Is there any truth in a Pub Co needing nine months credit, when it puts it’s tenants on cash with order when they struggle to pay their bills?

I was at a lunch last week and met the Editor of an influential business publication, the conversation moved to Pub Co’s and where were some of them heading.

He said that one company had now allegedly insisted that at least one of it’s main service providers extend the companies credit to nine months.

This if true is a serious indictment of the main companies cash flow problems, regardless of what it is doing to the supplier.

Three months credit is outrageous, but has become the norm with all major companies, six months credit was supposedly demanded by certain companies six months ago and now it is alleged nine months, the supply company is either making a massive profit which I sincerely doubt or has a very understanding bank.

The supply company cannot take legal action because the bulk of it’s business is with the main company, if it took legal action it would bring a flood of similar claims and would bring the main company down, it’s a business nightmare.

The main company is making insufficient net profit to service it’s loans and pay it’s non essential suppliers, the writing has to be on the wall.

However on the other side I have visited a number of pubs where the BDM is trying to get rid of the lessee.

The first, the lessee has a favourable lease and a site worth more than it is as a pub with a very limited capability, the BDM is using every ploy to get rid of the tenants.

The second was a town centre arm pit with a low barrelage, they were promised a major refurb, with the rent set to match the refurb.

The refurb did not happen and they increased the business to just under 300 Brewers Barrels in eighteen months, they were told no survey was necessary, everything was fine by their BDM, they are now trying to get them out under dilapidations and a host of other ploys.

The couple have done their job, put the business on it’s trading feet and they are now expendable, they will lose their deposit and new people will be used as a cash cow until expendable.

If the information is right, this whole business has to be so close to Mr Ponzi’s method of trading as makes no difference.

The company would appear to be not paying it’s non essential bills, by extending it’s credit terms, raising cash by dumping good operators and bringing in new people with fresh money and like the losers in the “Weakest Link”, the old tenants leave with nothing.

The chance of getting a good operator is about one in twenty, why get rid of them, you want long term profitability, not short term cash and instability.

Barfly