Monthly Archives: July 2010

Barrel Dregs, Pub Co makes the rules up as it goes along???? (88)

A submission from our latest writer Pot Boy North.

Pot Boy North’s Yorkshire persona came across a nice little bit of “angels dancing on a pinhead” type speak in a Pubcos take on the Brooker case. If it were not so chuffing serious ‘twould be proper comical. No, we are not all flat hats and whippets up here, but suffer just as poorly as soft southerners at the hands of clog dancing  BRMs , held as how they are “on message”. My mate in his Yorkshire City pub with bags of local competition, put forward that Brooker had last September,through the good Judge Hughes established some solid areas of guidance in his rent review. Not least that he wanted a reasonable living and a sensible take on rent.

For example that the reasonably competent tenant would amongst other things consider the state of the market (ie,recession), smoking regs, availability of money, the tie as against the free of tie.downturn in trade, fall in profitability, etc. In Brooker the tenants rental bid was 35% accepting that it was a particularly harsh lease. Basically that the old established 50/50 rent/profit split was a thing of the past and up for a realistic approach. What follows is a direct quote from e-mail correspondence of a BRM justifying the Pubco take on increasing his rent.

“The Brooker case confirmed the appropriate use of the profits method of valuation,that the rental bid is market driven,unique for every pub and that each rental assessment should be undertaken on its own merits. My rental asessment  contains an equitable apportionment of the divisible balance between Landlord and Tenant to reflect the risks and desirability of owning the property and operating the business,ie 50%.I do not consider this to be inconsistent with or contrary to the Brooker case.”

Almost classic bit of Head Office legal advice generated double speak.It is as plain as a pikestaff saying that this Pubco wants to acknowlege but ignore Brooker as if it didn’t exist. Stuff  the clear guidelines that Judge Hughes set out. My pal was chelpin to me that he has an income that equates to less than two quid an hour and that for an eighty hour week to “reflect the risks and desirability” of his City suburbs pub,within range of a massive supermarket and seven different take aways. Makes PBN’s blood chuffing boil !

Some bracing North Sea air is called for to calm down.

Pot Boy North.

“This site  is a privately funded website and growing in readership every day. To achieve a wider recognition the Editor would welcome cross referencing back to Barrel Dregs postings through other Blog or Websites. Information about our industry has so much greater power if more people are kept informed. Many thanks if you would be good enough to do this”.

You no longer need to go to www.buyingapub.com just click on “Barrel Dregs” on Google.

The views expressed are not necessarily the editors and www.buyingapub.com accepts no responsiblity for them, we do try to avoid offensive or litigious statements being made.

Alliance Online Catering Equipment – suppliers of Pub and Bar Equipment to the UK trade.

Barrel Dregs, Great Pub Co. Con. Update. (87)

Barrel Dregs, Great Pub Co. Con. Update. (87)

My apologies for raising this topic again, but it is essential to make as many people question what is going on and please pass it on to everyone that may appreciate it.

I had a phone call a some time ago  from a reader of the Web Site saying that he had just viewed a paper written about ten years ago by an ex lessee of a major Pub Co.

The content of the paper was virtually the same as my Pub Co Con, except it named Pub Co’s, names and figures involved.

The writer had been bought off for supposedly about £550K and sworn to eternal silence under pain of severe retribution should the document get publicized, he was asked to appear or submit evidence to the Select Committee which he declined and remains very nervous and in obscurity.

If this is correct, this is a terrible indictment of certain companies activities and the people that run them.

Having looked into it as far as I am able to, it coincides with a number of acquisitions at the time, where millions of pounds changed hands and any form of proof document of this nature would have caused a major scandal and financial mayhem, to buy silence for a few £100K was neither here nor there, but physical threats are something else.

We all know that certain undesirable people can be bought to carry out all sorts of activities assuming that you have enough money, totally anonymously, goes on. If this is in fact correct and I am assured it is, I just hope that the people involved are no longer connected with the industry, we have enough legally unscrupulous people already.

I have been subject to two years attempts to discredit me for my submission to the Select Committee and my efforts to stop corporate abuses to honest licensees, hopefully I will be able to say that the matter has been concluded to my satisfaction shortly, if not it will be a very interesting story for Barrel Dregs.

The Great Pub Co. Con or how to manipulate an industry. (Update)

Purely thoughts from a Bar Fly

First of all a group of City Whizz Kids get together, they decide to deal in property, but not just any property just pubs, there is no regulation the whole industry is fragmented, it is in fact wide open to manipulation.

The Monopolies and Mergers Commission have brought in the Beer Orders, no brewer can own more than a specific number of pubs, so a stack of pubs will be sold off at rock bottom prices, lots of land, buildings, tenants with leases and ties on supply. It’s a licence to print money.

They buy their tranches of pubs, they screw the suppliers for three months credit, put all their lessees on fourteen days direct debit, they have immediately generated stacks of cash, in fact millions before the first bill has to be paid. Banks think they are wonderful, being City Guys they know where to get the money to expand. They hoover up all the small Pub Co’s at good prices, this raises their estate value and impresses the banks.

How do they raise the rents without incurring a lot of legal come back, get their own and supportive surveyors to draw up a Valuation Paper under the Professional Institute banner hence this Valuation Paper  is born chaired by one of the Pub Co’s Chief Surveyor with other Surveyors who are possibly dependent on Pub Co’s for business. To be fair to the Institute this would be the apparently obvious thing to do, it is very easy to baffle anyone who does not fully understand the vagaries of the pub tied industry that the direction taken by this committee was not the correct one. They would appear to have completely overlooked having a surveyor on the committee to represent lessees and tenants or anyone that had the foresight to realise the future implications for lessees and tenants. This document professionally legalizes rent increases on a basis of future trading or an alternative use, none are specifically definable or can be calculated, in most cases on the middle to lower end of the estates existing turnovers are ignored and a rough bricks and mortar valuation is used.

Totally over valuing the trading ability of the property and creating unsustainable rent levels.

High turnover property is valued on trading ability, if the bricks and mortar valuation produces a lower notional value, this is why high turnover pubs are not having the same problems as the middle and lower end pubs, their rents are still high as part of the aim for high estate values.

By constantly pushing up rents this in turn revalues their whole estate, further impressing the banks and shareholders. At the same time they have been buying up all available good freehouses and depending on the turnover or the bricks and mortar valuation to achieve the highest rent and ultimate valuation.

(One major Pub Co bought a high turnover destination pub for just over one million pounds and set the rent at £75K, which was possible with a good operator, both lessees struggled, the second is in serious trouble, the property itself without the level of business would barely fetch £550K.

The second pub bought for £465K with a turnover of £220K and given a rent of £34K, based on the bricks and mortar valuation, all three lessees have been in trouble, the first vanished overnight, the second sold it with unaudited accounts owing money everywhere, the current one is hoping to sell as soon as possible before his credit runs out, the turnover is just below or the same as the original at purchase six years ago, all were and are experienced operators.

A newcomer to the industry took over a pub in South Devon the Turnover was £120K the rent £32K, the Pub Co involved accepted his business plan, he was delighted.

To service the rent and overheads he needed to increase the turnover by 300% to break even. The term Caveat Emptor is conveniently used by all these Surveyors, Pub Co’s and business agents, this to my mind is totally unacceptable and has to be stopped.

They have not released any pubs back into the open market as freehouses as the old brewers used to do to stabilize the freehouse market, in stead they have sold them on to other Pub Co’s at high prices because of the rental levels. This in turn creates a scarcity of freehouses and ensure that prices will always remain high, safeguarding their securitization against loans.

Pubs were only released into the open market individually with covenants restricting any future use as a pub, they are for alternative use.

By virtue of this massive estate value and the cash flow creates the illusion of a very safe company, provided a recession does not come along.

Update:-The recession has caused mayhem with these companies cash flow and they are now being forced to sell pubs on the open market, which totally undermines the book value, since pub values are not quite in free fall, but money is vital to service the debt mountains. A recent Pub Co pub was sold for around £165K, it was up for rent at £26K and the mortgage payments are £331.00 per month, if the pub doesn’t become viable in a year it will be sold for development.

Having created these massive estates of pubs, they put all their aspiring lessees through very rudimentary training, very few being capable of reaching the dizzy business heights to service the rent and tie combined, they last roughly eighteen months purely because of the problems disposing of an over rented lease, to be replaced by another aspiring naïve lessee. The rents are supposedly established for a competent operator at the greatest stretch of the imagination these newcomers will never achieve that status without a number of years of profitable trading.

Business agents could be construed as misrepresenting the pubs that they sell, since they are all aware of the competent operator standard relating to rent levels, they again hide behind Caveat Emptor.

They have various rescue packages which usually takes the form of cash with order which substantially improves the Pub Co’s cash flow and means the lessees future is strictly limited without a major cash injection, often very hard to do. Their other rescue packages are short term expedients, temporary rent reductions which are repayable on selling the lease. On assignment of the lease the out going lessee is responsible for any defaults by his successor, a kick over from the Privity of Contract banned in 1997, the option to get out of that is a payment of a percentage of the sale figure, usually £7K plus or the greater by percentage.

Having created these monster Pub Co’s far in excess of the Beer Orders requirements, since they do not brew beer they can legally own these vast amounts of pubs. They now have a dominant position in the market and effectively exert control over various organisations, professional bodies and endless suppliers, they can now dictate the market, they have a cavalier disregard for their lessees who are failing constantly and losing their hard earned money and being made bankrupt, evicted and homeless or just might manage to sell their lease to another sucker. They decline at all times to disclose the failure rate and how many lessees are totally disenchanted with their trading conditions, their Web Sites promise everything and give very little apart from an ability to extract cash at every opportunity.

The whole thing is a brilliant con in achieving this power and sadly this power is being abused. The rents are unsustainable the tie and lack of discounts makes lessees uncompetitive, even if the tie was removed it would not make the bulk of these pubs viable because of the rent levels, which have been pushed to the crazy heights to raise the estate values to raise more money. The myth that leases could be sold at a profit, which the Pub Co’s have always pushed, applies to high volume pubs up to a point, but all the others the high rental levels are making them uneconomic and extremely difficult to sell even with minimal value, certainly not the expectations promoted to newcomers to the industry, which these Pub Co’s feed off.

The levels quoted for the average value of their pubs is far in excess of normal freehouse valuations, since normal freehouses are based on turnover figures and not inflated rental values. In fact in my opinion the true values are up to 50% less than quoted, which puts these companies into negative equity, which would be fine as long as the market is expanding, but since it is falling as well as property values, the cash flow is dropping, pubs are boarded up and even more people are failing since banks are very reluctant to loan money to overstretched lessees. It raises the spectre of a very inflated bubble about to burst with the recession biting. Very few companies are in a position to take over these mega companies especially with unsustainable rents that are not linked to turnover and profitability, the key source of their income is stretched to the extreme and falling. They cannot sell pubs back into the open market as individual premises because the true valuation of their estates would be exposed, something has to give. See Update above.

The suppliers across the board have been sucked in by these companies to provide them with up to three months credit with minimum of profit on their products, they in turn are owed thousands of pounds and cannot afford to let them collapse, in a number of cases it could create a domino effect with disastrous consequences, similar to the early sixties in the building industry with a number of large companies using the same tactics.

Sadly all the other pub owning companies have followed suit in rent levels following this seriously flawed Institute document, which is in mine and a number of others opinion the key to all the lessees problems. It was set up by people with a vested interest in raising all the values of rent and freeholds across the industry with no concern for the tenants, it may have been unintentional initially but when the enormity of it’s effect was understood, it has been utilized without any consideration of business viability to achieve the maximum value by very aggressive companies to the maximum effect. The result is expendable, ill trained lessees, the Licensed Trade Charity is inundated with hardship cases of new and vastly experienced, long term licensees who are being evicted from their pubs and homes by the avaricious greed of these companies.

If they had not been so greedy, they could have had sustainable rents linked to existing turnovers, which may not have given them the massive capital growth, they could have given up to £160.00 a barrel incentive based discounts on beers etc at today’s values and 28 days credit. Which would have made virtually all their pubs viable, their tenants would have remained longer, the administration costs and lack of continuity of these changes would be vastly reduced. They could have sold all their failing pubs back into the open market individually, which would keep the freehouse market active, they could have had a condition that they had first option to buy these pubs back at current values if successful, they could have agreed to supply all beers at say up to £170.00 a barrel, which would have given them an enormous discount coming back for no work at all. Their natural growth would not have been so rapid, but their assets would have been well consolidated and they would not have failing lessees and public opinion against them.

It would be nice to put the clock back, but this cannot happen and a lot of blood letting will occur. Licensees are not an expendable commodity, but an essential commodity in this operation. The major Pub Co’s and a lot of small ones could be between a “Rock and a Hard Place”, I just hope that they have the sense to realise by having expendable lessees, tenants that they are killing their money makers, vacant pubs do not make money, they cost money.

The recession, has as predicted, played mayhem with the majority of Pub Co’s, their inability to understand how to motivate a Licensee persist, added to a reluctance to accept that the only cash source is by selling products, in a shrinking market.

The thinking Regional Brewers have realsied that the Pub Co Model is doomed and are trying desperately to distance themselves from this method of trading and getting back to their core business of brewing and selling beer, sadly because of the removal of the need for existing business figures to be factored into RICS original rental calculations guide lines, virtually every company using a member of RICS has been infected with over renting.

This in turn has created enhanced balance sheets and to explain to shareholders that they have to come back to reality is not easy.

The COP’s being approved so far are, unfortunately endorsing the Pub Co Model by failing to define precisely and accurately a Competent Operator, Reasonably Efficient Operator or an Average Operator, all can be interpreted at what the decison maker sees fit, in fact the lowest common denominator if need be, i.e. having taken the NCPLH which entitles anyone to have access to a licence provided that they do not have a criminal record.

FMT without detailed guidelines based on facts is equally as wide open to abuse.

The Industry has to get back to selling beer and products, with defined professionalism, there are too many people who are incompatible with the industry, the lack of adequate in depth continual training and guidance would remove these people and develop the abilities of the people with potential.

We need the best operators and they need to make a decent living, not screwed for being successful and evicted, to have an inexperienced hopeful run a good business into the ground.

One of the founders of the Pub Co Model who has left the industry now, said that the Pub Co Model is unsustainable and to pursue it is financially folly, he in my opinion is right.

Barfly

“This site  is a privately funded website and growing in readership every day. To achieve a wider recognition the Editor would welcome cross referencing back to Barrel Dregs postings through other Blog or Websites. Information about our industry has so much greater power if more people are kept informed. Many thanks if you would be good enough to do this”.

You no longer need to go to www.buyingapub.com just click on “Barrel Dregs” on Google.

The views expressed are not necessarily the editors and www.buyingapub.com accepts no responsiblity for them, we do try to avoid offensive or litigious statements being made.

 

Barrel Dregs, My! Pot Boy is having a go at that nice Mr Dick Turpin! (86)

Pot Boy does not always believe everthing that is printed in the trade press, but “Dick Turpin’s” fess up to the Morning Advertiser on 15th July was more than just of passing interest. You see the thorny question of just what a Tenant of a supply tied Enterprise Inns pub should earn for an average 70/80 hour week has never been properly clarified by anyone at Enterprise. Well, not until now it hasn’t !! 

To quote from the article,….”unless a licensee has a realistic chance of making £25K per year. We don’t want the pub”.In simple plain english, an INCOME (not benefit in kind) of anything less than £25K is just not economic or acceptable either for the Tenant or Enterprise. That is now confirmed by the big cheese, the Capo de Capo, the big boss. PB had one over on the Lawyers and Surveyors that make up a few of his six o’clock crowd. None of them had spotted that little gem, so PB jingled the charity box and suitably large contributions were made.RESULT ! Nice to give rather than take “trade tidings”. It was however pointed out by one of the legal beagles that there is a rather nasty flip side to the quote which PB in his innocence had not spotted.

Say a tenant is not capable of earning the magic £25K a year, but is content to run a great pub, the heart of the local social community, on a not quite full time basis, shut all day Monday and Sunday night, (like many village pubs of great glory) and is content with say £20K a year (as indeed recommended as the basic “wage” by Jamie Rollo of Morgan Stanley last year). Will Enterprise use all the tricks in the book (rent hikes, OTT dilaps claims, regulation compliance requests etc, etc) to get shot of the Tenant and to fog the pub. Does this includes giving incorrect so called advice at lease renewal to con the Tenant into not seeking the renewal that they are entitled to have by Law? PB has a few examples of just that quietly stored away, thank you very much !

After all the great man did say “We don’t want the pub”. As he is known throughout this land as an honourable man, we must as mere mortals believe the truth of the words that he has spoken. So, it is assumed will all his acolytes and minions and verily, they will act accordingly, for it is known and believed that his word is law unto whom he pays their humble stipend.(Ed..for goodness sake PB, less of the Godly nonsense !)

Anyhow,it seems that Profits Test calculations for tenants will now be modified to factor in “Dick Turpins” pearls of wisdom.I wonder if Rent Quote Forms will be even more fiddled to compensate ? 

Back to the cellar. Avert your eyes for you are not worthy, praise the.. (Ed..enough!)

Pot Boy. 

“This site  is a privately funded website and growing in readership every day. To achieve a wider recognition the Editor would welcome cross referencing back to Barrel Dregs postings through other Blog or Websites. Information about our industry has so much greater power if more people are kept informed. Many thanks if you would be good enough to do this”.

You no longer need to go to www.buyingapub.com just click on “Barrel Dregs” on Google.

The views expressed are not necessarily the editors and www.buyingapub.com accepts no responsiblity for them, we do try to avoid offensive or litigious statements being made.

Alliance Online Catering Equipment – suppliers of Pub and Bar Equipment to the UK trade.

Barrel Dregs, a further sequel to BD64 (87)

 

……Pot Boy seems to have stirred up an almighty hornets nest over Barrel Dregs 64. Calls are being made by a certain Pubco to “pass the tape to them”. Well,first of PB has not even identified the Pubco ! Caps are fitting and all that. Guilty is as guilty does.

Word has it that the Pubco concerned wants to weed out the person concerned.Promote them to higher places ? Sack them ? PB just hasn’t a clue other than the person concerned, if he’s reading Barrel Dregs, is having a very sweaty time not knowing what the future holds.

Any number of Companies could in theory be turning such a blind eye to their BRM/ARMs bully boy tactics.One thing for sure NO DICE in handing over the tape. What was given in total confidentiality stays in TOTAL CONFIDENCE. PB will continue as one of the free and unfettered voices in Barrel Dregs and continue to publish that which is sent/told to him with names and places “protected”,but the facts,if verified,will go out to the world at large.

Pot Boy

Comment

Two well known whistleblowers were proved legally right, but they never worked in the industry again, the establishment closed ranks and sealed their fate, we can expose the abuses and hope that the companies involved will take action to rectify these activities.

We would suggest that all companies give their Managers instructions to look at Barrel Dregs and make sure that they don’t feature in it, conversely if a Manager does do a brilliant job then we would like to give credit where credit is due.

Finally, please, please, all our readers, get a small tape recorder and insist on recording all discussions with the company representatives, if you have the least doubt about the content of the subject or person you are dealing with.

If they refuse to talk report them to the MD of the company involved or us and we will raise it with the company.

Tape recorders can be bought off ebay for very little money, I carry one everywhere, it’s amazing how the conversation changes from aggresion to moderation.

Barfly

“This site  is a privately funded website and growing in readership every day. To achieve a wider recognition the Editor would welcome cross referencing back to Barrel Dregs postings through other Blog or Websites. Information about our industry has so much greater power if more people are kept informed. Many thanks if you would be good enough to do this”.

You no longer need to go to www.buyingapub.com just click on “Barrel Dregs” on Google.

The views expressed are not necessarily the editors and www.buyingapub.com accepts no responsiblity for them, we do try to avoid offensive or litigious statements being made.

Alliance Online Catering Equipment – suppliers of Pub and Bar Equipment to the UK trade.

Barrel Dregs, Pot Boy and the O.N.S.????? (85)

 

The Office of National Statistics (ONS) issued a few pearls of wisdom the other day which caught Pot Boys beady eye. Inflation fell in May to 3.4% from 3.7% in the previous month. The ONS also reported that the Retail Price Index (RPI) fell to 5.1% in May from 5.4% in April.So we are still above 5% for RPI increases being applied as an annual escalator to rents. Lets go to the so called median rent in the standard pub market of say £30K. If the 5% were applied over five years the rent would be £38471,an increase of £8471.

So what you may say,and the Pubco/Brewer will shrug and say “well,you knew what you were signing up to when you took on the lease. Don’t start to gripe now”. But lets examinre the numbers again in the light of three fairly simple assumptions. First, sales (on average) will stay pretty flat and might even drift downwards.More VAT, less discretionary spend, deepening recession etc. Second, operational expenses will for sure increase year on year as certain as night follows day. As in Pot Boys passim,it is reckoned that the annual increase in expenses is something in the order of 6%-8%. Third,a vast number of leases were “signed up” well before the recession began to bite.

Back to the numbers. Pot Boys regular Chartered Surveyors tell him that cast in tablets of stone is the Profits Test basis of rent valuation. That PB can accept seems to be a pretty sound way of doing things if you don’t fiddle the input figures. By the by, PB once went to a BII lecture many years ago where a sample of the Profits Test Valuation was put up on the screen. The next “page” was to highlight in red, those bits of the calculations that could be willfully fiddled by an underhand Pubco/Brewer (Ed..Shurely not !). The whole screen went red !!

Anyway, the final part of the Profits Test calculation results in what is called The Divisible Balance which until the Brooker case (PBs passim ad nausiam) was split 50/50 between rent and the tenants earnings. So if that same split were applied,the pub would have had to have earned in clear EXTRA PROFIT an additional £16942 to allow for the extra rent of £8471. But hold on a cotton pickin’ miute,thats CLEAR PROFIT.

In terms of ADDITIONAL SALES that is a totally different proposition. To get to the extra profit in the final line of the Divisible Balance, PB has it on best authority, that you would have to put in the till an extra £90K or thereabouts guaranteed to just stand still.Is the penny beginning to drop ? The pub with a rent of £30K may well have a total sales ex VAT of say £265K.So to stand still,the total sales in only five years have to go up to something like £355K  in the teeth of a recession and the three assumptions as above. Get a little real here !!

The chances are that sales ex VAT will see nothing like the increase required and the tenant will be massively worse off. The RPI annual escalator has NOTHING to do with profitability or the proper basis of rent assessment. It is a bare faced con job of the first water and every year makes it harder and harder for the Tenant to scratch a living. So much for the likes of Dick Turpin spinning the line that “we don’t do upwards only rent reviews”. Pinoccio moment,you bet !!

To market aware potential new entrants into the trade, it is a no brainer. Don’t touch an RPI linked lease with a barge pole.

Thinking of numbers, PB has the monthly stock check later today. Essential to keep the mind concentrated on earning (and keeping) every last penny.

Pot Boy

“This site  is a privately funded website and growing in readership every day. To achieve a wider recognition the Editor would welcome cross referencing back to Barrel Dregs postings through other Blog or Websites. Information about our industry has so much greater power if more people are kept informed. Many thanks if you would be good enough to do this”.

You no longer need to go to www.buyingapub.com just click on “Barrel Dregs” on Google.

The views expressed are not necessarily the editors and www.buyingapub.com accepts no responsiblity for them, we do try to avoid offensive or litigious statements being made.

Alliance Online Catering Equipment – suppliers of Pub and Bar Equipment to the UK trade.

Barrel Dregs, the RPI could be in trouble with Pub Rents??? (84)

 

Pot Boy senses the wind of change gently blowing hot breath towards the Tenant when it comes to rents at Lease renewal.Always a But Tocks (Forest Gump reference) clenching time for the Tenant. But the Pubcos and Brewers are as evenly scared witless that the individual Tenant will suddenly become market aware and chat to one of the very few Rent Review Chartered Surveyors that knows all the wrinkles. Two such of the few happen to be some of my regulars, who take the chance on the odd occasion to each sup a couple of pints of my cask marque Best Bitter before troddling back to their missus. Ever wondered how I get so much cracking information from that direction that is always on the button. Now you know !!

Anyway, as previously told, the RPI index is running at just over 5%. That being the case PB has it on best authority that there are a number of rent based lease renewal cases that are destined for the County Court. They will tell the Beak that the rent being geared to RPI is AN UNREASONABLE LEASE TERM. Remarkably this has also been recognised by Marstons in  a few of their new leases. Basically as the recession keeps biting us all in the bum, a rent linked to profitability cannot begin to work if the profit is eroded from day one by the artificiality of RPI pushing the rent ever upwards. Novel line of thinking, well most certainly yes ! If any of these cases succeed then goodbye Pubco profit base from rents on lease renewal. The Pubco business model is suddenly kaput !! Like a dart heading srtaight towards the ground,or an event  proceeding swiftly to the scene of the accident.

 Pot Boy jests not. If any of these cases gets a sympathetic hearing in the County Court, which is more and more likely, and the Judge does agree that RPI is an unfair contract term, the Pubcos are well and truely STUFFED !! Just stop and think for a nano second. ALL Pubco leases and a horrible number of Brewers leases (Greene King ,Batemans,Everards etc,etc,) are all totally dependent on RPI to screw their Tenants (sorry,er,Partners) into the ground when trade is slipping away and overheads are marching ahead at say,at least 6% a year. The basis of valuation is still the nationally accepted Profit Test so PB is told.Profit erosion is as plain as a pike staff and there is a very strong chance that the Courts will also see it that way.

Pubcos/Brewers be very scared, very scared indeed. If this line of thinking does gather credibility your days are well and truely numbered.! Whats called a busted flush.

Yes, dear readers, you heard it here first !!

I think on that note I might even pull myself a rare pint while on duty. It will last all night !

Pot Boy.

(Editors Note;Don’t like to make Pot Boy any more big headed, but he does have quite a stunning point. Please do not under any circumstance agree to a Lease Renewal without taking professional SPECIALIST LICENSED PROPERTY advice from both Commercial Lawyers and Chartered Surveyors. It will for sure cost some sort of fee if you want detailed advice and representation, but it could easily save you thousands and thousands in getting the deal right. Do not be bullied !)

“This site  is a privately funded website and growing in readership every day. To achieve a wider recognition the Editor would welcome cross referencing back to Barrel Dregs postings through other Blog or Websites. Information about our industry has so much greater power if more people are kept informed. Many thanks if you would be good enough to do this”.

You no longer need to go to www.buyingapub.com just click on “Barrel Dregs” on Google.

The views expressed are not necessarily the editors and www.buyingapub.com accepts no responsiblity for them, we do try to avoid offensive or litigious statements being made.

Alliance Online Catering Equipment – suppliers of Pub and Bar Equipment to the UK trade.

Barrel Dregs, sequel to BD No 64 (83)

 

Pot Boy is more than chuffed at the continuing daily expansion of the readership of Barrel Dregs and the increasing number of messages that come in from all parts of the Country.

Very heartening and thanks to one and all.

Keep it all coming as your identities and case histories are safe and sound.

We now have  a complicated double Catch 22.

Bit of background first.

Pot Boy passim No 64 was a precis of a long tape recording sent in strictest confidence.

 No names,no pack drill and the Pubco was not identified as were none of the people involved.

Well shock horror when PBs Editor was contacted the other day by The Oval Man, hot foot from discussing Pot Boy with the No 2 in a Pubco (“Igor”) who demanded to know both the identity of Pot Boy plus the identity of the beleagured Tenant and the release of the tape in question.

Well go swivel “Igor”!!

First,Pot Boy NEVER EVER reveals his sources.

They stay buried and will always be so.

Second , the Pot Boy identity stays as evenly BURIED in the Licensed Trade with feet in both camps, one lease and one freehold.

(Ed.”.I think we will call it a day there !”)

 Next, that piece 64 must have hit a very raw nerve to get the urgent request that it did.

This raises the first Catch 22.

If the Pubco Director’s cap fits so neatly and he  thinks he knows who it is, why not give the offending mortal the boot.

Problem !!

Pure conjecture , but the guy might just be getting spectacular results for the Pubco by again and again using the same appalling tactics that were confirmed in piece 64.

Heaven knows, he might even be headlining the rent success story in house for exceeding targets.

Turn a blind eye and let the results keep rolling.

Sod the Tenants, think of the toxic debt mountain and troughing solid bonuses.

The Pork Barrel wins yet again.

Should he go or should he stay ?

Difficult if the Corporate hand is not forced.

Let sleeping dogs lie.

 What if the true identities are , by consent of the Tenant, allowed to came out ?

 The next catch 22.

The Tenant is rightly concerned that the Pubco will easily bear a massive grudge if the good ‘ol boy concerned becomes a sacrificial lamb and is for expediency fired as “a rogue element” to keep the corporate image squeaky clean.

Discourages the troops doncha know.

Although the blind eye is always turned,any of his colleagues might be caught out by a steerwise Tenant with a hidden tape recorder.

Tatty Bye safe job, no company car, no pension and no laptop.

What chance of easy employment for a failed BRM.

Well work that one out with a pencil !!

 The outwards corporate image is all and BRMs seen as failures are but cannon fodder !!

The Tenant is no fool.

The Corporate memory is exceeding long.

Remember Bernie and Delores Creehan, they were effectively black listed for ever more as a result of standing up and being counted.

Was it truely worth it ?

 Good question.

Todays Pubcos are if anything more vindictive so I don’t blame the Tenant in piece 64 for staying beneath the radar.

So neither side has any real incentive to “fess up”.

Sort of Catch 44 !

Another day another dollar and more barrels to change.

Love the polycarbs,they are so much lighter !

 Pot Boy.

Comment from Ed, there is at least one other cases very similar to No 64 with another company, my advice would be keep the tape safe and I would suggest that it might just make the company take large steps to ensure that it’s BDM’s etc act responsibly, if not it is one for the Select Committee at the right time.

Comment from Barfly, I have been subjected to recrimination for exposing the truth and my advice is like Pot Boy’s keep your head down until you are sure that you cannot be got at and use the information where it will be most effective at the right time, if you need to. The main thing is use your mobile phone or get a small tape recorder and record every conversation with any company representative that you do not trust implicitly, for your own peace of mind. I see too many people who have been promised everything and received nothing. What happened to honesty?

“This site  is a privately funded website and growing in readership every day. To achieve a wider recognition the Editor would welcome cross referencing back to Barrel Dregs postings through other Blog or Websites. Information about our industry has so much greater power if more people are kept informed. Many thanks if you would be good enough to do this”.

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The views expressed are not necessarily the editors and www.buyingapub.com accepts no responsiblity for them, we do try to avoid offensive or litigious statements being made.

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Barrel Dregs, another saga from our serious pub buyer??? (81)

 

We have just completed a trilogy of viewings on three of Admiral’s disposals……

We know that Admiral began life by buying the dregs from the big pubcos and have already viewed a number of those. One would have thought that part of their business plan would be to refurbish the worn out and underinvested buildings prior to letting them to new tenants but, it would seem, not a bit of it.

Firstly, a community pub in one of the old mining communities in Wales. Currently on TAW and a credit to the current lessee who has made a good start cleaning the place up. The trading area is clean and tidy and, on our visit had a number of customers enjoying the hospitality. The cellar was clean, fresh and tidy. An obvious pointer as to why there were regular customers. The living accommodation was also showing that efforts were being made. It had a small function room awaiting long overdue refurbishment. The lessee had invested in completely refurbishing the kitchen making it clean and safe ready for the introduction of a food offer. Externally the place was typical pubco. Shabby and peeling paintwork, grass overgrown and in need of some minor building repairs.

The second, another Welsh pub, was in stark contrast to the first. Although the sales literature does not specifically say “vacant possession” it does not say “investment opportunity” or “sitting tenant” and most definitely did have a tenant with a number of years still to run on the lease. We were informed that most of the furniture, inside and out belonged to the tenant and that it would be leaving with her should she not receive a satisfactory offer on them following the sale. It further appears that the first she knew about the sale was a letter stating that the pub had been selected for “possible disposal.” Within days the local valuer (a friend of the lessee) arrived to value the place and was astounded that no one had actually told her that the pub was, in deed being sold from under her feet.

Words fail me that a supposed ethical company can treat one of their tenants in such a way.

The trading area was pretty uninviting (possibly deliberately and, who can blame the lady) badly in need of redecoration and refurbishment. As for the kitchen, I would not be prepared to use it without a complete clean at the very least. As with most of the pubs we have viewed, the cellar was as it should be – clean and tidy. The living accommodation was in reasonably good order and homely. (nice to see) Externally, the place was a mess. The usual paintwork problems, slipped tiles and generally unloved, underinvested and uninviting. The lessee also told us that the drains were a complete shambled, needing rodding on a regular basis in order to stay clear.

My final offering in the Admiral Taverns gallery of shame is a small pub in a Herefordshire village. This is currently being run under management with vacant possession on completion. It has two large paddocks in addition to the building. One paddock is used, and has been since 1986, by the local cricket club. No formal agreement exists on their use of the land and the chairman of the club tells me that Admiral have shown no interest in making any formal arrangement despite numerous attempts on their part. They have a water supply tapped into the pub’s and as far as we could ascertain paid nothing for this. The other field has electrical hook ups for caravans and we believe licensed for that use. Both fields are outside the “build envelope” of the village and as such must remain fields. (not a developers lot then!)

The trading area of the pub is divided into two parts by the “kitchen” One side is the locals bar and as always would benefit from re-modeling and decoration. The other side is a function/restaurant that is largely unused – the locals don’t like to drink in there and the kitchen certainly would not pass as a commercial kitchen making a food offer impractical. The toilets are about adequate. The accommodation is spacious but in need of complete redecoration and some refurbishment. Externally there is some re-pointing required and most of the barge boards need replacing. A coat of paint over the years would have prevented this.

In spite of all this we made offers on this one. There was great potential with the pub being unopposed and a number of teams waiting to return when things stabilized. Our offers were well below the ridiculous asking price and every offer was rejected. (My partner is firmly of the opinion that they were not passed on and the agent thought we would keep upping the offer – wrong, we walked away)

As a small addition in an attempt to redress the balance and give hope to other would be pub buyers. We have seen a wonderful pub that is an absolute credit to it’s owner of 41 years. It is advertised on Sidney Phillips’ site, ref :- 33825. We could not find a spot anywhere in the place that needed a lick of paint. It is well laid out and easy to operate. There is a huge beer garden and equally large car park.

The downside is that it is a couple of miles outside the village along a typical Welsh lane with inclines to 1:3 and quite narrow. As a consequence it is trading very gently and open lunch and evenings. With an experienced landlord possibly as a destination food house, (camping is another possibility) we think the place could fly away. Beyond our current skills to do it justice unfortunately otherwise we would have made an offer on the spot. A real gem!

Back to the computer and agents endless bull.

Oh for a truthful agent with sensible prices!

Pump Handle

“This site  is a privately funded website and growing in readership every day. To achieve a wider recognition the Editor would welcome cross referencing back to Barrel Dregs postings through other Blog or Websites. Information about our industry has so much greater power if more people are kept informed. Many thanks if you would be good enough to do this”.

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Barrel Dregs, Pot Boy doesn’t believe the BBPA stats on Pub Closures???? (80)

Whose telling Porkies??????

There has always been a shroud of mystery or a whiff of something not quite right over certain BBPA statistics.

Pot Boy has always been suspicious of the BBPA mantra peddled by Mark “Mad Max” Hastings and his boss the “Shake and Vac Lady”,Brigid Symmonds OBE.

We have been told over and over again that the Tied Leasehold estate was in sound health because free of tied pubs were closing at least at double the rate of supply tied pubs.

No empirical evidence was ever produced and statistics were oft repeated that the BBPA Party line was not only correct but set in tablets of stone.

This of course totally backs up the caring nature of the BBPA membership as it just happens to include all the Companies/Brewers/Pubcos that run, guess what, Tied Estates.

So their collective caring sharing Business Model can only be correct in stopping the evil rot of closure.

Er,well not quite.

In fact it seems” Mad Max” and the “Shake and Vac Lady” have been peddling some quite substantial pieces of misinformation that would appear to vindicate the Pubco /Tied business model.

Yes Siree !!

CGA Strategy,(www.cgastrategy.co.uk) who are some of the sharpest tools in box when it comes to in depth analysis of the On Licensed Trade have recently published some statistics on Pub closures.

It seems the current NET rate of closures is running at between 30 and 35 per week.

Still a horrifying 1560 to 1820 every year.

The rate of closure peaked at 50 per week and averaged 39 a week in 2009.

The 2009 figures are NET of new openings which CGA computate as 60 closures against 21 openings, ie,net loss in 2009 of 39 pubs per week.

Within the 39 closures each week are 22 leases,12 independent or freehouses, and remarkably, 5 managed houses.

The data does not include the supply tied CHURN which shows up nowhere because although the business may have gone to the wall, the pub reopens again, so no stats !!

To Pot Boys mind new openings, ie brand new pubs, rarely if ever comprise supply tied leaseholds.

So CGA have pinpointed 60 closures per week, ergo, 3120 pubs a year going permanently out of business.

This also does NOT include the supply tied CHURN stats which some say are running at double the rate of permenant closures.

The gross figure of 60 comprises a minimum of 56% leases, or 34 pubs.

It is a shrewd guess that the majority of the gross figure are Tied Leases.

Add to that the CHURN rate (never ever revealed) and you can see the BBPA stats for what they are worth.

Er, not a whole lot !!

Sort of puts into perspective the general tone “speaking for the industry” that we get from the caring BBPA.

While the truth was getting its boots on the misinformation has sprinted half way round the world.

Well what a surprise !!

 Off to inspect an award winning cellar South of the River.

 Pot Boy.

Ed…”.Pot boy, why ‘Shake and Vac?’ ”

 PB…”Because her aim is to clean things up, and some say shes well fragrant, although like the original product, more wonder if it will make any odds in the long run”.

Ed..”Nuff said!”

Note:- The TAW and Closed Reasons Tracker for one major Pub Co showed over 2000 enforced changeovers (Churn) in the year prior to the Select Committee Hearings and the recession, not a good recommendation for the Pub Co Model.

“This site  is a privately funded website and growing in readership every day. To achieve a wider recognition the Editor would welcome cross referencing back to Barrel Dregs postings through other Blog or Websites. Information about our industry has so much greater power if more people are kept informed. Many thanks if you would be good enough to do this”.

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The views expressed are not necessarily the editors and www.buyingapub.com accepts no responsiblity for them, we do try to avoid offensive or litigious statements being made.

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Barrel Dregs, BII and Qualifications (79)

The BII would appear to be encountering a number of problems, possibly brought about by conflicting interests of some of the Directors and others in positions of influence or a lack of in depth, real understanding of how the Industry has been manipulated from a secure profitable Industry to a highly precarious one for the people generating the real income, licensees selling beer and products.

Membership has dropped dramatically, which for a members organization is catastrophic.

The demand for qualifications has also dropped, because of the failure rate within certain companies leasing pubs, many would be publicans are terrified of committing themselves to such a precarious occupation.

The economic situation has caught a number of companies out and left them seriously financially exposed, spending money on qualifications and extended training is an  expense to be avoided.

This in itself is short term trading and ignoring the long term consequences.

The point that I would like to make, the BII have three key levels of qualification.

Graduate (GBII):- Having passed some qualifications and no experience.

Associate (AMBII):-Having passed some qualifications and had a minimum of a years managerial experience.

Full Member (MBII):-Who has passed some qualifications and three years managerial experience or minimal qualifications and at least four years managerial experience.

I would like to see the managerial experience as profitable trading.

Every professional institute in the world has roughly three levels and similar qualifications to become a Full Member.

The Licensed Industry despite being one of the world’s oldest businesses ignores any level of professionalism and has one category, in rental terms Competent Operator or Reasonably Efficient Operator or Average Operator as approved by the BII in a recent Code of Practice, none are defined in technical terms and allow any company to get away perfectly legally with the minimum licensing requirement, the NCLPH, a one day course.

The majority of companies give a few days more training, but this is totally inadequate if we want the best people and to turn the Industry back into a career for life.

Some of the thinking Regional Brewers want to see professionalism return to the Industry, most have been influenced by the so called “Pub Co Model”, sadly to their detriment and are finding it difficult to return to the core business of selling beer and not being property companies, for fear of upsetting shareholders and balance sheets.

They have to stand back and view their long term prospects, property values and speculation will be very precarious for the next decade, certainly funding will be based on trading profitability and not over valued estates.

The fault of minimal qualifications could lie with the BII and its inability to get the Industry to accept levels of professionalism for their tenants and lessees, in providing viable rental levels and quality of pubs that suit their ability i.e. a training pub for GBII’s for at least a year with additional instruction, then promotion to a more worthy pub to suit their ability and guidance AMBII, finally, if they make the grade to a serious pub where they become a Competent Operator, MBII after a couple of years.

I would like to stress that rents should be linked to ability and viability within these pubs at all stages, plus a flexible policy to allow operators to move to a pub that will develop their talents, too many people fail within eighteen months because of unsustainable rents, many are incompatible with running a pub, we have to return to selling products and ensuring that the majority of pubs are profitable,  the emphasis has to be on professionalism.

To return to the BII, following some discussion with other senior BII Members, the current influential management would appear to have totally failed to grasp the relevance of the BII levels of membership and what their real importance should be in the Industry.

Mary Curnock Cook desperately tried to attach importance to BII levels of qualification, post nominals, with very little success, because the Industry was stable and the majority of good companies had training systems that worked, but the BII qualifications were optional and not essential.

At that time the BII categories fitted in well and the take up on all levels of membership was good, the only drawback were people questioning the advantages and extra cost of being a full members rather than a graduate or an associate, the relevance and importance of being a full member should be an achievement not bought.

The growth of the Pub Co Model leases destroyed almost anything that involved anything other than initial training, the lack of being able to move up the pub ladder as it used to be, combined with unsustainable rents and draconian trading conditions, virtually destroyed any mass movement within the industry to promote staged development and training.

Hard pressed lessees can ill afford to take time off for further qualifications, even when the training has already been paid for to the Pub Co.

The Pub Co Model is now seriously discredited, even one of its founders who has left the Industry recently stated that it was unsustainable and to try to perpetuate it, is financial folly.

There are thinking Regional Brewers out there who want to return to serious professionalism within the industry and have the best people and operators working for them.

The Pub Co Model came in quietly and spread like a canker, engulfing the industry, we need to step back and have staged levels of professionalism linked to BII members qualifications, with supportive companies, starting with a few and hopefully growing to return to a truly professional industry.

If those companies can be seen to have the real professionals and top operators the BII would regain serious credibility.

Hopefully putting the BII and the Industry back on course.

Sadly the major Pub Co’s will not follow this course, but there are a number of Regional Brewers who would like to achieve this and they may be able to lead by example, by encouraging the best operators or people with potential, back into the Industry.

Cellarman

“This site  is a privately funded website and growing in readership every day. To achieve a wider recognition the Editor would welcome cross referencing back to Barrel Dregs postings through other Blog or Websites. Information about our industry has so much greater power if more people are kept informed. Many thanks if you would be good enough to do this”.

You no longer need to go to www.buyingapub.com just click on “Barrel Dregs” on Google.

The views expressed are not necessarily the editors and www.buyingapub.com accepts no responsiblity for them, we do try to avoid offensive or litigious statements being made.

Alliance Online Catering Equipment – suppliers of Pub and Bar Equipment to the UK trade.