Pub game changes, behind the bar

As the epicentre of Western Australia’s hospitality sector, the emergence of a host of new independent players in Perth has reshuffled the order of the local business in recent years.

Three Pound Group, Sneakers & Jeans and Nokturnl may not collectively own as many pubs and bars as any one of the three national players operating in WA – Australian Venue Co, ALH Group and Signature – but their impact is noticeable and rising.

Nokturnl’s Ross Drennan and Drew Flanagan had never even worked in a bar before they launched a hospitality event business that morphed into a growing pub chain with the opening of the Old Synagogue in Fremantle, followed more recently by the equally big outlet The Beaufort in Highgate.

Their plans for Yagan Square and South Perth are also ambitious.

Sneakers & Jeans, run by Andy Freeman, had an assortment of small outlets before its joint venture with South Australian brewer Pirate Life effectively launched three venues in one two years ago.

Opening Australia’s biggest pub in 2018 really put Tim McLernon’s Three Pound Group on the map, with the sheer scale of The Camfield, which sits in the shadow of Optus Stadium on the Burswood Peninsula and feeds off Perth’s biggest sports venue as much as it does its Swan River views as well as its proximity to the CBD and the casino complex.

The business started in 2013 when Mr McLernon partnered with former footballers Tony Buhagiar, a hotelier in his own right, and Tim Gepp to launch The Stables in Perth’s CBD.

They joined forces with the Brockwell family and soon had a collection of assets, each with different percentages of ownership.

The syndicate model is tried and tested, with groups of like-minded publicans and their silent partners from other fields often inviting a manager or some other up and comer into new ventures to expand their collection, pool their experience and get some economies of scale.

It is not always an easy club to break into.

“For me it took 15 years for someone to take a punt on me,” Mr McLernon said, regarding the founding of his first bar.

More recently, the syndicate formalised its structure as Three Pound Group Holdings, with all the assets housed in the one company with a board that consists of Mr McLernon and Mr Buhagiar, with Perth nightlife legend Chris Brockwell and his son Saul.

These days he heads a group that has 400 staff and revenue of about $50 million a year.

More than 15 people are based at the business’s back office running key functions such as human resources, finance and marketing.

Mr McLernon said his goal was to drive that turnover to $150 million a year.

The group is in the process of adding two new venues, in Baldivis and Rockingham, which will continue its expansion beyond Perth’s inner city that started with the opening of Good Company Bar in Karrinyup Shopping Centre two years ago.

The amalgamation of five pubs into one company has provided the opportunity for some long-term staff to be given equity and the company is also looking at other benefits to reward staff to keep them in the stable, with the upscaled operation offering more career options and reasons to stay.

“Hospitality is driven by having good managers,” Mr McLernon said.

“If we don’t have that I would be working 150 hours a week.”

Notwithstanding Three Pound Group’s corporatisation, a mid-tier Perth operation remains a hands-on business to a certain degree for those at the helm, Mr McLernon and Saul Brockwell.

“I obviously still do nine-to-five stuff and can’t be everywhere at peak times,” Mr McLernon said.

“I am certainly there at the riskiest times, which are the most important.

“I have done 25 Melbourne Cups in a row.

“It can be a quite daunting responsibility to be the go-to person if something goes wrong.”

To some degree that level of onus on the manager is a reason Bree Maddox sold her high-profile operation The Court Hotel last month to Australian Venue Co for an undisclosed sum.

Bree Maddox has sold The Court Hotel to Australian Venue Co. Photo: Michael O’Brien

While The Court is big enough in its own right to offer some economies of scale, for Ms Maddox the ever-increasing rise in regulations brought risk she was unable to share with others.

“The whole reason there are so few sole operators is because of the investment required to purchase a venue, not just financially but in time and knowledge,” she said.

“It has got more difficult over time; regulation has increased so much.”

Ms Maddox’s responsibilities across the spectrum are such that any business of The Court’s scale outside the hospitality sector would have another layer of management.

“As much as you have people in your business that have those roles, you are still head of those departments,” she said.

An active player in the politics of the sector, Ms Maddox also cites the long list of regulatory changes that have taken place over almost 20 years running her business, from smoking bans to the implementation of optic pourers to control serving measures, each of which brought risk of penalty to the licensee.

Recent industrial manslaughter laws, which threaten company directors with jail if their negligence leads to the death of an employee, are just the latest, and possibly the biggest, risk to publicans whose businesses involve big crowds, potentially intoxicated people and lots of unusual night-time activity.

“Gone are the days of The Court when you would see a drag queen up a ladder changing a lightbulb in stilettoes,” Ms Maddox said.

“A lot of the older guys I speak to are just tired, they have had enough.”

As Australian Hotels Association WA chief executive for the past 25 years, Bradley Woods has certainly borne witness to changes across hospitality in WA that few outside a handful of long-term owners would have experienced.

Mr Woods agrees there has been change but believes it is more in what the public expects of pubs and bars rather than the composition of the industry.

He acknowledges the emergence of small bars around 15 years ago as well as the rise of big national players such as Signature, which bought the local Varsity bar chain to boast 15 WA venues; Australian Venue Co, which will have 21 outlets following the acquisition of The Court; and ALH Group, which is the state’s biggest at 28, including many pubs acquired in 2011 when the Compass Hotel Group collapsed.

However, Mr Woods said none of those changes compared with an industry shake-up that occurred about 40 years ago when entrepreneur and corporate raider Alan Bond bought The Swan Brewery and sold off about 150 pubs that it owned around the state; ending its near monopoly status when it came to beer in WA.

Even during that time, he said, there were some very successful independent publicans who had big sites in the city with multiple bars that operated similarly to the way modern multi-bar venues do today, albeit often with accommodation attached.

“The models are not too different,” Mr Woods said.

“This is just a point in time.

“There are certainly synchronicities and commonalities with what has happened historically.”

However, he believes the industry has been more responsive to consumer needs, in part because WA publicans cannot lean on gaming to supplement their income like their eastern states peers and instead must do better in terms of food and beverage service.

There is an obvious connection with the demise of Swan.

By releasing its hold on the hotel market, which led to competition in brewing, Perth enjoyed the emergence of the nation’s first significant craft brewer, Matilda Bay Brewing, which in turn led the revival of premium pubs such as the Sail & Anchor, The Brass Monkey and The Queens, a group of outlets that ultimately formed the nucleus of ALH.

“The industry has become clever and more sophisticated at recognising consumers have different desires and needs, and a way to make those venues sing is to offer more varied experiences,” Mr Woods said.

“WA has led this space for a long time because we don’t have gaming.

“Venues need to be more in touch with what consumers want and more entrepreneurial in offering something unique.”

The composition of the mid-tier ranks of WA’s pub sector tends to support this, with high-quality venues sitting at the heart of most groups.

For instance, the biggest of the locally owned players, Prendiville Group, has its roots in accommodation, which it marries with some of the state’s most unique hotels as well as the upmarket Sandalford Wines.

Its latest venture is the significant tourist attraction Samphire Resort, which it has bolted on to the Rottnest Hotel, an iconic pub that was revived from long-running torpor as the former Quokka Arms.

Another player whose scale is lost in its multi-bar focus is a strong alliance of pubs largely referred to as FJM by outsiders.

While the Adrian Fini-led FJM Property does control key venues such as the sizeable, upmarket and successful State Buildings, it is more of an umbrella group, as most of the venues have different ownership structures.

The FJM grouping has its roots as far back as 1991 when key members acquired the Claremont Hotel.

Two of those original partners, David Mack and Barry Jones, are directors of the broader FJM Properties business, although Mr Fini was not an original investor in the Claremont, which is now owned by Australian Venue Co.

Another original partner, St John Hammond, holds direct stakes in some of the group’s venues and broadly oversees the hospitality operations.

There is also a connection between that syndicate and the pursuits of restaurateur Nic Trimboli.

He and Howard Cearns were involved in Matilda Bay’s success and later, with Mr Fini, started Little Creatures brewery, which they sold for $380 million in 2012 collecting at least $100 million between them.

The three of them are directors of Cicero Management, which owns, among other things, the Alex Hotel in Northbridge, home of Shadow Wine Bar.

Mr Hammond said the syndicate structure was less common these days but the publican grouping in the FJM orbit had been durable over more than 30 years, even with the death of one founder, Murray Kimber.

The group also has a slightly different model than many of the emerging groups, preferring to own their own freehold properties with an eye to development beyond the pubs themselves.

“I think that is testament to the business gone by and the personalities involved,” Mr Hammond said of the lasting nature of the syndicate.

“It is about trust.”