Back in 2003, Lee Cash and Hamish Stoddart reached a similar conclusion over a few beers on a Majorcan balcony. Former Le Petit Blanc manager Cash had opened The Rose & Crown in Warwick a year previously, with chartered accountant Stoddart coming into the business full-time a little later, having previously been Cash’s business mentor and minority partner. The Rose & Crown became the template for a group of progressive pubs with great food that would have a significant influence on the sector.
Cash and Stoddart are having breakfast in the snug of The Thatch, in Thame, Oxfordshire, a pub typical of the Peach estate in being located in a small but affluent market town. Recalling this pivotal moment in their group’s 10-year history, the duo josh with each other good-naturedly, occasionally finishing each other’s sentences. “Itwas pretty late in the evening,” recalls Cash. “We had two or three pubs in the estate and were trying to work out how to take the business forward without compromising standards. We realised that the presence of ownership is pretty much essential in a decent pub, and that’s how the idea of the Peach Partnership came about.”
“But a proper partnership, ”interjects Stoddart. “Not a 2 per cent or 3 per cent pat-on-the-head, but a significant stake in the business that gives the people that run our pubs a proper sense of ownership.”
In single-site operations key senior staff often hold (or are eventually given or allowed to buy) a chunk of equity, but in multi-site outfits the practice is virtually unheard of. Critically, the initiative enables Peach to side-step the big problem many multiple operators have with certain venues being run on a perfunctory basis by GMs that aren’t incentivised enough or know they’ll be moving on.
“By their very nature, the big hospitality organisations are constantly turning over management staff,” continues Stoddart. “That might be OK in restaurants but it just doesn’t work in pubs. A good pub needs a long-term presence that loves the area and is willing to get to know the customers".
Peach’s partners look after between two and four sites each, spread over a small patch. “Our partners should be able to walk into any one of their pubs and know the majority of the guests by name,” says Stoddart. Peach’s head office is just south of Banbury, Oxfordshire, and the current policy is that all the pubs need to be within two hours’ drive of that hub. The Peach estate spreads south and west from Leicester with notable concentrations within the affluent, white-collar hotspots surrounding Oxford, Milton Keynes and Leamington Spa.
The Richard Onslow, a relatively recent addition to the group, is an exception – it is south-west of London in Cranleigh, Surrey. Most of the venues are traditional pubs but The Almanack brand targets newer units.
As well as creating long-term relationships with guests, the partner is there to keep very tight controls on the day-to-day running of the business.By Cash and Stoddart’s own admission, it is becoming increasingly challenging to turn a decent profit in a pub in the current climate. The ever-increasing burden of tax and legislation requires someone at the helm with a real interest in the business to make a rather delicate equation work.
With 15 sites and counting, Peach now has six Peach Partners. In most cases, partners are recruited from within the business, and all need to stump up between £20,00 and £50,000 equity, a major commitment, but a relatively small injection of capital in terms of how much money it takes for Peach to open a pub. “We’re bringing the majority of the capital to the table, and in return we want total commitment for the next three to five years.There is some risk involved for them too – they need to make it work, but if they do they’ll get a significant chunk of the profits,” says Stoddart.
What makes a good partner boils down to what makes a good publican. “You have to be brilliant at running a community pub and brilliant at running a fresh food business too,” says Stoddart. “But you’ve also got to be prepared to listen to the others. There is a Peach formula. We’re creative but we can’t deviate too far from that.”
Soon to be a partner too is operations director Spencer Graydon, a comparatively recent addition to the senior team and former ops manager at national restaurant chain Ask Italian. His appointment signals a shift in attitude for the group, which is planning on opening three to four sites a year for the foreseeable future. “We needed someone with experience of running a much larger group,” says Stoddart. “Spencer is trying to simplify the way the wider business works, to increase the time the partners and GMs spend on the floor, and also increase operational profits.
"The appointment appears to have paid off, with Peach ending on a high last year with sales up 23 per cent, boosted by three openings including The White Horse in Harpenden, Hertfordshire – an under-performing pub last owned by Jean-Christophe Novelli.
If Peach completes its aim of three to four acquisitions this year, turnover is predicted to reach the £22m mark.Cash and Stoddart have their sights trained on Cheltenham, Bath, Cambridge and Oxford city centres, and a London opening is also in the offing thanks to improved rail links to and from the capital.
Peach is also looking to increase profitability by limiting its exposure to the beer tie. In the early days of the business, Peach’s estate was mainly made up of pubs tied to the big pubcos. The cost of entry was relatively low but each pub had to pay inflated prices for key alcoholic product lines, significantly reducing profitability.
“It suited us in the beginning because we were opening pubs on a shoestring, but now we’ve grown we’re targeting free-of-tie leases and even freeholds [which are never tied]. But buying bricks and mortar is expensive, it’s difficult to expand quickly doing it that way,” says Cash. “Since the recession some of our tied leases have been converted into freeholds. Pubcos are more open to conversations about buying the freehold.
”Aside from this, the Peach acquisition strategy remains much the same: pick up run-down and under-performing pubs in affluent locations at a relatively low price and spend a significantly larger amount on a sympathetic refit. The cost of the transformation costs an average of £400,000, which typically eclipses the acquisition costs.
Very good mid-market food becomes a prominent feature but Cash and Stoddart don’t like Peach to be thought of as a food-led company.“We aren’t restaurant operators,” says Cash. “Right from the off we've run pubs and we're 50/50 at most sites between wet and dry sales. Granted a lot of wet spend will come from people that are eating, but the bar is about 25 per cent of business."
The menu is focused on tweaked versions of pub classics (think fishcakes, beef stew, Caesar salad,sausage and mash) alongside more adventurous dishes. Last month, for example, The Thatch at Thame was offering pan-fried pigeon breast, crushed celeriac, Port and redcurrant glaze; and a smoked haddock and potato terrine, curry and vanilla dressing with Bucksum leaves.
Elements of the menus are standardised but each pub has some autonomy to develop its own dishes. The starter and mains are backed up by a selection of deli boards containing tapas-styleportions of items including terrines, British cheeses and mini-pies, making for a flexible approach. Ingredients are of high-quality,with dry-aged beef, pigs from Jimmy Butler’s award-winning farm and sustainable seafood.
Most of the pubs are all-day businesses. During our morning interview the coffee machine is working overtime, with at least 30 people coming in for hot drinks and bacon sandwiches. “Pubs don’t traditionally do coffee but the trade needs to find other revenue streams. When we started out we’d get tables of boys having boozy lunches on Thursdays and Fridays. That’s gone now – so it means you need new ideas,” says Cash.
Peach isn’t short of these: from sustainability initiatives and butchery courses to simple offer tweaks and updates such as super-food salads and picnic hampers. The pair’s principal challenge is to grow the estate steadily without forfeiting the culture of the business.
“We’re not going to expand for the sake of it, especially if it means letting pubs slide in quality or profitability,” says Stoddart. “That’s the good thing about not having private-equity involvement and the partnership model, there’s nobody in the business that upsets our apple cart.”