Thursday, May 15, 2008

Matthew Evans your naivete, and fundamental lack of grasp of the situation, is staggering. One can only presume you have, over a period of years, been thoroughly inculcated with the combined PubCo Propaganda Pamphlet.

"The melt down has been precipitated by economic forces and government legislation the poor response of the industry is because of the weakness of the major players. The folly of constantly restricting their business partners room for manoeuvre is coming home to roost. The pubco model sensibly (for both parties) applied is by far the most resilient structure to take on board our problems."

The essential points of this industry being in 'meltdown' is twofold:

1) The capital assets of the national estate (i.e. the Pub buildings stock) have been scandalously neglected first by lazy, flatulent Giga Brewers prior to the beer orders and for the last twenty years by rapacious fast growing PubCos who carved up thetraditional estate between them.

This has left a vast amount of ruinously neglected buildings for 'budding entrepreneurs' to take over, as a 'low cost entry into the business, and try to bring back to contemporary code according to the terms of their lease, while the PubCos slap dilapidations orders on them that demand correcting wrong that are decades old. This in itself puts an unreasonable, and unbearable unforseen financial strain, on any self respecting lessee who takes a pride in their premises who discovers the bottomless pit of investment in their Landlord's assets just comes straight off their own trading bottom line.

2) The combination of the tied dry and wet rent is materially, factually, inexorably, greater than free of tie rent. The operating profit achievable on a tied pub has never been as much as can be made in a comparable property that is free of tie. No one can seriously argue this point because the 'low cost entry into the market' has ALWAYS been the main selling point of tied leases. The margins achievable have been steadily eroded by the PubCos existence by their aggressively applying unsustainable upward rent reviews to the whole estate, by controlling supply costs to fall massively in their favour i.e. the PubCo, through its complete hold on the lessees, makes as much or more money out of beer, AWP and building insurance and peripheries than do the lessee or tenant.

The combined pressures of the above circumstances - where the tenant bears the burden of all increased external and internal costs while PubCos share no risk or financial burden whatsoever (and in fact are a substantial instigator of these increased costs) puts such unsustainable financial pressure on these small businesses that there is no flexibility left in the system for tenants to be able to ride out an economic downturn of any description.

You casually say that everyone in the industry knowingly signed contracts which put them in this situation as if it's a granite foundation that supports the whole PubCo edifice. Well perhaps it is so. Dealing with that point fully is for for another discussion but what a tragic refuge for FTSE companies to have to use to try to get themselves off the hook for the massive injustices they are responsible for meting out to thousands of individuals across the nation.

Proof that the system does not work is that all these people are revolting. There is absolutely NO fair relationship / partnership of any description between tied lessees/tenants and their PubCos. PubCo says JUMP and they damned well expect the 'entrepreneurial' tenants to leap.

Matthew. If you were the galley slave instead one of the unquestioning masters swinging the cat-o-nine-tails your world vision would be a lot different.

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