Thursday, July 24, 2014

The words Greedy Heartless Bastards spring to mind?

This is taken from Britain's Lost Pubs, a Facebook group:

'This is one of the reasons pubs are closing:  This was copied from a friend's page who is a publican:

"Despite my request to Enterprise Inns for some discount on my beer or rent to help us through difficult times...
... they've put my rent up by almost £40 a month.  So I don't think they need any more nails - I'm out of here, whether I like it or not."

The words Greedy Heartless Bastards spring to mind?'

The value of the bricks and mortar for alternative use is one thing but in the meantime the pubco's (property companies as you point out above) Churn tenants through their pubs with a form of simple hidden corporate asset stripping that keeps the pubco's off the hook behind smoke and mirrors and makes the whole desperate plight of pubs across the country seem as though people are changing habits and going elsewhere for their entertainment. People ARE abandoning pubs but this is because increasingly, due to their being owned by big companies who don't give a flying toss about pubs - ie pubcos- the national pub estate is falling into dilapidation while the pubs sell expensive beer. People go elsewhere to get better over all value but at heart they still love pubs.

Pubco's do this by advertising pub leases at no premium which, by default are businesses that have already failed (or else the pub would not be available To Let) on the grounds that these represent a Low Cost Entry into the pub sector and a great opportunity to build a new business out of nothing, reap the rewards by building up value and goodwill then sell on the business in the future. The pubco's then charge rents that are too high (because it is such a great business opportunity people accept the rents as fair) while obliging tenants to buy beer through their own supply chain at double open market rates, on the grounds that their rents are cheaper than the open market, which is quite simply a lie.

The combination of high rent and supply prices depresses tenant profits, tenants are unable to invest in their businesses and eventually (usually within 18 months as it happens) leads to their business failure. The pubco then markets the lease again and another tenant comes along and repeats. Thus the term Churn - like butter out of milk. Once the pub is so run down through decades of chronic lack of investment that no one is crazy enough to sign another lease - the pubco puts the pub on the market freehold suitable for alternative use subject to permission - with a track record of the business having failed serially - for the above reasons.

The pubco's get away with it simply because it seems irrational to outside observers of the pub sector that one business's success (the tied pubco) is predicated on the serial failure of thousands of other businesses (the pubs).

The pubco's do this because sweating their assets so hard is the only way they can repay the interest on the gargantuan loans they raised in the 90s with which they bought the pubs in the first place. It is ALL about corporate greed and boardroom short termism. They - the pubcos - are trading while insolvent but with strong cash-flow (cash is king) that comes from those high rents and beer prices and the fire sale of their underperforming pubs that are proven to be no longer 'economically or financially viable'.

It is the #GreatBritishPubcoScam

The government knows what is happening but let it continue because they will NOT meddle in private contract.

The upcoming legislation regulating pub co bad behaviour was planned to have a Market Rent Option - but it hasn't. And so is a whitewash.


  1. Where to start?

    Pubs become available to let through retirement, the tenant moving to another tenanted pub, the tenant buying a freehold, going into another business for more social well as financial failure which may be overrenting or may be tenant's incompetence.

    Even FDFYL couldn't come up with a tenancy/FOT cost price ratio of 2x (best effort 1.75) and that was comparing pubco LIST price with wholesaler NET price. As an example of real life pricing, a brief look at the Star vacancies with open financial information for each letting will show that they offer discounts of up to £125 (or 20%+) from their list price.And a parallel rent assessment comparing like with like demonstrates that for every £2 on the cost of beer the rent is less by £1 on the 50% bid principle.

    Tenants do sign up for new leases - the Pattenmakers is a classic of the tenant so desperate to stay that she lied about the terms on offer at the renewal as part of her campaign. A 2013 survey by CGA found that 74% would sign up with their pubco again.

    As I understand it trading whilst insolvent is an offence. Have you forwarded your evidence of this wrongdoing to the appropriate authorities? Or are you just slinging mud?

    It's not 100% the pubcos' fault. It's not 100% the tenants' fault. But whether it's 99/1 or 1/99 or 50/50 is not something I have the evidence to quantify; neither, I would suggest, do you.

    1. The difference between you and me though is that I give a damn and you don't.

  2. The difference between us is that I go to some pains to provide evidence to rebut your claims. Your responses range from the emotional to the insulting without addressing the evidence.

    1. Rubbish. I've never posted anything that cannot be verified you go to pains just to snipe anonymously because you have a pro pubco agenda. Make yourself known and prove that there is an element of objectivity about your position. You will not do this. Will you?

  3. Your starters for 10:

    Try verifying 2x FOT/Tied cost prices - as an average, not just one isolated product somewhere.

    Try verifying that all changes of tenancy are down to tenant failure.

    Try verifying that the pubs PB referred to in the piece below were all tied.

    Try verifying that the pubcos - all of them - are trading whilst insolvent.

    Who I am is irrelevant; if you make claims you should be prepared to substantiate them.

  4. And silence falls...........