Statutory code for Pub Co’s and Tenants
The Government consultation on a statutory code and adjudicator for the pubco-tenant relationship could be launched within the next week.
The consultation expected to last only six weeks depending on the Government timetable.
It is thought likely it will include a request for feedback on the option that a tied tenant should be no worse off than a free-of-tie tenant. This means that any pubco lease would be available free-of-tie with a rent at open-market rates.
This issue is likely to be the most controversial within the consultation document. It is expected to ask for comments on a range of issues, including the suggestion that the code covers only Pub Cos with more than 500 pubs, the future of the Pubs Independent Conciliation and Arbitration Service and how it might work with an adjudicator, as well as the extent of the powers an adjudicator should have.
This brings us back to a plethora of Pub Co’s with less than 500 pubs or a renamed major Pub Co with a load of pubs being called restaurants, diners, fast food outlets and very few being classed as tied pubs.
The Department for Business, Innovation & Skills is aiming to get the new legislation mentioned in the Queen’s Speech in May, industry insiders claim.
In February, the employment relations, consumer and postal affairs minister Jo Swinson said the Government was forced to intervene in the pubco-tenant relationship after evidence showed a “stalemate” within the industry.
The Campaign for Real Ale’s (CAMRA’s) head of policy Jonathan Mail said: “The big fight will be over the tied licensee being no worse-off than the free-of-tie licensee. At the moment, the licensee takes the risk and gets little of the reward. The pubcos just have not delivered.”
Federation of Licensed Victuallers Associations (FLVA) operations director Martin Caffrey was more sceptical about a free-of-tie option.
He said: “We want to see a fair division of that profit and free-of-tie discounts coming down through the pubcos to their tenants. [But] we believe that, if tenants try to negotiate a one-off deal as a free-of-tie opera-tor, they may be in a worse position.”
He also raised concerns about the proposed 500-pub limit, which would affect just six pub companies — Enterprise Inns, Punch Taverns, Marston’s, Star Pubs & Bars, Greene King and Admiral Taverns — claiming “there should be one rule for all”.
British Beer & Pub Association chief executive Brigid Simmonds said: “We will wait and see what is in the consultation.
“While it probably will include a question about a free-of-tie option, we have real concerns about the unintended consequences of going down this path.
“It is vital for the trade that the tied model works well as a successful business model for both partners — and it is not in their interests for it to be abused. We are, therefore, fully prepared for the model to be tested as part of the consultation.”
The RPI, an iniquitous system used by landlords of hiking rents above inflation, is being replaced by the RPIJ, this article shows how rents can be be further hiked beyond practical viability, perfectly legally, along with a vast number of other essentials, “What a Rip-Off”.
“Office of National Statistics / RPI
News reaches us from the Office of National Statistics in a pronouncement on 19 March 2013, that the Retail Price Index (RPI) will suddenly be replaced by the RPIJ which stands for ‘Retail Price Index Jevons Method. It appears that the RPI calculations were both inadequate and inaccurate to truly reflect inflation.
It appears that the Office of National Statistics which calculates inflation by looking in detail at the changing price of a representative sample or basket of around 700 goods and services, will now refine the long established RPI calculation system for a different formula which, surprise surprise, calculates a final inflation figure that is consistently lower than that which has been long established under the RPI standard calculations.
For example, the ONS confirm that in the past 10 years, the basket of prices has increased by 31.9% under RPIJ, compared with 38.1% using RPI.
Not that we have the vaguest understanding of the technicalities underlying this startling confession, but it appears that since the RPI was launched in 1947, the average inflation price has been using the “Carli” method. RPIJ uses the alternative and more accurate Jevons method.
This takes us directly to the insidious annual rent rises in a huge number of pub leases that are automatically linked to increases in the RPI as it has hitherto been calculated. It appears that this insidious annual rise over the last 10 years is out of kilter with reality. It is suggested that you don’t hold your breath hoping for a refund from your Pubco / Brewer as the rock solid defence is that they have acted in accordance with established principle which, after all, only changed when the ONS made their pronouncement on 19 March 2013.
In February, the RPI was 3.2%. However, the RPIJ for the same month is actually 2.6%. Please ensure that you specifically remind your Pubco that under the terms of your existing lease, RPI does now not exist and we suppose, a commercial side letter will have to be issued by your freeholder to make the correction into RPIJ.
Consumer Price Index (CPI)
Regarding the reality of RPIJ as detailed above, it was interesting that the Punch Growth leases were heralded as being of significant advantage over standard Pubco leases as the automatic annual rent rises were proposed to be linked to CPI. As it would appear that we have now had the universal replacement of RPI with RPIJ, it is interesting to reflect on how the CPI is actually calculated. It transpires that the ONS has confirmed that CPI in February rose to 2.8%, its highest level since May 2012 which puts it almost exactly on par with RPIJ which is actually lower at 2.6%.
It still does not excuse the basic system which automatically ratchets up rents, having no regard to the profitability of the property which in the current and continuing recessive times, still is a negative rather than a positive”
The ONS stated that as from 19th March the “old” RPI was null and void.From that date RPIJ came into effect.
An extract from This is Money, straight from the Treasury
Families may have been ripped off for decades by annual increases in bills linked to inaccurate inflation figures.
At the same time as the Office for National Statistics (ONS) published the CPI figures it was also forced to admit its retail prices index (RPI) measure was inadequate and had been replaced.
The ONS said the measure had been swapped for the ‘improved’ RPIJ
Inflation woes: Consumer price index inflation is likely to rise over the next couple of years before falling again, according to forecasts (Source: Bank of England)
RPIJ will be based on the same basket of good used to measure RPI currently but it uses a different formula to calculate a final inflation figure – which turns out be significantly lower.
And the difference in the calculations have revealed a huge gap between the inflation measures.
In February, RPI was 3.2 per cent, but RPIJ – published for the first time yesterday – was 2.6 per cent.
Over the past decade, prices have increased by 31.9 per cent according to RPIJ, but 38.1 per cent using RPI.
Since RPI was launched in 1947, the ONS has worked out average prices using the ‘Carli’ method.
But RPIJ uses the alternative ‘Jevons’ method – which explains the RPI – J
Other countries that used the Carli method, such as America, Canada and Sweden, have axed it. Britain is the last to do so.
Bu RPI is still being used to work out annual increases on many essential household bills, such as water bills and rail fares.
The Campaign for Better Transport showed train fares would be lower this year if RPIJ had been used instead of RPI.
A season ticket from Milton Keynes to London was £4,408 in 2012. This year, the same ticket costs £4,620. But it would have risen to only £4,562 under RPIJ, a saving of £58.
Stephen Joseph, chief executive of the Campaign for Better Transport, said: ‘There are two main problems with the way Government calculates rail fares.
‘One is the policy of above inflation hikes, which needs to end, the other is the use of RPI, which now looks untenable.
‘Many regular train users would find themselves paying hundreds of pounds less each year if the more accurate RPIJ measure were adopted.’
The impact on water bills is similar. The average water bill increased by £13 this year to £388, but it would have risen by £11 if RPIJ had been used. This difference would be hugely significant if applied over a period of many years.
A spokesman for Ofwat, the water regulator, said: ‘We have committed to using RPI as the measure of inflation up until 2020.’
Please view our other web site for Information, Help and Advice www.usenumberone.com
“20-20 Voice” Cancer Appeal
A worthy cause that needs your support, unfortunately several friends and colleagues have suffered with this nasty cancer.
What do the actor Michael Douglas, the footballer Bryan Robson and the cricketer Geoffrey Boycott have in common?
Is it Fame? Fortune? Wonderful careers?
Yes – they have all that! But there is something far less glamorous that ties these individuals together.
For all their positive notoriety in the press, how much media coverage did they receive when it was confirmed that they had throat cancer? The answer is hardly any at all and this is the major problem with Head & Neck cancers, even though instances have dramatically exploded by 600% over the past decade!
It is hardly surprising that Head & Neck cancers take a back seat. There is so much advertising and support through events like ‘Race for Life’, ‘Pink Ribbon’ and ‘The Moonwalk’ just to name a few, that publicise and raise money for Breast, Prostrate, Bowel and Lung cancers. These charities are all vying for your cash with vigour and that can leave little space for public awareness of the traumas of Head & Neck cancers, but we at “20-20 Voice” aim to change that as soon as possible.
It may surprise many to know that of all the cancers, we (Head & Neck cancer sufferers) have the best survival rate as radical surgery is usually the only option. We undergo a 10hr surgical procedure (laryingectomy) to remove the voice-box. Apart from this being such a ‘major surgery’, it leaves the patient soundless; totally unable to communicate vocally. This is a major shock to the system, be assured of that!
In hospital the ‘lary’ (laryingectomy patient) is on safe ground as the nurses & doctors are fully recognisant of our condition. But once away from that safety zone, a whole new, sometimes very difficult world awaits. Can you imagine not being able to telephone for an ambulance in an emergency? How to comfort a loved one is distress? How to gain attention when someone has turned away from facing you?
It has amazed myself, and others, just how underfunded our ENT cancer units really are as the NHS has suffered cutback after cutback thanks to political dysfunction. As the money is withdrawn, modern technology however fights on and now not only has the ability, via a RhinoVideoLaryngoscope, to video deep inside mouths & throats, but also to project the images onto a 30”, full colour, TV screen (which is 15 x’s larger than was previously available) thus allowing consultants to espy any cancerous cells normally hidden deep within us. This, of course, ensures quicker diagnosis leading to more immediate treatment, which in turn saves the patient time & stress (& probably the biopsy process). The hospitals save valuable ‘man-hours’ creating an all-round, win/win situation!
The jackpot, of course, to all of this is earlier detection catches the cancerous cells at an early stage, immediately making the problem area more treatable without the use of major surgery! Voices can be saved!
What price would you put on your voice?
Here comes the ‘But.’ The prohibitive cost of a brand new RhinoVideoLaryngoscope! At £50,000 per machine, it is no wonder that under-funded hospitals have to beg, scrape & borrow to be able to acquire such equipment. “20-20 Voice” Cancer Appeal intends to change that through creating public awareness and major nationwide fundraising.
This is where we ask you to get involved. The greatest fundraising industry of our time is the hospitality sector where a simple “20-20 Voice” collection tub on a bar can easily raise £200-£300 per annum. We need to appeal to as many pubs & clubs as possible to support our quest and ensure that treatment is available for this ‘silent cancer’ no matter what part of the country a sufferer may live.
We are receiving requests for equipment on a daily basis so we need to raise more funds as quickly as possible. We have willing supporters holding Rummage Sales (April 13th Loughborough), Mkt Harborough street collections (April 27th), “20-20 Voice” Spring Disco (May 25th), Leicester à Skegness bike ride (Aug 17th). But it is not enough! We need more supporters. We need your help!
If you feel that you can support us please contact me (Phil Johnson) at firstname.lastname@example.org and we’ll soon see what we can do together to raise funds to save lives & voices!
“20-20 Voice”Cancer Appeal
Comment: Phil the Chairman has a voice box and agreed to give me a call one evening, I needless to say forgot.
The phone rang and I picked it up and a totally mechanical voice tried to talk to me, I damaged my hearing in a past life, drilling and blasting rock tunnels, and assumed it was a canvassing call from some offshore con man, finally putting the phone down.
The phone rang again, a few minutes later and a clear ladies voice said she was calling from 20-20, because Phil had tried to call me.
The terrible realization that I had put the phone down him, left me speechless and then totally apologetic, how could I be such an idiot to not realise.
Fortunately Phil was obviously well used to it and laughed when he realised, he couldn’t talk and I couldn’t hear, we had no chance of a constructive phone conversation, add my Wife in, who had an eye operation, she couldn’t see, Phil couldn’t talk and I couldn’t hear, we were like Three Wise Monkeys and we all laughed, but Phil’s story is a great achievement and not one that I would like to go through.
If you feel that you would like to support this very worthy underfunded charity, by having a collecting box in your pub or restaurant please contact Phil.
New Products, interesting drinks, good value wines, food products and any other things that are of help or interest to people in the industry.
Give me a factual account, without any commercial blurb and I will publish the article on my site www.buyingapub.com with details of your company and a link at the bottom of the article.
I like good informative articles, because they get read, if they have commercials all the way through them, they don’t, a touch of humour also helps.
Articles in Word and no pictures, we try to provide information.
If that’s of any help to anyone.
Email your article to email@example.com
Howard & Co., Chartered Accountants, www.gmhoward.co.uk, 01284 704363
My beef about “The Quality Factor”
Ever since this recession started I have resisted advising landlords of the easy option. Sure there is a market for the £4.49 “eat as much as you can school dinners market” But let me ask you this? If by lord of miracles if we were all given a million pounds tomorrow where would these outlets offers and Groupon style deals be?.
“Perceived value” sales bundles means you can protect cash margins ,but requires some hard work acquiring promotional stock from your suppliers.
3 course Mothers/Easter day menu with free drink, flower for mum or Easter egg for kids.is adding perceived value, whilst still attaining a high price point.
I predicted some time ago that in the future there will be a renaissance in small independent quality butchers, grocers and farm shops as we get more and more cheesed off with grocery giants offering bland tasteless vegetable products from the other side of the world, with fruit so battered and bruised we have to throw half of it in the bin.
There has been too much David v Goliath pressure by the big supermarkets on the likes of farmers to produce “product for peanuts” whilst they continue to make massive profits, and that’s why when you compromise on quality we all start wondering whether we really did eat a piece of Shergar!!.
Let it be a lesson, that in the end quality wins, and maybe just maybe a trip down your country pub for a homemade steak pie and with meat locally sourced from the farmer in the village, and a pint of hearty ale will allow us to win the hearts and minds of the “value” customers defecting from this horse meat scandal.
The Pub Specialist
Buying a Pub or Bistro
The Common Sense Guide to Buying a Pub is now available to purchase as an ebook through www.smashwords.com. for $5.99 or UK equivalent approximately £4.00, depending on the exchange rate.
In addition you can read some the book before you buy, the book was written for the UK Market, but a lot of the general Business Information is International.
The biggest problems in any business are time and money, if one piece of information in this ebook saves you time or money, the cost of the book is minimal.
To read the whole book on line, click on this Link,
If you would like your own copy, please go www.smashwords.com.
Allergens have been identified as a possible source of problems Read More
Scores on the Doors an essential for all businesses involving Food Hygiene, Read More
Credit and cash Flow More
Energy Performance Certificates and M.E.E.S.
We have a large range of FAQ’s, Check lists on buying a range of businesses and a considerable number of supportive companies specialising in the topics that you need to run a business, especially licensed property. More
Buying a Restaurant, Buying a Bistro,
Coffee Shop, Café, Small Hotels
The Common Sense Guide to Buying a Restaurant is now available as an ebook through www.smashwords.comand their outlets for $5.99 or the equivalent UK Value approximately £3.75. The reason that we have done this is to get the essential information to a wider audience, in the hope that more people will find it easier to make a success out of their businesses.
In addition you can read some the book before you buy, the book was written for the UK Market, but a lot of the general Business Information is International.
The biggest problems in any business are time and money, if one piece of information in this ebook saves you time or money or both, the cost of the book is minimal.
MORGAN & CLARKE MARCH 2013 NEWSLETTER NO. 18
Pigeon House, The Broadway,
Oakridge Lynch, Stroud, Glos. GL6 7NU
Email: firstname.lastname@example.org Phone: 01285 719292
(Also at: London, Cardiff, Matlock, Braunton, Lewes)
It’s a strange feeling when you get bitten in the backside by something that is so obvious that you should have seen it coming. That rather big bite is called ‘midweek trade’. During February, almost without exception nationwide, Clients have suddenly come to the realisation that their midweek trade has all but disappeared. We did some further research and asked the specific question rather than waiting to be told. Again and again we had the same answer – “where has it gone?”.
A small example that underscores the position is as follows.
Middle-aged husband and wife, children long since flown the nest, welcoming supply tied village local that they had the habit of visiting three times a week on generally a Tuesday night and Friday night and Sunday lunch times after they had walked the dog round the village prior to coming home for a well earned Sunday roast. He always has a pint of premium bitter and she has a generous glass of white wine. They only ever had two drinks each at any one pub visit. Those two drinks were £7.85 per round, or £15.70 per visit. They suddenly realised that they were spending £47.10 on their three visits a week, or £2,449 per year. Looking at the price of the weekly shopping bill and petrol prices, they decided to cut out the Tuesday night. Once you lose the habit, it does not get re-kindled. Their midweek visit has effectively now gone for good.
1. The Statistics
With the acknowledgement of some help from CAMRA, the following statistics are particularly telling:
£20,000,000 – the hole in the Treasury Revenue caused by the Duty Escalator.
42% – the increase in Beer Duty in the last five years.
18 – number of pubs still closing weekly as the pub trade suffers.
180 – full and part time jobs lost every week due to pub closures.
It is a sad fact of life that the increase in Beer Duty has resulted in a massive fall in taxation revenue rather than generating extra income for Government. The counter-argument runs – if on 20 March taxation remains the same or even increases – that the health lobby will argue vociferously that the NHS is being over-burdened by drink-related referrals. It is of small comfort that the UK is now the second highest beer tax regime in the whole of Europe, just after Norway. As our simple example showed above, the increase of 42% in beer taxation since 2008, would indicate that going to the pub is now becoming a luxury and is almost looked upon as an unaffordable social activity. If the taxation position does not change and VAT is not reduced on restaurant and pub sales (fat chance of that happening!), the only way to ensure pub viability is through the substantial reduction in rent or a massive increase in product discounting, which are the only two flexible items that are capable of change in a profit and loss account.
We thought you might be interested in anecdotal evidence from Michael Axford of the Goat Inn, St. Albans. Michael wrote in and said:
“Just thought you may like to know that Total Gas and Power are not opening any new accounts for pubs any more. Just tried getting a quote for electric and I already have a fully paid up, never missed a payment account with them, for gas. Same thing happened with HSBC when we asked them for a new Business Account with a small overdraft. HSBC policy is that they will not touch any pubs that might need an overdraft facility, however small.
I guess it’s just a sign of the times………”
We are forever being told by the major Pubcos that the provision of hot plated food is an automatic “traffic generator” and certain to add profitability to any trading operation. This automatic mantra should be compared with an ever-increasing level of pub food operated under franchise rather than direct operation, which we are seeing increase week-on-week. This always generates the automatic response from the Pubco Retail Field Staff that genuine income is being lost and that if you are professional, you can always run a highly successful direct catering operation.
Whilst we always support and applaud successful food operations and indeed there are still a large number out there, thank goodness, the following illustrates that even highly geared professionals are not automatically guaranteed a smooth ride.
The 42 strong seafood change, Loch Fyne Restaurants owned by Greene King, has recently reported a decline in pre tax profits from £1.36m down to £414,000 for the year ending 29 April 2012. Overall turnover dropped from £49.2m down to £46.5m and the operating profit fell from £1.6m down to £769,000. The reduced trading performance over a relatively small number of sites, was attributed by a Greene King spokesman to: “a combination of site-specific trading circumstance and the general weakening of the UK consumer environment”.
Telling observations from a highly professional and motivated restaurant group.
4. Client Reaction
Following the conclusion of negotiations for a significant rent reduction at the Bell, Caerleon, just outside Newport, South Wales, our Client Lee Taylor wrote the following:
“I am more than happy for you to use us in your literature, in fact I insist upon it. I would say that lessees should always have their own independent valuation completed and this should then form the basis of the negotiation. Do not provide any information that they are not legally obliged to and always see it through to the end with arbitration used instead of PIRRS.
I would also advise the provision of a small fighting fund so the means are available to take the fight to them. As inevitably when a rent reduction is realised over the term of the review period, the initial outlay is a very small percentage of the overall monetary saving which is all bottom line profit.
Don’t be bullied, coerced or misled into accepting any settlement that you know not to be fair and equitable. Thank you very much for all of your help. It was very much appreciated”.
The Bell was a standard example of the provision of an upfront, free of charge, strength of case rent review, followed by agreement with a full and detailed Rental Report & Valuation and the subsequent opportunity of a face-to-face discussion with Lee Taylor, David Morgan of M & C and the Enterprise Inns’ Regional Manager. Lee Taylor subsequently finished off negotiations, firmly in line with David Morgan’s rent valuation. Job done!
5. And Finally
Two brief one-liners.
“Alcohol is not the answer but then again neither is milk” and
“Alcohol may indeed not be the answer, it just makes you forget the question”
Best wishes from the Team at M & C
Phone: 01285 719292
Comment from Barfly,
The stark reality is that, the business that a Pub or Restaurant enjoys is it’s market share at that moment of time, any growth in most cases is at the expense of another Pub or Restaurant, the market is shrinking due to legislation, the recession, smoking ban resulting in people drinking at home using cheap super market booze.
As M&C have said the mid week business is declining, pubs used to be open seven days a week, then closed on Mondays, add on Sunday evening during the Winter.
Soon, in rural areas they could be closed three days a week, it all needs innovative change and hard lobbying of your local MP to get legislation changed.