Monthly Archives: November 2014

MARKET RENT OPTION (MRO), should you go Free of Tie?

 

Morgan  Clarke Logos copy

MARKET RENT OPTION  (MRO),  should you go Free of Tie?

The request for an MRO is the wish to be free of supply-tie.   The option to do so is contained in all pub leases and triggers an automatic rent review.   Be warned, however, that until (and if) Statutory Regulation reaches Royal Assent – which could be some time away – there is a very large sting in the tail.   Basically your lease will not alter in its content.  This is what will happen because of ‘understandings’ not contained within the wording of the lease.

  1. The supply-tied leases contain upwards-only rent reviews which currently are not enforced as a result of the Pubco Code of Practice.   That Code of Practice does not apply to anyone who is free of tie.
  2. The Industry Framework Code – which is not referred to in the leases – would be unenforceable in the absence of Statutory Regulation.   It does not apply to free of tie leases
  3. There would be no cheap dispute resolution option through PIRRS.   It does not apply to free of tie leases.   The implication is that arbitration – which is now very expensive – is the only option available
  4. There is no opportunity for complaint to PICAS.       That only applies if you are supply-tied
  5. The conversion to supply-free rent should never be a calculation of replacing the Pubco wet rent.   The rent should only be calculated on the difference or uplift in genuinely sustainable gross profit margin increases which can be carefully calculated.

There are considerable cost and supply choice advantages of being free-of-tie (“FOT”).  However, the calculation as to rent should be considered very carefully before formally confirming the taking up of the option.   Being FOT should be researched as to input wholesale price, particularly as to small local Brewers who do not necessarily give (or can afford) substantial discounts.   Major Brewers – especially of lager brands – can and do give massive discounts compared with the current levels of discount that are being given by Pubcos.

The MRO is getting very close, but needs very careful study and calculation as to its financial advantages.

Government defeated in Commons vote over Pubco market rents:

Propel
Tue 18th Nov 2014 – Government defeated in Commons vote over Pubco market rents:

The government has been defeated in a Commons vote on the control that tenanted pub companies can exercise over pubs.

MPs voted 284 to 269 in favour of an amendment allowing landlords an independent rent review and to buy their beer on the open market.

The amendment to the Small Business, Enterprise and Employment Bill was put forward by the Lib Dem MP Greg Mulholland, who described the “tie” arrangement made between a pub and its owner as an “archaic” and “extraordinary” system.

It is thought to be the government’s first defeat on one of its own bills since the 2010 election. Tim Page, chief executive of the Campaign for Real Ale, said: “Today’s landmark Parliamentary vote helps secure the future of pubs. MORE

 

Beware of Pub Co free of tie Commercial Leases (Barrel-Dregs 271)

 

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Beware of Pub Co free of tie Commercial Leases (Barrel-Dregs)

Travelling in the wilds of East Anglia Pot Boy South dropped in to see an army chum who has been running an Enterprise Inns village pub for a few years. He has made a great success of the pub as an out and out restaurant,deli and cafe with beer sales dwindling to near nothing. Up pops the Regional Manager the other day,all smiles and geniality like a used car salesman. He moans about the lack of beer sales especially draught beer which my chum has now discontinued. MORE

Government moves family brewers back into scope of pubs code

Government moves family brewers back into scope of pubs code

By James Wallin, M&C Report, 14-Nov-2014

Pub companies with fewer than 500 tied pubs have been moved back into the scope of the statutory pubs code but relieved from some of the major responsibilities, following a Government amendment.

£2K Growth Vouchers for Pubs, Government Funded

For businesses looking for advice

On your marks, get set, grow 2015

Could you be on to a 8-1 profit winner!!

The Growth Vouchers programme will deliver support for up to 20,000 small businesses in England, focussing on small businesses who have never sought business advice before.They will be randomly assigned to an online questionnaire or face-to-face business advice assessment.

Some businesses will be randomly chosen to get a voucher for up to £2,000 to help pay for business support in one of the specialist areas. You’ll have to match the amount with your own funds. You can then find a Growth Voucher adviser to work with on the Enterprise Nation Marketplace; you then pay for the services in full and request 50% back from the government.

The Growth Vouchers programme is available to small businesses in England who are actively selling goods and/or services, have a turnover no greater than £45m, own 75% or more of their business, and have 250 employees or less.

Applications run till March 2015

The 5 sectors you can apply

  • finance and cash flow
  • recruiting and developing staff
  • improving leadership and management skills
  • marketing, attracting and keeping customers
  • making the most of digital technology

The supplier can only register into one sector our representative Lester Pyatt the pub specialist is posted in the Marketing attracting and keeping customers, although his coaching programme covers all areas required for a pub outlet.

As an example if you are successful in the ballot system the coaching programme in year one will if followed correctly by the landlord.

  • On a £300,000 net VAT increase
  • Sales increase by +15-20%
  • Minimum of 10k extra net profit guaranteed.
  • The cost of the Pub Specialist coaching programme is £2,500 or £50.00 per week ex petrol and travel
  • Less voucher match funding meaning the cost is reduced to £25.00 per week or £1,250.00 per annum at a cost benefit ratio 1 -8!!
  • All work is covered by professional indemnity insurance
  • We can forward telephone numbers to interested parties who would like to converse with past clients who have taken part in the coaching programme finance and cash flow
  • recruiting and developing staff
  • improving leadership and management skills
  • marketing, attracting and keeping customers
  • making the most of digital technology

 

To register interest in the Marketplace, please visit            www.enterprisenation.com/marketplace

Or talk directly to Lester Pyatt on 07931 238211                www.thepubspecialist.co.uk

 

 

 

 

 

Market rent only’ option ‘unlikely to happen’ says Punch chairman

 

Story of the Day: from Propel by Paul Charity

‘Market rent only’ option ‘unlikely to happen’ says Punch chairman: Punch Tavern’s executive chairman, Stephen Billingham, told City analysts yesterday (Wednesday) he did not believe the so-called “market rent only” option, allowing pub tenants to abandon the beer tie, would make it onto the statute books as part of the pub industry statutory code. The Lib Dem MP Greg Mulholland, chairman of the Parliamentary Save the Pub Group, and MPs from the Labour and Conservative parties tabled an amendment to the Small Business Enterprise and Employment Bill at the weekend that would allow tenants, after negotiation, to pay an assessed “market rent” and buy their beer from wherever they choose. Mulholland claimed the amendment would stop pubcos charging “unfair and unrealistic rents and rip-off prices for beer”. At a presentation to analysts on Punch’s 2014 preliminary results, Billlingham said: “My current view is that the market rent option for pubs is unlikely to happen in the legislation. That doesn’t seem to be where we’re going. The government has said that they don’t want to get involved in economic intervention in the pubs sector – they’ve actually ruled it out. Where the government is heading towards is a statutory code on how we conduct ourselves. While we think that’s unnecessary, we are willing to work with the government to make the code work effectively.” The market rent clause is due to be voted on at the report stage of the Small Business Bill on 18 and 19 November. MORE

 

Industry News:

Business Rates and the Inland Revenue

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Business Rates and the Inland Revenue

Having crossed swords with the Inland Revenue Rating Valuation Officers face to face on a number of occasions, regarding my various pubs Rating Valuations with some degree of success.

In the early days with very little knowledge of rating and a good knowledge of pub viability, whereas the Valuer had a good knowledge of rating and very little idea of the true viability of individual pubs, fortunately at the end of the day viability is the key to a valuation and not the use of Comparables.

These are some of my thoughts on Rating Valuation assessment.

In a set to with one of the Valuation Officers, it was patently obvious that he had no real understanding of the retail business, especially pubs and the licensed sector. MORE

 

 

Pub Co and Developers Dirty Tricks Department

Barrel-dregs 3Pub Co and Developers Dirty Tricks Department

There is nothing legally wrong with a Pubco selling the freehold of a supply-tie leased pub to anyone that they choose.   Although there is a moral implication, there is no legal obligation that the freehold should first be offered to the lessee in occupation.   This understandably money-return based corporate attitude of maximising assets, is stronger than ever in central and greater London and we have witnessed the following – almost now standard – tactics with increased and disturbing regularity.

Pubco sells freehold interest to developer.  Developer marches in to see the tenant and declares that they are now the new owners and “things will change dramatically”.   Shortly thereafter, a letter turns up from the developer’s solicitor declaring that the supply-tie has now been revoked, the trading operations are free from tie and that an automatic rent review will be triggered under the terms of the lease. MORE

 

“The Leopard and his Spots”, a sneaky Pub Co, (Barrel-Dregs 270)

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“The Leopard and his Spots”, a sneaky Pub Co, Barrel-Dregs

Once again a mate of Pot Boy South as nearly been caught in one of the oldest traps in the book, but not quite !

 

Brewery tenancy from which my mate decides enough is enough, nice little boozer with sea views but now non affordable rent. So he gives six months notice with the end of the tenancy  in January. Hears not a lot and gets worried and emails the retail manager with now only three months to go. The retail manager promises to get to grips with the dilapidations and the inventory assessed by their valuer, but is vague about when things might happen. Christmas is looming and winter wet weather has now set in, so outside decorations will be a major headache. MORE

 

Food hygiene enforcement ‘on the increase’

Food hygiene enforcement ‘on the increase’

John Gaunt & Partners 

Posted: 02 Nov 2014 04:00 PM PST

The Food Standards Agency has just published their “annual report on UK local authority food law enforcement” across the UK. This shows a small increase of 1% in the number of instances of formal enforcement actions carried out on food establishments in the UK since 2012.

In case of interest the full report can be found here: ‘Annual report on UK local authority food law enforcement‘. The summary of the key findings are at pages 4 and 5 and include: MORE