Feature: Turning a Profit, Chestnut Group

Hi Philip. Can you give us a brief overview of the Chestnut business?

Chestnut opened for business in 2013, following the acquisition of The Kings Head, my local pub, which became The Packhorse Inn in Moulton near Newmarket. We’ve since built up a collection of pubs with rooms and big house hotels across the East of England. The common factor is provenance. We are working towards 90% of the produce we serve being from the East of England.

Would you say running multiple sites is key to profitability? 

Economies of scale are certainly present in a bigger business, and while we make life tricky by having individual menus, different décor and multiple operating platforms – we focus on synergies that are out of sight of the guest. Finance and admin, HR and people development and centralised procurement provide a certain level of operational resilience.

In addition, we have vertically integrated other businesses into Chestnut to protect margins, including Peter Graham Wines, Connock, Barsham Brewery and most recently a food manufacturing business with a development kitchen. The broad portfolio of destination, community and hotel properties provides diversification to the overall performance, helping smooth revenue variance and providing more flexibility for our team.

However, we operate all the properties as independently as possible. They have their own identities, and each has a talent pool of its own. People are our most valuable asset and we don’t cut corners there, so our site labour costs are much the same as independent businesses.

How are you balancing the challenge of rising staff costs and the potential reduction of personnel?

The October 2024 Budget was a blow for the industry. The impact will have been felt harder by seasonal businesses (we have many), where particularly the summer seasons are staffed by students, who had previously not been caught by National Insurance as their wages for the period fell below the hurdle. Our primary reaction has been to look at additional revenue drivers that require less labour – rooms. The labour cost associated with room stays is 50% lower than that for our F&B business, hence we have allocated circa 70% of our CAPEX and acquisition capital to increasing our bedroom stock to help mitigate the increased costs.

The level of service we aspire to doesn’t allow for reduction in personnel. Not only does it hugely impact the guest experience, but it affects staff morale, so we have to prioritise having the right people on the team. It’s an ongoing challenge.

Chestnut's The Weeping Willow, Barrow

How are you balancing the challenge of rising food costs and the potential of passing that onto the customer?

Industry wide we have seen businesses look at sharing dishes, small plates and the creative use of different cuts of meat as a way of smoothing food price inflation to their guests. In addition, we are using our development kitchen to help refine recipes, achieve consistency and batch production to reduce costs. We hold ‘butcher’s block’ nights, where the team will butcher a whole animal and offer a first-come, first-served menu on the various cuts. 

Most importantly we need to ensure we provide an experience that is value. The price of a dish is only one of many components of value – hence we have outdoor theatres, book launches, talks, wine tastings etc across the portfolio to add to attentive engagement from our team to build those experiences.

What is the one piece of advice you would give an operator who is struggling to turn a profit?

I am a big fan of Will Guidara’s book ‘Unreasonable Hospitality’ and have given copies to all our general managers. His inspirational story centres around the impact of going beyond the expected level of service in our industry and the impact on guests and team. Reading the book will not add to the bottom line, but might provide a different lens on how to make things work better. 

You may also be interested in…