<p><strong>From:</strong> Frank Dowling &lt;<a href="mailto:frank@farrockaway.co.uk">frank@farrockaway.co.uk</a>&gt;<br />
<strong>Sent:</strong> 06 September 2020 17:26<br />
<strong>To:</strong> Stephen Phillips &lt;<a href="mailto:stephen.phillips@templebright.com">stephen.phillips@templebright.com</a>&gt;; Stephen Nurse &lt;<a href="mailto:nurse_stephen@hotmail.com">nurse_stephen@hotmail.com</a>&gt;<br />
<strong>Subject:</strong> FW: Proposed Agreement</p>

<p>&nbsp;</p>

<p>Dear Team (Investor Panel),</p>

<p>&nbsp;</p>

<p>I needed to take the right time to deliver the below proposal, of particular importance was the recruitment and interviewing of some</p>

<p>very special talent. I had a second interview with one of the target candidates this morning.</p>

<p>&nbsp;</p>

<p>From the moment Stephen approached me via his partner I became interested in assisting where I could.</p>

<p>Over the last 6 weeks and undertaking much needed in depth research I would like to present my proposal to you.</p>

<p>This is based upon the concept of little axe big tree.</p>

<p>&nbsp;</p>

<p>I firmly believe with an owner/operator mentality these pubs can be turned into pretty nifty profit earners.</p>

<p>I am confident given the right time and professional approach these pubs will be able to exit their EIS structures and provide a positive return to the investors.</p>

<p>&nbsp;</p>

<p>The Trafalgar Tavern is not dissimilar to the 6 pubs that the investors have stakes in.</p>

<p>It has recently received a multi million pound investment and is in a massive upward trajectory.</p>

<p>It is a local neighborhood pub and it behaves like one, it sells cold beer, good wine, decent cocktails and ok food.</p>

<p>&nbsp;</p>

<p>I have addressed the ok food part with investment in a new &pound;500k kitchen fitout and introducing a phenomenal young and gifted chef in Daniel Doherty.</p>

<p>I am investing in Dan after many meetings and I believe everyone deserves a second chance in life.</p>

<p>I am testeament to this concept.</p>

<p>Going forward the Trafalgar Tavern will have excellent food, so will your 6 pubs.</p>

<p>&nbsp;</p>

<p>The Crown, the Three Cranes, the Hero, the KPH, the Harcourt and the Coach are great pubs, they need to act like the Trafalgar Tavern, they need to focus on their neighborhood, they need to keep it simple and sell cold beer and great food.</p>

<p>They need to become friendly and welcoming.</p>

<p>Besides the upper parts of the Harcourt they all have been heavily invested in and should be in good shape to start up again&hellip;&hellip;Quickly.</p>

<p>&nbsp;</p>

<p>Mother Ship (Home Office)</p>

<p>I propose in order to run the 6 pubs properly we would need the following talent, I must add that C-19 has thrown some extremely talented people in our laps especially in skill sets of sales and marketing:</p>

<p>&nbsp;</p>

<ol>
	<li>Team leader: Frank Dowling&nbsp; in each site weekly, leading the team to deliver the proper results</li>
	<li>Operations Manager: Lorraine Harrow, has been my operations manager over the last ten years, and started with me in 2003 as a glass collector, she will be in</li>
</ol>

<p>each site every week leading the professional operations of the onsite teams</p>

<ol>
	<li>Executive Chef: Dan Doherty, leading the chef teams, menu development and deployment, maniacal food cost control</li>
	<li>Payroll and HR manager: Kate Rogers</li>
	<li>Book-keeping and Cost Control: Abbas Ali, AA will also require a data inputer for 3 days pw</li>
	<li>Social Media Team (websites, Instagram, Facebook, all visual identities: Hannah Sherwood and Jack Brent</li>
	<li>Sales Team, driving events and generating revenue outside of normal pub trade revenue:&nbsp;Amy Harte and Charlotte Chittleburgh</li>
</ol>

<p>&nbsp;</p>

<p>I have attached the CVS&rsquo;s for the last 4 as they are new to me but all four of their backgrounds are outstanding and fit in perfectly to the 6 pubs demographic</p>

<p>&nbsp;</p>

<p>Proposed costs for the Team</p>

<ol>
	<li>FD: &pound;0</li>
	<li>LH: &nbsp;&pound;75,000</li>
	<li>DD: &pound;75,000</li>
	<li>KR: &pound;10,000</li>
	<li>AA: &pound;40,000</li>
	<li>HR and JB: &pound;75,000</li>
	<li>AH and CC: &pound;75,000, please note that each of these women would receive</li>
</ol>

<p>A bonus of 2% of all net sales, which would come out of the individual sites profit and loss</p>

<p>So if they achieved sales of &pound;10k in a month for sales, an additional &pound;200 would be paid to them</p>

<p>&nbsp;</p>

<p>It would be our goal to drive &pound;1m of additional sales into the venues outside of its normal day to day pub business.</p>

<p>&nbsp;</p>

<p>&nbsp;</p>

<p>In summary the Mothership&rsquo;s costs would be &pound;350,000 per annum to be billed each month in advance divided between each Operating Co.</p>

<p>This works out to roughly &pound;5,000 per site per month.</p>

<p>&nbsp;</p>

<p>If you think this is too steep we can cut it down accordingly but I believe this team gives the venues the best chance to succeed and eventually provide a high level of profit.</p>

<p>The Mothership will have an agreement with each Property Co. and Operating Co.</p>

<p>I believe this represents a &pound;800,000 swing on the current arrangements</p>

<p>&nbsp;</p>

<p>&nbsp;</p>

<p>I have decided to not take any remuneration personally for the following reasons:</p>

<ol>
	<li>I have enough of profit from my existing business</li>
	<li>I am focusing on a long term relationship and focusing on driving value and the option to transact will be my long term reward</li>
</ol>

<p>&nbsp;</p>

<p>&nbsp;</p>

<p>Property Co.&rsquo;s</p>

<p>I propose I should become one of the directors of each property company as this will allow me to take the lead on debt negotiations with regards to the existing property company debt.</p>

<p>In addition each property company should budget &pound;10,000 p.a. for statutory account filings. This will be accounted for in the operating companies affairs.</p>

<p>I propose that Accounts Unlocked perform this duty. <a href="http://www.accountsunlocked.co.uk/i">http://www.accountsunlocked.co.uk/i</a></p>

<p>Depending on the appetite of the Advisory panel I would lead the investigation and attack on JM (obviously depends on how he behaves on exit)</p>

<p>&nbsp;</p>

<p>Operating Co&rsquo;s</p>

<p>I propose that 6 new operating Co&rsquo;s are set up to trade each venue on behalf of the Property Co.&rsquo;s via a management agreement</p>

<p>The operating co&rsquo;s will be owned by FD and will allow all future trading liabilities to be insulated against the Property Co&rsquo;s assets</p>

<p>The following would be the parameters that we would like to adhere to:</p>

<ol>
	<li>Staffing, fixed and variable would be in the 30% region (it is unknown how the hotel rooms are managed ie. Night managers etc.)</li>
	<li>Gross profits on food 70%</li>
	<li>Gross profits on drinks 70%</li>
</ol>

<p>&nbsp;</p>

<p>I think the following target revenues for 2021 could be achieved with the C-19 hangover (in general it is predicted&nbsp;that there will be a 35-50% drop on pre c-19 revenues)</p>

<ol>
	<li>Coach &pound;1.25m</li>
	<li>Crown: &pound;1m</li>
	<li>Hero: &pound;1m</li>
	<li>KPH: &pound;700k</li>
	<li>Three Cranes: &pound;500k</li>
	<li>Harcourt: &pound;400k</li>
</ol>

<p>Certainly our goal would be to break even for the year 2021</p>

<p>&nbsp;</p>

<p>It would be anticipated that the 2022 revenue should get back to 2019&rsquo;s revenue:</p>

<p>&nbsp;</p>

<ol>
	<li>Coach &pound;1.6m</li>
	<li>Crown: &pound;1.25</li>
	<li>Hero: &pound;1.25m</li>
	<li>KPH: &pound;900k</li>
	<li>Three Cranes: &pound;750k</li>
	<li>Harcourt: &pound;750k</li>
</ol>

<p>We believe we could deliver a profit based upon these figures</p>

<p>&nbsp;</p>

<p>Working Capital:</p>

<p>Each operating company should have 1 month (on the 2019 figures) of working capital in order to properly operate and pay its liabilities in a timely manner from the start of trading.</p>

<p>Cash on delivery of most purchases should be contemplated.</p>

<p>&nbsp;</p>

<p>Insurance:</p>

<p>It may be required for all insurance premiums to be paid up front from the start of trading for the new year, I am pricing up the insurance premiums as we speak.</p>

<p>&nbsp;</p>

<p>Reporting:</p>

<p>Within 3 months we aim to provide a weekly snapshot to the Investor Panel in order to track the weekly progress.</p>

<p>I would propose that we meet with the Investor Panel quarterly to review all of the affairs of the companies, these snapshots will be the basis for the management accounts as well.</p>

<p>&nbsp;</p>

<p>Strategic Decisions:</p>

<p>As part of the quarterly meetings we would propose to present a food tasting for our advising partners to feedback to us, we will also share any other strategic thinking at these meetings.</p>

<p>&nbsp;</p>

<p>Profit Share:</p>

<p>We would like to agree a profit share arrangement between the Prop Co&rsquo;s and Operating Co&rsquo;s, the remaining profits will be delivered to Prop Co. at an approved time.</p>

<p>&nbsp;</p>

<p>Term:</p>

<p>We would like a three year term with an option to extend for another 3 years.</p>

<p>&nbsp;</p>

<p>Agreement Determination and Breach Remedies</p>

<p>It is important that The Prop Co&rsquo;s have the ability to determine the Agreement, I would want this ability to be for serious breaches or non-performance.</p>

<p>I would like to agree the correct and fair mechanism for determination and how breaches can be remedied to prevent determination.</p>

<p>It would not be fair for Prop Co&rsquo;s. to determine on an ad hoc basis.</p>

<p>&nbsp;</p>

<p>Start up Capital Expenditure:</p>

<p>It is anticipated that each site would require an infrastructure tune up from the C-19 lockdown.</p>

<p>A budget of &pound;5k per site should be contemplated.</p>

<p>&nbsp;</p>

<p>Capital Expenditure for the upper parts of the Harcourt</p>

<p>Obviously I have not had site of this but in the future if it makes sense to exploit this space, a cap ex budget should be contemplated now.</p>

<p>&nbsp;</p>

<p>Websites:</p>

<p>It would be hopeful that the websites IP will be transferred over from JM</p>

<p>Should this not be the case then a &pound;5k per site budget should be contemplated, however should the websites be handed over a &pound;2k per site should be budgeted to make each site more individual and unique to its venue.</p>

<p>It is vital that the 6 pubs are not viewed as part of a &ldquo;pub group&rdquo;</p>

<p>&ldquo;Pub groups&rdquo; are ego trips for the owners of them. These days punters get turned off by &ldquo;pub groups&rdquo;</p>

<p>&nbsp;</p>

<p>Agreement to an Option to Transact:</p>

<p>I would like to agree a mechanism that allows me to have an option to transact.</p>

<p>This option could be for any transaction agreeable that will deliver the best return for the investors</p>

<p>This may be a straight purchase, lease grant, sale and leaseback or any other transactional mechanism.</p>

<p>&nbsp;</p>

<p>I am confident that my team can turn these wonderful pubs into cracking profit earners but they need an owner/operator mentality and the emphasis should be on the pub itself and not the cult of the owner.</p>

<p>This is how I have succeeded in the past and I have a propensity of selling businesses for some incredible value.</p>

<p>&nbsp;</p>

<p>I look forward to discussing this further.</p>

<p>&nbsp;</p>

<p>Kindest regards,</p>

<p>&nbsp;</p>

<p>Frank</p>