to an impressive £27.95 (Deus, 75cl), but they are often treated as an alternative to wine – each dish on the menu has a pairing suggestion. The higher price-bracket draught beers aren’t even sold in pint form, but rather in a third of a pint.

Clever location​

The affluent Northcote Road in Battersea is an obvious place to launch a premium beer-driven pub company, and as we talk it starts to fill up. But the sites The Draft House operates are far from dead certs. The Northcote was formerly a rather down-at-heel Pitcher & Piano at the far from prime end of Clapham Junction, and its relatively tight pitch of 1,200sq ft didn’t leave much space for manoeuvre. When McVeigh moved in it was taking £8,000 a week; now it’s taking £20,000.

The second site, The Draft House Westbridge, on the south side of Battersea bridge, is in an even less obvious position. McVeigh has owned the site since 2004 when he was running it as successful Italian pub/diner Matilda until the chef became ill – it was actually here that the seeds of the concept were sown.

“The restaurant had lost its way, but being stubborn I said ‘relaunch it as a straightforward gastropub instead’. So in 2007 we did and it became The Westbridge. The bar manager was obsessed with beers and kept adding more until we ended up with 16. It was really busy so I thought this was something we should do properly.”

Northcote opened in late 2009 with The Westbridge coming under the banner in early 2010 – Tower Bridge opened late last year – but the brand could have got off the ground sooner if McVeigh had got the first site he coveted, an empty 7,000sq ft A4 site in London’s Westfield shopping centre. “It was 2008 and Westfield was about to launch. It hadn’t sold this enormous site and the agent was getting a bit nervous. It was a modern building so we wanted a Ronseal name so people would know it was a pub. That’s where The Draft House name came from.”

Eventually he lost out to Geronimo Inns, which subsequently opened The Bull pub there. “In January 2009 it was looking like Westfield might not work and I couldn’t get anyone to invest in the project, which was £1m-plus. I lost the site, but kept the name,” he explains.

Given the three very pubby sites The Draft House occupies, the original decision to launch at Westfield jars with current strategy. Is he happy he didn’t get it in the end? “We’ve gone into classic pub buildings, but I’d like to think it can work in a shopping centre or high street.”

“We just missed out on a site in High Street Kensington, which would have been a tester. We’ve got another offer in at the moment in west London, which I have more hope for.”

Despite the notion that the property market is currently awash with nil-premium sites, McVeigh has yet to experience this. He has paid a premium of around £100,000 on all his sites, including the Westbridge back in 2004.

“If it’s an untied lease and there’s an existing pub fit-out the premium pays for that fit-out. At the Northcote we were able to use the bar, loos and cellar. There were quite a lot of savings there.”

The future​

Expansion is evidently on the cards and McVeigh has funds in place. His backers include Neville Abraham, founder of Groupe Chez Gerrard, and Mark Sainsbury of the Zetter Hotel and Moro, and the stated aim is to get 10 sites by 2014. “It could go quicker or slower, but the plan is, come 2014, to offer them an exit if they want it.”

This growth of around two new pubs a year is 'relatively slow', and requires further investment in the short term. After that the plan is to grow from cash-flow.

“We’re achieving bottom-line profit across all sites. If you’re building a brand it requires investment until it gets to a certain size and can then fund its own expansion.”

With the Northcote now packed, McVeigh seems to be onto a good thing. It’s still a slog, he insists. Takings at Tower Bridge, the largest of the three in size and turnover, are not as high as McVeigh had hoped.

“It’s growing, just slowly. Takings are £25,000 net a week; the aim was for nearer £30,000. But it’s heading in that direction. It’s better than starting big and gradually tailing off.”

Is it turning over enough, I ask, to which McVeigh snorts with derision into his pint. “It needs to take way less than that to make a profit. I’ve been in the business long enough to know you can’t just hang around and lose money. We’re quite keen on making money.”

“We haven’t yet shown what we can do. We’ve taken on sites that aren’t prime and we’ve made them work. Would that translate into making a prime site work? The answer is, when we find one, we’ll see.”