“It’s very difficult to compete with a nutter with a passion”

Tim Martin, founder and chairman

Tim Martin was a vociferous campaigner for Brexit last year.

In the weeks leading up to the EU referendum he travelled the length and breadth of the country, absorbing what his staff and customers had to say, meeting with local newspapers from Aberdeen to Swansea, and generally sharing his contempt for the economists, politicians and intellectuals that he claims have misunderstood the implications of the euro, the exchange rate mechanism and the repercussions of leaving the EU for decades.

Some 500,000 beer mats calling for the UK to exit the EU were distributed by Wetherspoon pubs, while reports in the media said Martin donated £200,000 to help the ‘Leave’ cause. We all know the ending, and we all know what has happened since.

In the hospitality industry specifically, operators have been grappling with the falling pound, rising food prices and the prospect of everything from furniture and fittings to kitchens becoming more expensive.

There is something called monomania when people just keep washing their hands. I keep opening pubs”

Stability will no doubt return in due course, even if nobody knows precisely when, but in the meantime is there anything about the last nine months that might make Martin change his mind about things?

“No, I don’t think there ever will because the key thing for our future and the future of our children — never mind the business — is democracy,” he answers without hesitation. “If you look around the world, the most prosperous and the freest countries are those with democracy, and the EU is becoming increasingly undemocratic — five unelected presidents, a court that isn’t subject to democratic control and a mock parliament where so-called MPs can’t even initiate legislation! You can see the damage it has already caused in southern Europe, where they tried an experimental currency that no government can work. What we need is for the French, the Germans and the others to be out of the EU and for it to become a sensible common market.”

Jousting with the establishment is something that Martin, who was speaking at the recent Pub 17 industry conference, is more than happy to do. When he’s not taking on the EU, he can usually be found protesting against the tax discrepancies between the pub sector and supermarkets.

“When I started in the trade, VAT was 8%. It is now 20%. Supermarkets don’t pay it and pubs do. The other one is business rates. About 16p or 17p a pint in a pub; about 2p in a supermarket and the disadvantage from that has increased. Supermarkets have taken 50% of beer trade and that is the real threat — we are not on a level tax playing field. If you go into a supermarket, you will see that the industry can’t possibly compete on price. Whereas in the past it was maybe one and a half times as expensive in a pub, now it is four or five times, so that’s a really big issue.”

Martin finds it strange that those running PubCos haven’t really fought for it — “it is a bit of a weird one isn’t it, you’d think that it would be what they were most campaigning for but broadly speaking they haven’t been” — and the tone of his voice hints at his disappointment in the industry for failing to flex its collective muscle.

All he wants is “equality” with supermarkets. “It is a very burdensome tax indeed and it should be shared,” he argues. “The government needs the amount of tax that it gets so it can’t just get rid of it, so what I would like it to do is share it a bit more with supermarkets. When I say share it, they pay more tax, we pay less! That’s fair isn’t it!”

JD Wetherspoon runs more than 950 pubs. Business rates will add an extra £7m to its cost base this year, its salary bill will be 4% higher and the Apprenticeship Levy will cost it £2m. Brexit doesn’t even compare in this respect, notes Martin. “There are some costs going up on food but it is minuscule compared to, I suppose you could say, regulation.” That said, the company isn’t using it as an excuse to close the purse strings. It intends to increase the level of capital investment in existing pubs from £34m last year to £60m this time around.

Wetherspoons has traditionally tapered down new openings when the property market has become over-heated, but it is earmarking 15 to 20 new launches in the current financial year, albeit that it has sold 21 sites over the past six months.

JDW tax commitments

Martin admits it is “difficult to say” where it currently is in the property cycle, but there is no doubt it has learned from some of the mistakes it has made in the past.

“We over expanded a bit,” he concedes. “We waited until the property market turned down, which it did quite viciously, and where we had some very good or excellent pubs we decided to open a second one close by. Well, that was an extremely big mistake which we have been trying to row back from.”

 

The JD Wetherspoon empire famously began in 1979 when Martin opened his first pub in Muswell Hill. He toiled for a couple of years and confesses that had he been offered a way out at the time he would have grabbed it with both hands. But success soon arrived and he relished the chance to expand.

Today he jokes that the company barred him from seeking out new sites years ago because if he had his way Wetherspoons would be opening up sites everywhere.

“There is something called monomania when people just keep washing their hands. I keep opening pubs! And it is an equally manic activity except the government gets a lot more tax from people who open pubs. I really do like pubs, I love to go out, hate to stay in, and luckily enough I have found a passion for the business. Some people like stamp collecting — whatever it is, it is very difficult to compete with a nutter who has got a massive passion if you haven’t!”

One thing his reconnaissance trips have taught him is that there is no direct formula between the size of a place and whether it can sustain a pub. The Pen Cob in Pwllheli, a small North Welsh town with a population of just 4,000, does “extraordinarily well”, according to Martin, whereas it has “overdone it” in much larger locations.

What I would like is for tax to be shared a bit more with supermarkets. When I say share it, they pay more tax, we pay less!”

He once heard an expression in the planning world that the success of a site boils down to the number of ‘nodes of attraction’. A small town opposite a railway station, a bus stop or a library would almost always fare better than somewhere twice the size without those facilities, he theorises.

Tim Martin, chairman

JDW’s accounts certainly paint a picture of a business that makes more good decisions than bad ones. Last year it reported record sales, profits and earnings, continuing a remarkable story of growth since its flotation on the London Stock Exchange in 1992.

Like-for-like sales crept up 3.5% to £1.59 billion for the 12 months to July 2016 as the company banked a £57m profit. Martin is just as proud of other less obvious achievements, such as the fact that the average pub manager stays with the business for 11 years. “That gives a tremendous competitive advantage,” he says. “Obviously people have to stay motivated, there is no guarantee that anything you do in the pub or restaurant business will be a success but it is definitely a help.”

Martin’s own longevity, meanwhile, is less predictable. He is 62 now and admits that succession planning is not something he’s given much attention to. He finds it impossible to say when it will be the right time to call it a day. “There is a famous investor called Warren Buffet and I agree with him that I am planning to retire five years after I am dead! I think we are built to work, so for me I will keep ploughing on.”

JD Wetherspoon’s kitchens ‘covering most bases now’

The chances of JD Wetherspoon striking out into a new area of F&B — as it famously did with coffee and breakfasts — remain slim as the company’s focus now is on nurturing its existing menus, its founder Tim Martin has told FEJ.
Mr Martin, who is chairman of the national pub chain and still owns 30% of the business after floating it in 1992, said the expansion of its offering in the past decade made milestone-defining forays into untapped areas unlikely.

“I think we are covering most bases now,” he explained. “The main thing is not really to try and move into new markets but to try and improve all the aspects of the menu and products that we already sell. We think that is much more important than trying to find a new area to go into. It is much less glamorous and much less newsworthy — but it is also much more difficult!”

Mr Martin — whose fortune has been estimated at £300m — revealed that JDW’s strategy is to alter the menu at its 900 pubs every six months, with the emphasis squarely on “small improvements” over wholesale change.

Although JDW made its name as a traditional wet-led pub chain, it has benefitted hugely from the evolution of the sector into a place for all-day meals and hot drinks.

JDW is now one of the largest sellers of coffee in the UK and Mr Martin described the exact moment when he realised the chain needed to get into that market.

BOX OUT 1 - Breakfast

“A few years ago I was wandering with one of our guys in Central London and we noticed a Starbucks completely full at 4 o’clock in the afternoon, and we thought, ‘bloody hell, there’s a lot more people there than the pub we’ve just been in’. So we started doing Cappuccinos, which is a very difficult thing to do well with 500 or 600 pubs — and I wouldn’t by any means say we perfected it but we realised that if they take the trade away to an institution other than a pub, nationally you are not going to survive in the long run. We don’t sell quite as many coffees as Starbucks but we sell a hell of a lot more than most coffee shop chains.”

History repeated itself a short while later when JDW expanded into breakfasts. The move was greeted with huge scepticism at the time but breakfast is now its number one selling meal.

“I am not saying everyone should do that — be bloody careful before you do because it is a big enterprise — but it is an example of shifting the business on,” he said.

Asked by FEJ if catering equipment price hikes since the start of the year would lead to a temporary downturn in JDW’s spend on new kitchens, Mr Martin replied: “I think it is something that has to be managed… but no we are not halting investment, we are continuing as normal.”

A day in the life of the chairman of JDW

Tim Martin’s days are often spent visiting as many of JD Wetherspoon’s pubs as he can, often getting up early to catch a train from his home in Devon to some far-flung part of the country in order to remain connected with what’s happening on the “frontline”.

He tries never to fall below 10 visits a week and abides by three simple rules, which consist of always saying hello and thanking staff; making notes of anything that is wrong rather than handing out “bollockings”; and encouraging ideas for improvement. He then returns to the office once a week to discuss what he’s picked up during his travels.

“I remember years ago they asked a Japanese car maker why he spent so much time in the factory. He said, ‘we don’t make cars in the office’. I think that’s probably the main thing. The hardest part of the job if you’re running a group of pubs or restaurants is to actually go out yourself not surrounded by an entourage,” he says.

Martin recently carried out visits the day after he returned from a week’s holiday even though it was a Sunday, while on Christmas Day he dropped into three pubs. “The first one was shut and the car park was dirty — I took a photograph of it and sent it round on Christmas Day, it really peeved all our people off!”

JD Wetherspoon timeline 1 JD Wetherspoon timeline 2

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