Pub expansion – going for growth
You're running a successful pub, and now it's time to expand. You could buy a bigger property, but adding rooms seems like the better option. Karl Cushing investigates.
When your plans for your business have outgrown your premises you're left facing a simple question: should I stay or should I go? Plump for the former route, opting to modify and extend your business premises by adding rooms, rather than selling up and buying a larger property, and you'll quickly find yourself surrounded by hard-hatted contractors and hard-headed planning officers.
WHY EXTEND?
There are many reasons for adding rooms to a pub. Maybe you want to build up the lodging side of the business or add a new restaurant to grow food and wine sales. Or maybe you just want to drive revenue and add value to the property in anticipation of a future sale. Whatever your reasons, choosing to add rooms to your pub is not a decision that should be taken lightly.
"Many fall into the trap of thinking that just by adding another revenue stream the business will thrive and be more resilient in the downturn," says Lesley Watmough, a divisional director at chartered surveyor Fleurets.
"My advice would be that, before investing in your business, you must understand your market, the area and the competition. Consider the trade you are likely to attract and then look at what you would need to do to capture a share of that."
DO YOUR HOMEWORK
All too often, though, people skimp on the planning and preparation and rush into a project, says Paul Tallentyre, head of the pub teams at licensed property agent Davis Coffer Lyons.
"There are a lot of cases where people think ‘we have a lot of space, so let's extend' but then nothing really happens to the business afterwards. If you're not careful, suddenly you've spent a hundred or two hundred grand for no return. That can tip you over the edge - especially in this market," Tallentyre adds.
"What you don't want to do is to be too greedy and add too much space on at once."
Tallentyre also recommends checking out the competition and looking at what other successful pub operators have done and considering why it worked so well.
"You should also make enquiries as to whether other pubs locally are in the process of doing the same as you," advises Watmough.
ASSEMBLE YOUR TEAM
When you have a rough idea of what you want, it really will pay dividends to employ the services of professionals such as architects, licensed property agents and chartered surveyors at the earliest opportunity. Not only will they prepare your planning application and advise on what is, and what is not, permissible given your business and its location, they will come up with ideas you would probably never think of yourself. The chances are they will repay your investment many times over.
Some companies such as Humberts Leisure have both a planning team and a pubs team (www.humberts-leisure.com).
If you do not own the freehold, consult your landlord and check your lease to find out what, if any, options you have. Whatever you do, don't be tempted into doing works without either the permission of the landlord or gaining planning permission. In the latter case, if the local planning office find out they can get you to reinstate the property to its previous state, a frustrating and costly exercise. While you can apply for retrospective planning permission this should not be relied upon.
CONSTRUCT A BUSINESS CASE
When adding rooms you should construct a business case to make sure the project is viable. "It's always good to sit down and prepare a business plan first - it will give you more vision, as well as an idea of what you will spend," Tallentyre says, adding, "You really have got to look at it as a separate business you are adding."
Consider the potential impact it will have on the existing business. For example, if the works cause your existing business to fall off, the loss of earnings is going to add some serious costs to the project. Also, consult your customers to get their thoughts. Adding some swanky new letting rooms and an extended restaurant won't help your business much if a chunk of your regulars forsake your joint for one down the road.
To find out if the works will add value to your business, speak to licensed property agents who know the local market. If your preliminary calculations show there will be a return on investment this will not just put your mind at ease, it will improve your chances of raising finance.
TIMING
Timing is key when it comes to a build project like this. If you are adding lodging rooms, for example, you will want to have them "live" for your busy periods such as summer. Bear in mind that the planning application process can take a lot of time - especially if you have to tweak your plans and resubmit them on one or more occasions. Plus, if you need to apply to change the use of a building you will probably need to have your application approved before you can submit your planning permission application. The cost and duration of building projects also have a habit of spiralling out of control, so be realistic in your timeframes and have a contingency for unforeseen costs.
PLANNING LAW
Fortunately, having an in-depth knowledge of planning law is not essential - that's what people such as chartered surveyors are for - but getting a grasp of the basics will pay dividends. A good place to start is the Government's planning portal (www.planningportal.gov.uk).
Getting planning permission will be harder if your property is a listed building, or in a conservation area. Another big factor is location. Planning law in England differs from that in Wales, Scotland and Northern Ireland and locally your chances of getting planning permission will vary because of factors such as the size of the local population, the number of similar businesses nearby and the attitude of the local planning office.
In general, it's always worth contacting your local planning office early on in the proceedings to get a rough idea of how they operate. If you are really uncertain about your chances of getting approved you can apply for "outline" planning permission. Although this isn't equivalent to gaining full planning permission, which you will still need to apply for, it is a good indicator of your prospects.
If your planning application is granted, you have five years within which to carry out the works before the planning permission lapses and you have to reapply. If it is refused, you can always appeal or change the application. Look at the reasons the local committee gave for refusing your plans.
NOW IS THE TIME
While it may seem foolhardy to attempt such a major project in the current economic climate, if you do your research well you can ultimately help to ensure the longevity of your business. Conversely, put it off and you risk missing the boat.
"Licensees looking to add, or make more of, their letting rooms, for example, may have timed it just right," Watmough says. "It is worth remembering that those making full use of letting rooms will also enjoy the associated additional revenue.
"I would imagine that a good traditional pub with letting rooms offering an English breakfast will appeal to many tourists and visitors this year, and for years to come."
Only extend your premises if you've got good business reasons for doing so
THINK OUTSIDE THE BOX
When Ady Smith and his partner, Karen, owners of the Dove Street Inn in Ipswich, Suffolk, decided to expand their business last year, they came up with some ambitious plans.
The couple, who bought the freehold pub in late 1993, wanted to add space to the pub, albeit for drinkers, rather than diners, but they also wanted to add two letting rooms, a retail outlet and a microbrewery to produce their own ales. "We felt it was the right time to move the business forward," Smith says.
To expand the drinking area, the couple employed the services of an architect who drew up some plans for a conservatory and lodged the planning application. However, to keep costs down, Smith project-managed the build and the couple did much of the work themselves, doing quieter stuff after hours and noisier jobs before opening time. "We also tried to keep it local and employ our regulars, where possible," he says.
All in all, Smith reckons they saved £15,000-£20,000 this way, making it "a worthwhile headache". It also took just four months as opposed to the six he was quoted by a local contractor. And remarkably, he says, despite the disruption, business increased slightly during the construction period. "I probably aged about 10 years though," he laughs.
To house the rest of the project they had considered building an extension on to a car parking area but when a building over the road went up for sale at an auction they plumped for that. "We didn't even understand the ins and outs of the auction process - we didn't even have any finance in place!" admits Smith. "But there's a first time for everything!"
Unfortunately, their existing lender proved unwilling to help finance the purchase. In response, they turned to commercial mortgage broker Christie Finance (www.christiecorporate.com) who helped them refinance, funding the purchase in time and enabling them to pay off existing borrowings. The conservatory is now up and running - the couple are just waiting to get it signed off by the local building inspector. As soon as that happens they will start work on the separate building. For this project, partly to keep costs down, they even submitted their own change of use and planning applications - "a minefield", Smith admits.
"But now's the time to do this kind of thing if you can get the funding," he says, adding, "It is a gamble, but then life is a gamble."
Source: www.dovestreetinn.co.uk
