Saturday, May 02, 2009

Adam Withrington: Isn’t this a Fair point? – Part 2

@Steve W. Where do you get the idea that "almost all tied deals" need "very little up front investment"?

Putting life savings or the proceeds from the sale of a house is hardly "very little up front investment" is it? And besides, without considerable investment a new business is unlikely to work. A very common problem with tied pubs is that they hardly ever get ENOUGH investment to make them work. And the long term returns are completely compromised because the GPs on retail are so low as to make a business non viable even before the need to repay investment capital or borrowings.

AS for being shocked then maybe I'M the on who has been naive for decades. My background was in high end independent catering - bars, restaurants and clubs. I came into the tied trade with open eyes fifteen years ago but freely admit now that I did not expect an easy time but neither did I expect to be routinely lied to, have business scenarios completely misrepresented to me by the freeholder and to be misled about many aspects of the business I was supposedly getting into where 'woprking together to build trade' was a key part of the supposed joint success that would come out of the development my business.

As for the tie working. It doesn't, actually, work. And as all those licensees who don't speak out vociferously against the tie it's usually because of fear of recrimination if the pubco finds out; Fair Pint knows DOZENS of tied licensees who completely support our aims but WILL NOT sign up to the campaign for fear their pubco will find out and come down on them like a ton of bricks.

We also know sizeable multiple tied operators who privately tell us their businesses do not work because margins are so poor on beer that basic overheads are not covered. Some of these are frequently mentioned in the trade press.

If you look at the exterior decorative state of tied pubs and you'll see your assertion that very few people have to invest much is wrong - Fair Pint got off the ground in part by a few tied licensees going into what we deduced would be tied pubs on the basis of their state of disrepair and introducing ourselves to the licensees. We did not get it wrong once. And we found a lot of anger, despair, and penury. Across all pubco estates it is the same...

Then we found that most of the reactions to our suggestions that we should set up a campaign was 'there's no point, you'll never change the pubco system, it's too powerful' or, 'they'll crush you before you get it done'...

Lastly for the time being, your suggestions that licensees should take their freeholder to court are laudable and in essence correct advice but the enormous barrier to such action is, quite simply, cost. Small fish cannot afford to put sharks in front of a court.

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