Friday, March 07, 2008


I believe there were more than 300 lessees prepared to offer information at the committee hearings last time but one that was picked out to use as evidence proved to have their 'facts' wrong - and their evidence brought all the others into doubt.

Imagine being an interested member of the select comittee looking into the relationship between PubCos and their tenants.

ON ONE SIDE GIVING EVIDENCE YOU HAVE two or three top chaps from the PubCos, who are united absolutely in their cause and position; G&T for example; saying apparently very rational things like: "We welcome this opportunity for our business model to be scrutinised. We have modernised and brought added value to an industry which traditionally has underperformed all round. We have invested heavily in our estates and helped our lessee innovate, we have brought an industry which was the butt of jokes worldwide for serving warm beer and curled up sandwiches to being at the forefront of international culinary and drink diversification excellence.

"The relationship we have with our lessees is a genuine partnership. Our success is absolutely bound up with and depends on the success of our lessees. WE share risk with them all the way - our major investment programme is evidence of this and we are proud to work with our lessees in joint investments to the tune of XXXX million every year. It is clear that we do not impose conditions which put them out of business. Our interests are shared, and in addition to the investments we put into our lessees every year we have teams of aggressively recruited highly experienced expert business development managers who work with all our lessees in all aspects of their business. If a lessee (they are called 'customer' now, I'd bet in anticipation of the next time this is looked into in detail) has difficulties all they have to do is hold a frank discussion with their area manager who is there to help. We look at all situations individually as no two pubs are the same and every lessee is unique. As in any industry however, unfortunately, we aknowledge that inevitably some lessees just do not have the skills required to operate a pub business successfully in the contemprary marketplace and these are the ones who will be dissatisfied in their relationship with their freeholder. To counter this, all the detailed research we do with our lessees generally shows the vast majority to be happy with the relationship and to be meking a good living out of their trade. To support our argument just note how many entrerpeneurial people come into the trade every year, taking over pubs and maintaining the great tradtion of the British pub we are so proud to be underpinning with our business model. As for monopoly, price fixing and taking competitive advantage - this is a fiercely competitive market - as evidenced by the huge estate which my friend giving evidence opposite is chairman of - our gloves are off just while we give evidence for this committee, otherwise we are only here for the beer".

THE WITNESSES IN THE OTHER SIDE for several hundred lessees are polite, sensible, rational, passionate and thoughtful people in suits who care about the inequity of the situation and believe, absolutely, that thousands of lessees are being treated appallingly and that the PubCos routinely take advantage of their position of strength to nail down lessees and squeeze every last drop of profit out of them. They see 'churn' in the industry as clear evidence of thousands of people either going out of business, or making forced sales to get out before the inevitable bankruptcy or insolvency happens, and have crusaded for years to try to get the law changes, the competition commission, tyhe OFT, the Enyerprise act enacted and so on, only to be thwarted at every turn by the money and skills the well funded big boys can throw at the situation.

They state a well put, well researched case with evidence provided by FSB, they cite various examples of lessees whose business has failed as a result of conditions imposed through the lease model, some lessees give evidence directly - all individuals who are just one among thousands who are not there backing them up, their arguments are treated as individual circumstances by the ceo's opposite who kwwp saying they are not familiar with the particular case so cannot comment in fetail but their research proves otherwise, One witnesses evidence proves to be slightly questionable and the whole lot comes down. Also the people representing the lessees don't have their necks on the line as to an extent do the CEO's and their argument must seem more academic than impassioned and true.

The people hearing the evidence know nothing about the trade, they don't know any publicans, they hear a rational argument they can relate to given by the PubCo's and a story redolent of penury, scandal skulduggery and deceit more aligned with the characters of a Dickensian drama than the modern clean thrusting plc FTSE indices they are used to reading about all the time. They see strong competition in that there are several major players in the market and believe, in all conscience that the severe recommendations they will issue will be taken on board and everyone will end up being happy lappy dappy.

They will ccome back to it in a few years in which time the PubCos put the screws on ever tighter in the knowledge that they SIMPLY CANNOT LOSE. There's loads of people prepared to invest large amounts in setting themselves up in a pub business, and when there is no more in the queue, the preprty value will have increased dramatically as change of use is proven by repeat failurte of a pub on the site. And the pubs that survive the maelstrom of market forces, increased costs at every turn, smoking ban and the rest, will have less competition because a third of the other pubs have closed down and, at least theoretically, more customers as a result.

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