Monday, April 05, 2010

The Basics of the Tied Business Model

Richard, there doesn't seem to be a conclusion to your line of thinking about it all depending on what working capital you have. Apologies if I'm I missing something? What is your point?

By the way many tied lessees don't have working capital when they start (vis the tied pub model promoted by pubcos as 'a low cost entry into the pub trde') and if they have an overdraft it's always guaranteed, as is the lease and everything else.

There is also no working cash flow with the pubco since rent is paid in advance, following a substantial up front deposit, in my pubcos case there is even a cash deposit equivalent to a thirteenth of the annual prjected beer volume, and just fourteen days' credit on beer purchases... In fact I've recently been told that the 14 days credit is being reduced wherever possible to SEVEN days which very obviously should be taken as a sure sign of serious cash flow problems at the pubco end.

This is all to do with why the tie does not work and how so many tied lessees get into serious financial trouble withing months of signing a lease... Even before the building dilapidation schedule starts to add to the losses they are already making.

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