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Saturday, May 19, 2012

The nation's pubs are in a trap. The pubcos are in a trap. We are in a trap the pubcos made for everyone.

On one Facebook publican's question about buying a freehold pub from Punch Taverns 

You can almost guarantee that it will need to be rewired, plumbed and basically everything needed to get it up to code. It will leak heat like a sieve in winter and struggle to be cool in summer. As it's in Burton there is a chance that it got better over the years than most of the country's pubs but I doubt it.


This area - individuals taking on former tied freeholds and turning them round is an important subject because it's one potentially very significant way ahead for the pub industry. If large numbers of individuals who are easentially able to run their businesses well but have been starved of cash, and had their business development hamstrung by the pubco tie, were able to take on their freehold and invest wisely then push ahead with an invigorated business that's had a major shot in the arm and is then run by people who have free of tie purpose and can see a meaningful future working in their pub ... It could transform our landscape and if it happened on a big enough scale would have a significant impact on the whole economy.

The point is that pubcos are a blight on the pub sector. They starve the whole industry of cash and liquidity, make it impossible for small businesses in the sector to raise borrowing or get equity investment by making the whole industry look financially toxic - so the sector has not been substantially invested in for three decades which is why it's being abandoned by customers.

Government won't legislate against the tie because it fears the consequences of the pubcos' demise with thousands of pubs coming into the market with no buyers. The fact is there are thousands of potential buyers out there - they're the publicans who run the pubs already.

The problem here is that behind the scenes at Westminster and in the fabric of our nation's decision makers, the central myth of the pub sector is it's seen as an industry where every individual pub is a small business that cannot thrive or even survive without having the backing and strength and economy of scale of a big brewer or pub company behind it. It is total nonsense that's been promotes by all the big companies since before the beer orders because it's a lie that suits them. One way and another as long as the tie remains In any way shape or form it means the big companies stay in control, supposedly 'nurturing' or 'partnering' poor weak individual publicans who otherwise would fall foul of being unable to compete in fiercely competitive world of pubs run by chain operators.

It's palpable nonsense. It's gobbledygook it's the paradox that keeps the status quo in place.

A free and fair market where publicans were allowed access to affordable finance and they owned their freeholds would radically change the pub industry to make it what it should be: something for Britons to be proud of.


Main problem with the whole toxic sector is the only people who've been making enough profit out of it to be able to raise finance against their activities are the people who are not actually running the pubs. Pubco's perennially efficient asset stripping activities have stripped the pub sector of investment while making it a pariah for banks and institutional lenders.

There is money available in some circumstances where if you take the pubco's usurious levy out of a pub's balance sheet and p&l and the publican's left with the profit and the wherewithal to invest in the business but then, even when the pub's in the pubco's disposals list, the pubco often will sense an easy ROI and demand a ludicrous sum for the freehold.

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