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Wednesday, January 16, 2013

Thankfully Word is Getting Around About Pubco's

From the Army Rumour Service site. Otherwise called: http://www.arrse.co.uk

"Has anybody had dealings with Enterprise Inns? Looking at getting a lease on a pub but their contracts seem to be able to let them increase the price they sell me beer and the rent at anytime."

Among some pretty well informed responses Micawber wraps it up very well.
Post 1:

"Don't touch the big Pub Co types with a barge pole.

I haven't got time to spell it all out but my local was a simply brilliant wet sales freehouse a while back, making a decent living for the landlord and his family whilst providing a top boozer for the customers.

I don't know how he financed it, ie how much he put down himself to buy it and how much he borrowed, but repayments on his loan, however big it was, were fixed. He was able to buy his beer etc from wherever he liked and was able to get it at maximum available discount and the more he sold - the cheaper he could buy it. Any extra income he generated through his own initiative from barbies, beer festivals, live music, quiz nights, skittle leagues, curry nights etc was all his to keep. It was a busy, happy, well run boozer in the middle of a local community for which it was the social centre.

He sold it to a PubCo for a very tidy sum and and what followed was a string of personal tragedies and disasters as a series of landlords were driven to the wall trying to follow in his footsteps.

The basic elements to the spit roast being high rents both as a flat fee and a percentage of any extra revenue generated at one end and at the other having to buy all the drink from the PubCo themselves at top dollar. So gone is the beer discount and also gone is the incentive to do extra stuff - and with them goes any chance of making a profit.

After a succession of human disasters and about five poor bastard tenants who lost every cent they had the pub shut for a year and eventually the PubCo sold it. Bingo - it's a freehouse again and almost back to its old self.

Those PubCos are quite simply the unacceptable face of capitalism and don't go near them."

Post 2

"I think the thing to understand about the PubCo business model is that it has nothing to do with running pubs, it is just a version of property development.

You buy a pub, stick in a landlord and charge him around 10% of the purchase price as rent, regardless of how his books are actually looking. Then, as you have a number of pubs, you get all the drink yourself at a huge discount but make your pub landlords buy it from you at top rate. Then just out of greed, you set a level of expected income and take a slice of anything that comes in above that line.

After 10 years your pub has been paid for by the tenant and you have lived high on the hog from the rigged beers sales and the extra rent, or used the dosh to fund further pub purchases. But the central thing is the rent, you have no direct interest in the success or otherwise of the pub itself or the welfare of the tenant, simply that the rent keeps coming in. The moment that is threatened, bin the incumbent and get another.

Capitalism should work by handing the profits to those who come up with a good or service that is cheaper or better than the competition.

These PubCos have contributed nothing, their pubs are no better, the beer is the same, they've done nothing of any use to the customer but just shuffled around paperwork and other peoples' savings to feather their own nest exclusively."

Great posts Micawber.

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