We’ll let you in on a secret - pubs are making a comeback.
Just over the recent holiday season, pubs saw a sharp increase in festive sales, with reports of sales growth of 12.3 per cent over a two week period.
Statistics from Office of National Statistics (ONS) also shows a glimmering outlook for pubs, with employment being reported as on the rise in the sector, with a 6 per cent increase since 2008 and a more significant increase in rural areas, being a 17 per cent improvement. This may be due to pubs expanding into serving food and a need for kitchen and front of house staff.
The last decade has been a difficult time for pubs, with many closing shop due to dramatic legislative changes, unaffordable rents, cheaper supermarket alternatives and a decrease in consumer spending.
Despite the decline in the number of pubs, ONS reported a stable turnover for the industry.
So for those pubs that have survived this difficult period and continue to flourish will prove to be resilient assets with potential for significant growth, according to Mark Edwards, head of restaurant and bars sector as accountancy firm, BDO.
Edwards explains: “There are a number of exciting, fast-growing managed pub and bar groups that are likely to be on the radar of investors. We can expect a wave of consolidation in the next 12-18 months.”
There are a number of reasons for this sudden comeback, in particular, the rise of local communities. There is an attraction in investing and creating value locally, and being the go to ‘hangout spot’. Consumers are also looking for a unique experience, with millennials wanting to find that 'Instragram shot’.
Premiumisation is another reason for the attraction towards investing in a pub. Availability of craft beers, craft spirits and independent coffee brands opens up higher margins and growth opportunities. And if you can convert certain spaces as accommodation rooms, you can also take advantage of the hospitality boom.
So, how do you buy into this opportunity?
Pubs are available on a freehold or tenancy basis. If you are looking to invest in the property market, you may consider the freehold option. This means you will take both the property and the business. Definitely not for the faint hearted, you’ll be the owner of an independent pub.
If that’s a bit too much for you, you can become a tenant for a large pub chain. This way, you’ll be able to run your own pub but have the support of the bigger company.
In terms of financing, there are a few alternatives to a straight out cash purchase. In fact, in the last five years, there has been a trend towards using crowdfunding to raise finance to further growth in pubs.
And if you’re not ready to take the plunge completely, you can look at investing in a pub through shares. This will give you part ownership of the pub and gives you the opportunity to see whether this is an investment opportunity you want to take more seriously.
If you're looking for a new business venture, this is the time - invest in a pub.