Monthly Archives: June 2009

Pub Co Duplicity or Stupidity?

Picture this.

A beautiful pub in the country with restaurant and 6 letting rooms. A pub company that says it IS doing £179,000 per year on wet and they will charge £40,000 rent.

Add to this food (Est by Brewery £45,000 minimum), and accommodation (Est by brewery £60,000) Not unreasonable for the lot!

Then add £83,000 of improvements. Making the cellar legal, kitchen legal, lighting and electricals the same and generally “doing up the place” as promised by the brewery.

There we have it!  A refurbished pub / restaurant ready for the summer season 2008!

Nope earliest estimate is now 2010!

Oh yes! And also…… Average Takings have been, at best, £4,500 net over 18 months which mean I lose £1,000 a week give or take ….and most of it’s give!!!

Deduct from this the number of microwaves, fridges etc. that have “blown” due to electrics which are illegal and have had to be replaced. Light bulbs which cost me over £700 to move in and ongoing problems with boilers, freezers etc. which have cost approximately £3,000.

Then, when no refurbishement activity from the brewery takes place and it’s costing £100 per week in “blown” appliances. I decide to throw in the towel.

I get someone who is prepared to take the place on (Nutter but there we go!) and then find that the brewery decides to give them a “deal”

What happens? They do the deal without my knowledge and come back to me to say “We’ve done a deal” Oh and by the way……. because we have decided to give the new incumbents £10,000 off their rent…. YOU have to pay.

I am now left with a position where I can’t afford to leave and can’t afford to stay!

I know the more experienced out there will think I’m a halfwit. I probably am. But this is a BIG WARNING! Do not go into this without your eyes wide open! The Pubcos will tear you apart they do not give a toss about your well-being!

Any help would be greatly apreciated.

I would prefer to remain anonymous for obvious reasons

Pub Co’s and Competition Commission

The Industry has to change radically.

Some ideas to think about, submitted to the MA Forum 17th June 09.

Existing turnover has to be a key factor in any rental or freehold calculation, it is the pub’s or businesses market share at any time.

To ignore it leads to a totally false valuation.

Taking a new lease or tenancy.

1. The rent should be a percentage of existing turnover.

2.   4% on a lease with a tie, at the worst 25/75% discount, lessee/landlord, full FRI lease (Suitable for all brewery tied estates)

3. 5% on a tenancy with a full tie, small brewers (On a 200 Barrel pub a small brewer will make at least £50K on the tie) External maintenance and internal structural by Brewer, internal decoration by tenant.

4.  6% on a lease totally free of tie, full FRI

5.  3-5 year rent review with leases

6.  1-5 year rent reviews on tenancies

7.  All improvements by landlord to be assessed for one year on impact on turnover and reviewed back at the end of the year, the effect that it has made on the business and % calculation brought in for the remainder of the rental period any over or under to be reimbursed over the remaining rental period and revert to normal % at next rent review.

8.   Any structural improvements by the lessee are not to be the cause of a rent increase until the next review and the normal % will prevail

9.  If there are no turnover figures to assess a rent then a sensible estimate should be made for the first year with any adjustments being made at the end of the year in either direction without causing financial hardship, that % rent will continue until the next rent review.

10. The % figures may appear low by current standards but they are in line with rents when virtually all pubs were profitable and viable.

11. Pubs should be viable at 35-40% of maximum take and not breaking even at 80-90% maximum take.

12. By lowering rents, leases will be worth serious money and enhance property values in the long term.

13. By lowering rents lessees and tenants will have a serious long term career opportunity

14. All failures are reputed to cost Pub Co’s £30K in lost revenue, lost continuity and overheads.

15. By bringing the rental assessment in as a percentage of turnover, it is totally identifiable and the need for convoluted humbug to assess future rents is finished. It removes the RICS from the equation and valuers who have no intimate knowledge of running a pub and fail to understand market share.

16. Arbitration will be virtually a thing of the past, it should all come down to reasonable negotiation.

17. All lessees deal direct with the suppliers that are not their own brewer, any discount is paid retrospectively to the landlord one month in arrears.

18. Lessees could achieve 28 days credit which will help their cash flow.

19. By dealing direct with suppliers this removes the present situation of extended credit by Pub Co’s with minimal credit to their lessees, in addition the failure of a major Pub Co will create a domino effect with disastrous consequences.

20. The present RICS Valuation System ignores existing turnover and assumes that the available business is infinite, it is finite and any increase in trade is at the cost of another business, no projected improvement of business should exceed 15% and even less in the present climate.

21. No Pub owning company should have more than 2000 pubs and should not be financially connected to any other company in any shape or form, the same with the directors, they cannot be on more than one Pub Company if the total number of Pubs in the various companies exceeds 2000. I would have preferred 1500 pubs. The present market has been totally dominated and dictated to by the major Pub Co’s because of financial and commercial pressure.

22. A number of licensees are against having their turnovers disclosed, but if they want fair rents this has to be an essential. The turnover is the key factor not the net profit, if the rental % is higher we get into audited accounts, profitability and return to the present mess in a different form. Audited accounts are always in arrears, turnover is not.

23. By using % for rental valuation and existing turnover, the licensee gains benefit from his efforts, if there is a low turnover at the start he enjoys the benefits of his diligence until the first rent review, the landlord enjoys the increased rent at the first review.

24. By using turnover as the basis for rental calculation e.g. £200K turnover would equate to a freehold valuation of £250-300K by the old yardstick of 1.25-1.5 times turnover. Free of tie, if a landlord is sensible he is in a position to negotiate far better discounts than a sole operator, he can then offer his lessee say £180 per barrel discount and pick up between £30-£50 additional discount retrospectively from the brewer on a £200K T/O = £12K rent on a rough barrelage of 150 a further £4.5K plus giving a return of £16.5K plus which equates very favourably with commercial rates. These calculations change dramatically with any form of tie or tenancy assuming that a Pub Co’s discount at present is £220 plus, the brewers can afford to sell the beer to Pub Co’s and make a profit, if they sell it direct to their tenants, the profit has to be in the region of £250 per Brewers barrel.

25. All Pub owning companies will squeal at these percentages, but the options are a clear straight forward method of rental calculation, leases and tenancies will have greatly enhanced valuations, we therefore have better quality demand for them in terms of licensees and we will have a long term career opportunities for most would be licensees, not a select few.

26. The freehold values will be linked to viability and not speculative figures, banks and mortgage companies will start loaning money on freeholds and leaseholds and the industry will get back on it’s feet.

27. If the industry values are based on profitability growth rather than Spiv Banking or a near Ponzii scheme, the financial sharks will get out of the business.

I have tried to cover most of the issues from my perspective, the majority of Pub Co thinking has become short term over the last ten years, lessees are expendable and they now realise that the cost of an evicted or failed lessee is too much.

The present financial crisis is in danger of becoming terminal for a number over valued and over borrowed Pub Co’s from the small to the very large.

The keys to the situation are the licensees, if the trading conditions can be set up to be viable and profitable, long term training and business awareness made available for all, we have a better quality licensee who will invest in his business and property and make it a long term career, this benefits both landlord and tenant.

Any comments would be appreciated.

Barfly

Brulines Cont..

Enterprise fined a lessee for buying out and deducted the fine and their alleged other costs from their D.D.

This was deemed in breach of the banking code and the money was replaced by the Bank in question.

An interesting point, if Brulines information is used for fining or eviction by a Pub Co and assumed to be correct by the Pub Co to justify legal action for eviction.

Surely it would be correct to use the Brulines data to check the figures used to calculate the FMT and rents, if found to be totally incorrect, the Pub Co should be fined, the lessee reimbursed and the Surveyor or  BDM responsible sacked.

The argument that Brulines data only relates to beer sales and therefore would not produce a reasonably accurate turnover frigure is a spurious one since any good stocktaker would easily work out a far more accurate forecast than the present system used by Surveyors.

RICS, TRVG (Trade Related Valuation Group)

My mole in the RICS tells me that the TRVG did not like the comments made by the |Select Committee’s |Findings.

The have supposedly decided to do absolutely nothing of any consequence to their valuation system, this is totally unconfirmed, but has been sent to me from a number of sources. It will be a sad day if they do not address the problems generated, they may think the system is adequate but it’s misuse and abuse proves that the system does not work equally and fairly for both sides.

One learned surveyor was alleged to claim that it was “Greedy Pub Co’s” who were responsible for the misuse of the system which endorses the Select Committee Findings.

However the amount of leaks that came out of the TRVG meeting would appear to confirm that at least one if not two members are concerned about ignoring the Committees Findings and certainly the members of the RICS that I deal with think it would be very unwise for the RICS to alienate itself from the Select Committee or possibly the Competition Commission. The Competition Commission and a number of MP’s have been informed of this alleged information in order to try and steer the RICS back to an unbiased, fair and transparent valuation system.

Good Pub owning Companies

If you run a pub for a good, fair, thinking Pub Company please let us know.

We are very short of them at the moment and have no desire to recommend a company that new or experienced people will have a minimal chance of success. We would also like to be able to direct the better operators to reliable companies.

If you are looking for a pub it is worth contacting these companies if they have any vacancies.

 

Arkells Brewery, Swindon, Wilts:- Traditional family brewers with good managed and tenanted pubs. They are discerning pub owners and have good staff and licensees, West of London on the M4 corridor. 

Bath Ales, Somerset:- They have, at the moment nice well run managed houses with good overall management.

Their pubs are in the Bath and Bristol areas.

 

 

Hook Norton Brewery, Brewery Lane, Hook Norton, Oxfordshire, OX15 5NY, Tel 01608 737210

Palmers Brewery, Bridport, Dorset:-Traditional family brewers with nice pubs and good management.

Pleisure Pubs, Brighton, Sussex, small good Pub owning company www.pleisure.com

Wadworth and Company Limited, Northgate Brewery, Devizes, Wiltshire SN10 1JW  Tel. 01380 723361  Fax. 01380 724342, nice pubs, tenanted and managed in  the South and  West of England.

 

Licensees Horror Stories 3

Thanks for your message.  Although myself and my girlfriend have lost our pub, our home and our business (along with a small fortune) I feel it could have been a lot worse, and it is for a lot of people out there.
 
I am 24 and my girlfriend is 23.  We got into the pub trade 2 years ago after completing uni.  Although young, we managed to get the locals on our side and they have been brilliant all through this.  Even though they have lost their local and the meeting place for the village they have remained supportive as they see what pressures we were under from the brewery Pub Co. 
 
In the end both myself and Liz had another full time job and we were working about 70 hours each week.  After 6 months we got used to working all those hours, and I started to feel lazy when I had an ‘easy’ week and only did 60.  From September until December the pub started to fare so badly we had to put our wages from our other job into the pub to keep it going. 
 
When we asked our Pub Co for help they gave us their ‘business recovery plan’.  This consisted of a £40 discount on a 22g barrel.  The only problem is they insisted on extending our partial tie to a full tie during this period.  So they gave with one hand and took with another.  Before this came into effect we went out and stocked up on everything we could, as we knew they would sting us on spirits, wines and minerals.  The plan was supposed to last 12 weeks.  They stopped it after 5 without telling us, it was only when I checked the invoices that I found out that it had stopped.  They claimed that it was taken off us because we didnt buy something from every category each week.  They knew we would never do this, and we couldnt just buy things for the sake of it.
 
The sad thing is that it was working, with this discount our GP increased to a level which plugged the gap.
 
In early December I had a meeting with my area manager and when I said we will need help or we will go under, she said we had better arrange to give the keys back. 
 
So we planned to hand back the keys on the 5th January, after having a good send off.  On New Years eve, shortly after my £1600 beer order had gone out of my bank by direct debit I cancelled the direct debitsinc I didnt want anything else going (rent for the next month).  Sadly the bank returned my money.  Within 3 hours they had sent a bailiff round.  They had not tried to contact me in any way.  I paid him the beer money (minus his costs, as I thought it unreasonable that enterprise did this without even asking me for the money).  4 days later, I received a letter saying that I had an unpaid bill and would I kindly put it into their bank.  So they sent the debt collector out before even formally notifying me.
 
After this we both got tired of fighting.  The keys went back, I am still waiting for the final bill.  Even though I paid all the rent and all the beer we owed them (we can out even in that respect), I still fear they wll come after us.  The delap report stated we needed £50,000 worth of work doing (in under 2 years).  They in all likelyhood will keep our £3500 deposit and our £5,500 f+f.  They claim to break the contract early they would have 3 months rent from us.  So now we are just waiting for the day when they ask us for the best part of £50,000.
 
Anyway, they treated us harshly from what I can see.  However they have been a lot worse to others.  Although it will take us 6 years at £800 per month to pay back all the money we have lost in buying the lease in the first place, we are young enough to get over it.  I really feel sorry for the older generation, who have lost everything including their youth.  My parents have kindly put a roof over our heads.  We are lucky to have very very stable and reasonably well paid jobs.  Most of all we have our health and are still together!
 
We have moved the dominoes and pool team to a local club, so still see the locals.  But it is not the same.  It is very hard to adjust to normal life again.  However in the coming months it will be good to have a life, although we dont have much money, we will have time to do anything we want!!
 
I am glad to see the share price plummet today.  Hopefully things can change and those who are holding on will be saved.  The pubco’s and Labour have a lot to answer for.
 
Anyway, I dont know what you need this for etc, but thanks for listening!! What is your situation? I hope you fare better than I did.  Finding the MA forum helped keep me going for the last 3 months.  Without it I wouldnt have made it, so I owe a lot of strangers an awful lot.  Something I doubt I would ever be able to repay, but you should let everyone know that the regular posters make all the difference in the world.  In a sea full of sharks, it was nice to find a small boat to cling to for a while.
 
Thanks,

Sadly I have had to delete the name of the Pub Co for legal reasons, but they are still using the same tactics and methods in spite of claiming to address the problem in the press.

Licensees Horror Stories 1

I just hope that if any Pub Co Boss or Employee reads these terrible stories, they feel some degree of remorse. I just wish that they were not true, but they are and they won’t stop coming in.

 

I am currently struggling with a Pub Co. The latest letters from them threaten to take back our three pubs we face mounting costs and accusations of buying out. My situation is being re-played the land over, I am paying £100 a week rent and they want £1000. I refuse on the basis that the business is non-viable, no discounts (aside from one old lease at £40 a brewer’s barrel). I am paying this rental amount as I cannot afford their full rent. What I  want is to pay a fair rent and to be given discounts as a part of our Partnership agreement.

We have asked for help over the last 18 months. We are still awaiting capex and safety works to be done at two of the premises, the original works are now over two years old and have lease works which are even older. We received a BRI (Business Recovery Incentive) at one pub.  This was changed into a deed of variation, based on the fact that the rent had been set to high since the refit. We asked for the rent to be back dated to day-one and were told that this could not be done as they had overspent on the capex (although the rent was set at the end of these works).

Any BRI deals offered did have tie-ins contrary to the Pub Co’s statement to the BEC, namely WSM (wines, spirits and minerals) and or f&f (fixtures and fittings.) They allowed a short term discount of £100 a BB (Brewer’s Barrel) to carry on which they then called in. Due to an oversight on their part we were hit with a bill of £12k which we cannot afford.

We have asked for full breakdowns on how the rent is assessed so that we can challenge it. This information has not been made available although we have asked for it repeatedly over the last year or more. 

I do have a rental breakdown (given over to confuse us rather than help, but which has proved very helpful.) This was provided by my Regional Manager, for another lease, which we challenged only to have their chief surveyor turn up and give a new, completely different, assessment but still arrive at the same rental figure! We challenged his figures and were not allowed to speak to him again. Then the Director came down to tell us to pay or go to arbitration. After we displayed some of the errors carried out by their surveyor the Director left with the promise to look into it. He came back with a lower rental figure, which was still way off the mark, and refused to show us any calculations. We were told arbitration was the only route. He completely missed out the fact that an external valuer should have been called in, as per their Codes of Practice.

Their area manager approached us before Christmas to say that he could offer us temporary discounts at £50 per BB at all sites and he would put the rents to zero so long as we agreed to be out by the 2nd week in January (he tried to tie us in for WSM as well but we referred him to the Pub Co’s comments at the BEC and he withdrew this part). We said we would be happy to take up his offer on the discounts, as we had been asking for this level of help for a year, but not on the basis of surrender as we wanted to discuss our situation with their CEO. The deals were put in place and then revoked at the end of a short period, with us having to pay back the discounts before orders would be accepted. Rents for January (previously removed) were added back onto our debt.  They are not willing to freeze rents during negotiations even though they have already proved they can.

We then took our complaints to the CEO, he said if you pay your bills then I will talk to you. He is fully informed of the practices used by his company and directly liable as he cannot deny being told. We could not pay these debts, we gave an explanation as to why this was so and what we were doing to further the business. We have now received mail saying that he will not talk to us any further and the case(s) will be handled by their solicitors. 

We have been on cash with order for over a year now and yet weekly our beer deliveries are being  delayed due to problems within credit control and no fault of our own. This kind of petty harassment is hugely damaging to a business.

There are so many elements to this case that I could write forever. I have been given no choice but to publish this information to try and help others.  I am seeking legal advice on the best way forward. Needless to say the evidence has been submitted to the Inquiry. The information on your site is accurate, and I thank you for posting it, but I don’t know the best way to get the PubCo’s to implement change.

I talked to both Fairpint and David Morgan who have offered advice. I will carry on the fight but I wanted you to know that having sites like yours allows people to read about the truth.

 

 

RICS integrity

The alleged latest information on the latest decision by the TRVG (Trade Related Valuation Group) to not make any changes to their existing valuation policy, because they cannot see anything wrong with it, regardless of the Select Committees Findings raises interesting questions.

Are they concerned about legal action being taken against them by national companies if they change their policy?

Are they not concerned about the over renting and over valuing of most leased and tenanted pubs?

Are they not concerned about the failure rate within the industry of lessees and tenants and the hardship caused?

Are they not concerned about their professional integrity in not taking action to remedy an identified problem?

Are they being manipulated by a few members whose core income benefits from maintaining the status quo?

My advice which will not rate highly with the RICS, even though I was originally a member, is stand back and looks at the facts, you could be digging a big hole to bury yourselves, which I know a lot of my colleagues who are still members are not happy about.

Brulines Saga Continued

The CEO of Brulines is upset at the Select Committee Findings.

What did he expect a gold medal for being involved in hundreds of lessees being threatened, intimidated and evicted in many cases because of his system.

His own employees admit that it is a monitoring service and has not been a high tech calibrated system subject to scrutiny and approval by the Weights and Measures.

Any good engineer would immediately realise that it’s ability for precise accuracy would be in serious doubt.

The CEO is between a “Rock and a Hard Place”, if he admits that it’s use has so far been extended beyond it’s present capabilities, it leaves his clients wide open for possible litigation from people who have been evicted and fined by their landlords. In addition a massive loss of business and clients.

He has two options get the present system approved by the Weights and Measures as a regulatory system which is totally accurate or produce a new system that complies with these requirements.

If the old system does not meet the Weights and Measures requirements as a regulatory system, the Select Committees comments will be correct, if he claims or has claimed that the system meets their requirements and does not, his clients will sue him and he will lose a lot of business. If he maintains that it is a monitoring service and not a regulatory service his clients would be sued.

This could be interesting.

Licensees Horror Stories 4

 

Barfly, 
Thanks for your help, I got stuck behind the bar again last night. I did however fish the leaflet out and I am calling them today. It’s all gone horribly wrong here (after a year of profitable trading). My dad who I need for some kind of help in forming an action plan has stuck his head in the sand but the pub is losing about 2k a week and I am going crazy with worry. The loan for the assigned lease is secured against my parent’s house (120k) and the guilt I feel for bringing the family to this, is immense. We are
on the Pub Co’s recovery scheme with 100 off 36gall but is drop in the ocean compared to the bills that are racking up…..Weekends are still busy but whereas we were taking 1 to 2 k on weekdays we are now doing 500 quid if we are lucky. It all started in October and really suddenly! I blame myself for not reacting but what could I have done in such a huge downturn. I’m at a loss as to what to do now as my dad who has been in business (not pubs) all his life just says hang in here, but I know it’s too late already. The Pub Co can’t do anything as I’m on the discount already, bailiffs have walking possession of fixtures & fittings due to rates arrears and I’ve not paid food suppliers for 3 months. I just want to walk but my dad just won’t surrender the 120k investment and I don’t blame him! If it wasn’t for the greed of the Pub Co and we were paying a sensible tied price for our beer we certainly wouldn’t be in this mess!
 
Sorry to put this on you as you don’t even know me but I needed to get it off me chest. I will be at the protest on Monday. I really don’t know why the whole tied system does not wake up and revolt by just not buying from the Pub Co’s.
 
I feel it’s the only way.