Tuesday, June 24, 2008

RE: Realistic Rent Levels

To round off Martin's point above about expenditure: I spent £100K on refurbishment before opening for trade then a furhter £50K in the first two years out of cashflow. My business plan - the one I showed the freeholder - and my proof of finance - made it obvious that I was going to spend this money. And the building was a total crap heap before I took it on. There is NO WAY it could have become an award winning business without my spending that money. IN FACT it needed FAR MORE spending on it than I had - it should have been completely gutted, rewired replumbed and ahd new services put in - I couldn't afford that and have lived with a struggling, wildly expensive to maintain infrastructrue ever since which has perennial impacted on profitability.

NOW this of course is where the industry stalwarts will say 'Mark admits to' 'Mark cannot blame the PubCo' 'Mark was quite clearly naive when he took on the business' 'Mark did not seek the right kind of advice' blah blah blah, to get the PubCo devil off the hook.

My first accountants were a medium sized firm that had over twenty other restaurants, bars and pubs on their books. My bookkeepers were pub trade specialists my solicitors, who advised me on conveyancing and licensing were the solicitors of the Licenced Victuallers' Association and were recommended to me by two other tied pub lessees.

Before signing my lease I spent nine months working through my business plan, raising finance, talking to banks, doing extensive local market research with questionnaires, showing the premises to builders and fitters and negotiating ingoings with the freeholder.

I suppose, in retrospect, I really was one of those naive, inexperienced operators teh BDM's are always on about. You know the ones they talk about as if they deserve to lose everything they have ever earned or saved into a business. The ones we are supposed to feel sorry for the PubCo over because it wasn't the PuBCos fault.

Well. Prior to that I managed a West End nightclub for almost three years, before that I worked the door at one of London's busiest restaurants; Joe Allen and at Orso, before which I worked variously in small restaurants, big restaurants, Ed's Diner, The River Cafe, Kensington Place and previous to all of that I'd worked in cocktail bars and in two of Manchesters' busiest best known restaurants from washup to manager.

Even after all that catering experience I still felt like I knew nothing because I'd only run a sole trader business as a landscape designer and gardener; building over 50 gardens in six years, getting some of my work published in national magazines and newspapers, editing a national garden design journal and working alongside some of Britain's best known gardeners like Geoff Hamilton, John Brookes, Dan Pearson and Cleve West.

That is why I put so much time and effort into researching the tie and doign my sums and taking advice.

The Freeholder did not say, not one of my advisors warned me, that all that £150K would be rentalised at the first rent review. No one told me that the Freehodler would rub its hands with glee as I turned a zero recorded barrelage pub into a 550 a year pub and simply expected me to pay through the nose at every turn.
"You should have got licensed agreement to alterations for the refurbishment" I was told. I subnsequently discovered that EVERY single bit of work I spent that £150K on was considered to be 'maintenance and repair" by the freeholder and before the first five year term was up they did a schedule of dilapidations that threw up another £75K for me to spend to bring their building up to lettable condition. Including things like reinstating fireplaces that weren't there when I signed the lease, demolishing and replacing a shed (£13K). And this treatment is, as Ken Nason has pointed out before, ALL PERFECTLY LEGAL.

I can't tell you how all that made me feel.

Ten years ago I was talking to some of the then highest profile single outlet pub operators in the country about rent reviews, tied leases and BDM's. Like Mike Belben and David Eyre at The Eagle in Farringdon Road. Trying to get four or five of them together with me to do an expose of PubCo practices in the national press. They all, to a man (rarely any women involved in pubs, perhaps they are too sensible), said they would but couldn't because 'they' (PubCo) would kick them out at next rent review if they rock the boat.

That's not even 10% of the rubbish I've endured and learned at the hands of PubCos.

And I figure if it happens to someone like me who, actually, does have a lot of experience and is not naive (I am HONEST, however, which, clearly, is a massive failing in this game) and had money to put in; then the stories I hear from the PubCos about all the failures being bad operators and so on?

Well I get a tad sceptical.
I love these di5joint4d p0sts.

A major point that has to be made is that if PubCos, or any major business, acts inappropriately, fraudulently / outside the law, it is generally incumbent on individuals to bring them to justice. Justice COSTS MONEY. And individuals tend not to have money, knowledge or enough strength to bring justice to the fore.

And the corporate body will generally, if it is caught with its pants down, will just sacrifice a BDM or other lowly lackey to get off the hook "They were operating outside our code of conduct".


Cronyism: "cronyism describes relationships existing among mutual acquaintances in private organizations where business, business information, and social interaction are exchanged among influential personnel." "cronyism is contrary in practice and principle to meritocracy"

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