Pub Co’s, “Have they hit the Wall of Reality”, Barrel-Dregs.
My sources in the Pub Co world tell me that certain Pub Co’s may well have “Hit the Wall of Reality” and things are not happy in the individual Camps, are well it had to happen at some stage, you can’t keep milking a cow after the udders are dry, my farmer friend has always reminded me.
Their policy, has in the main been that Licensees were a an expendable commodity, they had peddled from Day One that buying a lease was the way to earn Serious Money and incredible Capital Gains, when they eventually sold the lease, a few did in the early days, statistically the majority didn’t.
Leases in the main are now a millstone round most licensees necks, the rents were and are outrageous, the terms of the leases draconian.
The BDM’s in many cases had no experience of running pubs profitably, many were ex sales people, well experienced in debt collecting, this suited the Pub Co model, as long as licensees were expendable.
The Senior Pub Co Management were and are Money Men, not like the genuine brewers who knew exactly how much beer they could expect to sell in their catchment area.
Tied Pub Leases, were almost unheard of until the Pub Co’s came on the scene, you had freehouses, brewery tenancies and untied pub leases.
Discounts were minimal, credit was one calendar month, with freehouses it was a great career with substantial capital growth, if you were a good operator you could float a reasonable amount of working capital by using your credit terms sensibly, not so with Pub Co leases, two weeks credit, after that the Pub Co debt collector is on your doorstep.
The good old Family brewers treated good licensees as their key to a successful company, they were brewers of beer, and the more successful a Licensee became the more profit they all made.
The brewers system was a short term Tenancy at sensible rents, that gave reasonable operators a profitable career for life, sadly many of the family brewers have jumped on the Pub Co Bandwagon or been bought out by the money men, the breweries have been demolished and converted into expensive housing.
A number of family brewers still operate and some still observe the principle that good licensees are the key to good business.
Back to “The Wall”, it would appear the amount of people having been made redundant clutching their redundancy money in their hands, has dropped dramatically.
Redundant people were a very soft target for Pub Co’s, a career change taking on your local pub, not anymore, the others were South Africans getting away from the many problems in South Africa.
It would appear that the rush of potential licensees with cash has diminished, too many good operators have left the industry, never to return, the Pub Co’s can only blame themselves, what was a safe career is now a highly precarious one with a Pub Co Lease or even a tenancy is highly questionable.
We have had too many good operators pouring their hearts out in despair at Pub Co policy and questionable tactics.
The draconian leases and lousy trading conditions, you can’t just give up and assign a lease, you’re responsible for the incoming lessee financially, added to the dilapidations, in many cases think of a number double it and clobber the outgoing lessee for whatever little he has left, in some cases the work was not carried out and passed on to the unknowing new lessee, this is illegal and worth pursuing with a good surveyor.
I had been called in to a distraught lessee, where the BDM told the lessee that the company carried out a survey at every change when he took on the lease, he saw no need to get an independent survey, the historic dilapidations were a nightmare which the Pub Co tried to claim for, the BDM had been moved to another area and denied all his previous statements.
It would appear not only are potential licensees avoiding Pub Co Leases, but the BDM’s are leaving for a quieter life, not that many of them were a help to the struggling lessees.
It also appears from a stressed Area Manager that one Pub Co has the highest number of managerial staff off on sick leave, maybe they should merge with the NHS.
The current Flu epidemic, may be used as the excuse, but my sources tell me that stress and dissatisfaction with lower managements limited responsibility to make a decision, whilst senior management have little or no idea and over rule most decisions made, sounds like the First World War, where the troops at the front were Cannon Fodder and the Generals sat at the back totally unscathed.
This leaves the remaining managers running round vast unmanageable areas like “Headless Chickens”, however much they try.
They cannot make a decision of any degree of importance without the Blessing from the Almighty, who may also be on Sick Leave according to Potboy, who is normally spot on with his info.
If this info is correct and I have no reason to doubt it, BDM’s and Lessees will be in greater demand and without them the tree will start to shake.
Some Pub Co’s are making realistic deals at long last, subject to confidentiality agreements, in case other lessees catch on.
One Pub Co that I have crossed swords with on a number of occasions, substantially reduced the rent on a pub going through an appeal and then offered to give £150 per barrel discount across the board to keep the lessee, I don’t like the Pub Co, but if they act that way they will get my full backing, it’s a serious step in the right direction if correct, and I am assured it is.
The overall business is shrinking from the Trade Press, it’s time to change, sadly it won’t, the Pub Co attitude has gone too far off line for senior management to change, many have taken vast sums out of the industry, which has become endemic, but without good front line management and good licensees the whole system could start crumbling.
There is more next week, but it appears “The Wall” could be in danger of tumbling, unless a different approach is taken very quickly.
The attempts by most Pub Co’s to circumvent the Government Legislation may come home to roost with a vengeance, if they have no front line managers and even less licensees.
Lease with a Sting in the Tail LINK
The Great Pub Co Con LINK
The views expressed are not necessarily the editors and www.buyingapub.com accepts no responsibility for them, we do try to avoid offensive or litigious statements being made. They are written by concerned professionals in the industry who feel that these issues should be raised to ensure that all licensees are made fully aware of many hidden pitfalls.
copyright (©) 2018, www.buyingapub.com