Saturday, February 16, 2008

Dear Phil. I don't think that's too emotive at all. You're telling it the way it should be told.

In my last rent review I managed to get the PubCo to provide a detailed P&L projection for my pub which proved that I can afford the £28,500 'uplift' in rent they expected (from 54K to 82.5K).

In this spreadsheet that I sent them to fill in, a very detailed analysis of my business, they were close on the top line figures - overall income and product split - but on the expenses and margins they were conveniently out on almost everything which made my real break even business look like it can easily return a net profit of 186K a year.

This is a paper exercise I'd love to put into practice but can't. I've tried to make 200K a year but it just doesn't happen. Does everyone reading this think I'm stupid? Graham. You think I enjoy not making 200K a year? The truth is, as far as the PubCo is concerned, I'm a nice guy who's got great ideas and a great operation but just happens to be crap at business who can’t control costs, particularly wages; of course. How else can they justify their ludicrous rent expectations? Wool. Eyes. Pullovers. Smoke. Mirrors.

I've been in this tied pub for almost 13 years and it's cost an absolute minimum 15K every year on maintenance and still has a dilapidations schedule of 70K (some of this will have reduced in the last refurb in Nov 06 where I spent the best part of another 100K (borrowed)). My initial refurb, turning a complete crap hole of a pub that turned over less than a grand a week into an attractive venue that could pull in the punters and get them to spend 8 -10K, but which still needed rewiring and re-plumbing, a new central heating system, new gas and water mains because the ones I signed the lease for were all domestic and on their last legs and my yellow pages surveyor didn't notice any of that, nor did he notice the narrow gauge drains, the lead pipes (replaced by me) or the leaks in the good looking roof (survey done in July) or the gutters that can't handle all the rainwater off the roofs during a downpour, making the cellar, back of house hallways and the front bar flood three or four times a year, every year. No that refurb cost 100K and I never got it back not will I. In addition to the general maintenance the horrifically inefficient heat insulation of the whole premises cost twice as much a year to keep warm as I budgeted in my original business plan, the constant little leaks in roofs and from pipe work buried in walls.

On top of that the bar's been shut twice for a day - taped off by the police - because of murders/stabbings/sub machine gun firing outside on the street; nothing to do with us - one of the stabbings the victim staggered in, blood everywhere; we called the ambulance and police and got shut for 8 hours. Well we weren't shut actually but they taped off the front of the building to take forensic evidence. The man had been stabbed a 100 meters away or so but because he'd been on the forecourt blah blah blah. Not insured for closure until more than 8 hours. We've had one armed robbery and five break ins. Prostitutes hassling customers, staff and customers mugged, or just senselessly savagely beaten on their way home from the pub. Aggressive beggars, street drinkers and drug abusers begging outside the premises. I could go on.

In their P&L the 5 front of house staff were part time, working 20 hours a week with 4 weeks holiday a year. We’re open 14 shifts seven days a week. This translates into a fantastic wage bill but in practice would leave several shifts a week with no one behind the bar or to serve food. ON paper the kitchen worked on three staff less than it actually is possible for it to function on – great again for percentages. And as for general management – they made provision for two weeks a year holiday relief for me and my partner.

The business rates were 2K a year less than actual. They missed out charges for gas for beer all together. Heat and light were significantly lower than actual… margins on drink and food were better than I achieve.

This fascinating exercise all contrives to make me return so much money on paper that I could have afforded a much bigger increase in rent and still be comfortably well off.

And another fascinating reality. How many reading here know of the ‘hypothetical’ landlord? A hypothetical landlord is used to establish what a ‘fair maintainable trade’ (regular income) should be for a pub – leading to a hypothetical income from which hypothetical overheads, hypothetical staff; hypothetical customers; hypothetical margins and anything else hypothetical that can be hypothesised about in such a situation to establish what REAL rent should be that is affordable by the REAL landlord.

The hypothetical landlord of The Son of Dodds pub would, according to my PunCo, generate an 18% increase in trade over what I get and better margins than I am manage to get all round. My hypothetical landlord would be a very well off person, no doubt with a couple of high end German motors and six holidays abroad every year.

However. No matter how convincing it is on paper, paper’s not real life, at least not in my case. But then I’m on medication and don’t know my arse from my PubCos elbow.

Incidentally, to finish off anther monumental post. Please believe me I don’t blame the PubCo for any of the problems I’ve had with bad conditions outside the door. I don’t get confused emotionally about where the problems lie. But the pub does happen to be slap bang in the middle of some of Britain’s poorest, most economically and socially deprived wards. And I have managed to keep the place busy for a long time, it’s always been a destination venue as well as a solid community based local. But that’s because I work my butt off to keep it that way. I find it slightly offensive that their hypothetical landlord would come in and increase income by 18% over what I’ve been doing all this time… to keep us in the press, to keep people from all over London hearing about us, to keep us busy. That is not what a normal hypothetical landlord does in my imagination.

Finally, for the moment, to the person who noted that some of us seem to have time to post that would be better spent working on the floor. Well, some people here are passionate about this trade and very good at it as well. And already doing 60 or 70 or more hours a week. How many more hours would make a difference to the income? And posting is a release from that, and finding/making the time to research and post here and there is important because we want to make this situation of gross inequity change. And we are interested in working together and in helping other people. Not just sitting on the sidelines quietly letting it all slide by until it really is too late.


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