Monday, October 03, 2011

Urban 75 again:

The bloke who owns Grand Union was on the Dragons Den recently boasting about how he now makes loads of dosh without actually doing very much at all.

People like that don't like work really, they operate on laws of averages and by throwing lots of cash around at a business idea. It's a pubco model within a pubco model. You have X number of outlets generating Y amount of income together with costs overall averaging Z. As long as Y remains at A over Z remaining at B a healthy profit will out, no matter how many outlets you have and it all looks great from shareholders and the Board's short sighted point of view because the company will be valued according to averages and spread of outlets by a brewer wanting to get its product 'out there'. The fact that anything up to 20% of outlets run under such a model are more or less dead ducks in brackish water is irrelevant, the whole remains buoyant as long as some of them are pumping cash into the pond.

If you look at the performance of GU's estate in detail they're no great shakes as separate units but all together they work. Their Camberwell branch is flat and underperforming mainly because it's the wrong location for their market - this is why I have a hunch the Sun and Doves will go to them, I reckon GU would do a storm on Coldharbour Lane - almost as much as they do on Acre Lane in Brixton where I've heard they've done £90K some weeks. I ASSURE you £90K is a phenomena that pumps cash through their whole chain operation, making up for any lacklustre performance there is at any of their other outlets where locations have been chosen badly.

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