Thursday, December 08, 2011

It's pleasing to see that Jacqui isn't disappointed about her experience with Punch. But Jacqui is only the fifth tied lessee I have come across who's been positive about the tie. Three of the others I know personally and have pubs that turn over between 750 and 1,000 barrels a year. These are among the busiest pubs in the UK. And I've met / spoken / had correspondence with HUNDREDS of tied lessees over the last twenty years. The other two are that guy who has The Cutter in Ely, I think it is, who's trotted out by Enterprise and the MA to 'prove' that tied leases work a treat, and Mark J Daniels who blogs for Greene King.

Back in 2004 I started seeking out other tied lessees, after experiencing systematic abuse by Scottish & Newcastle pub company employees over the best part of a decade: Never putting agreements in writing; ever responding to my letters or emails or phone calls about anything of substance to my business; Constantly breaking promises of business support; Hiking supply prices incrementally above inflation so retail margins were eroding; Overstating the gross profit my business was making (and seeing the my and their surveyor agree with lies rather than FACT) and getting totally shafted at rent review; Through never providing a single bit of any of the support packages they published as offering their tenants – like staff training programmes.

That was all prior to my 2005 rent review which I knew was going to kill my business and I was trying to find comparables I could use to show that I was already paying too much rent. Somehow all the comparables I found that showed I was already paying over the odds were not admissable by their surveyors; whereas all theirs, proving that the rent should double, were acceptable...

By 2007 I'd met dozens of people from every pubco and the vast majority were like: 'I've never been more than two weeks away from bankruptcy since I signed my lease'. Two were making a LOT of cash margin, both were doing over 700 barrels a year. THAT IS A LOT OF BEER and seemed happy with the tie. Even they, when I pressed them admitted their gp% were 'shite'. 'But I've got a pocket full of cash and 'I'll make hay while the sun shines and sell the lease to some sucker before the first rent review and they'll take the hit - Caveat Emptor mate, it won't be my problem'; is how one publican put it to me.

After ten years of not earning enough to be able to invest back in my building and earn a living wage while being told by S&N employees that I was paying my staff too much, not charging punters enough, hiring too may people per shift, not working hard enough at marketing and publicity, spending too much on extra curricular activities - errr, like marketing and publicity for example - (This was in the context of my KNOWING I was leading the industry in many things - like doing direct mail to 1,500 people in the late 1990's, transferring that to email as early as 2000, with a website getting hits from all over the world from 1996 and free wifi five years before anyone else in the UK, getting national press and awards for all sorts of things we were doing, which put us in the top 20% of turnover for all UK pubs while being slap bang in the middle of two of the most socially and economically deprived wards in the UK. Basically I was being hammered financially for being good at what I do and the pubco had the legal right to take everything I earned by 'proving' it was their site that was making all the money, not me.

After all that - which led to the Fair Pint Campaign being set up – it is clear to me that the vast majority of tenants are simply being roundly abused just as I was. Most of the people I've met have lost ALL their initial investment, have no chance of ever getting it back unless they sell it on to someone else and have made no ongoing profit out of their business while working all hours the gods send them.

The bottom line is the way the tie is abused by pubco's all over the show is what is closing pubs everywhere. The bottom line is the majority of pubs in the UK are under control of tied pubco leases the terms of which are used to systematically remove as much profit as possible from as many tenants as possible. The bottom line is it's NOT RATIONAL BUSINESS. Business HAS to be sustainable or else it's not business, it's systemic failure. The pubco model depends upon continuous financial and physical investment and ceaseless hard work for little or no reward by THOUSANDS upon thousands of tied lessees. When individuals go out of business more people take the place of the lessees who've gone bust until the pubs are so chronically underinvested in they are dilapidated to the point at which NO-ONE'S DREAM can overcome the physical reality and no one's left who will take the plunge and try to turn the pub round – and THAT is when the tied pubco throws the pub out of their estate into the freehold market and gives it to an agent with 'may be suitable for alternative use, subject to planning';

The bottom line is it's ALL a TOTAL SCAM.

And FOUR Select Committees got this in spite of the pubcos and the BBPA lying, conniving and spending Hundreds of £thousands lobbying them to the contrary, telling them: “it's red tape; it's beer duty; it's business rates; it's the supermarkets; it's changing consumer habits; it's competition from Starbucks; it's the smoking ban; it's unfortunate but there's thousands of unprofessional, lazy tenants out there (it's the nature of the industry) who are behind the times with their offer” (and it's got nothing to do with us charging them DOUBLE what they would pay free of tie and MORE for their rent than if they were free of tie);

And Ed Davey IGNORED the Select Committees who put in hundreds of hours of painstaking work getting to the bottom of the truth about this last dodgiest of UK trades, after the GangMasters, and should be ashamed that he's backed these scumbucket pubco's and sealed the financial death warrant for thousands more hard working tenants.

J Mark Dodds I've never know everything and I'm not bitter, I am realistic and I know a LOT about the pub sector and I know LOT of people in it at all levels. I don't profess to know everything now but I do know what I'm talking about and Max, nor anyone else, will ever make margins that truly justify their skills, investment, application and hard work - the figures just do not permit it (and from what Max has posted here it looks to me like he realises this which makes it hard to understand why he's interested in being ripped off) But I did come to the tied pub sector with a lot of successful background experience - experience which allowed me objectivity to see where it does not stack up and to have the confidence in my background to know that 'my failure' was not just my failure but a direct result of the system being skewed and manipulated against the skills and experience that came with me. When I was 29 I was general manager and licensee of one of London's highest profile nightclubs and restaurants, designing every last element of everything that happened in the venue, writing the menus, working alongside the Raymond Blanc trained chef, hiring and firing everyone from DeeJays to KPs to security to hat check, chauffeur cab firms, bar tenders to waitresses; negotiating daily with the likes of David Bowie and Chuck Berry's reps over their private parties, entertaining and looking after some of Britain's most recognised celebrities, developing the private membership. I hired great people and made the venue more than treble its income. Bring this to a tied pub and you will be HAD - Max?

MAX. If you have cash to invest in a tied lease you probably have enough of a base with which to raise what you need to get a mortgage on a freehold. Do everything through your business plan. The pub you want might go to someone with less enthusiasm or ability but Your passion and ambition are not going to go away. These are your best assets hold on to them. Get it slightly wrong now and - no matter that you have an existing successful business which allows you to feel secure - running a retail catering business is a very demanding affair. If anything goes wring it will gobble resources, cash, energy, focus, time, mental and physical wellbeing - all of which you have in reserve now. Conserve them and Research MORE. Get bored learning more about the business of pubs before you put any money in. Research, asking more and more questions, putting in a load of elbow grease and shoe-leather before you lay down any money is cheap and worth a lot of cash down the line. Remember, there is ALWAYS another site. Once you are in you are committed, no matter what the 'break clauses' are, you have put yourself on the line and you will not be walking away without having to leave a lot of investment behind. Often, what on most principles and assessments IS the right site is really NOT the right one - EVERYTHING has to stack up. Don't leave anything to chance. My site was perfect except it was tied. It was supposed to come free three years down the line and I was blackmailed into signing a deed of variation which took thirteen more years to kill my business. SLOWLY. Being one degree out now can turn into 180 degrees in three years. Remember this: YOU are what will make the business work NOT the site. Seriously review your belief that you cannot afford a freehold. There are routes to capital through brewery loans on a freehold.

Most of the brewers are changing their attitudes to loans, they dried up around 1995 for over a decade but, as the market has been foreclosed to them through the pub companies screwing down their margins into the floor, and as more and more tied pubs are failing, and as more free house opportunities are coming around - precisely because the tied market is collapsing - then the brewers are getting back into loans against volume as it's a way of getting their market share extended. One will also find they offer (genuine) support and cellar services back up as and when needed because they care A LOT about the quality of THEIR product. They make it they want it to be served right. They will provide training and point of sale material, fonts that are contemporary with their current branding rather than punched out of a sheet of generic metal. Oh and a whole lot of other stuff many tied lessees can only dream of.

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