The words nobody wants to hear about the on-trade

Get out the pitchforks and the blazing torches: I’m about to talk again on the subject of pub companies and their tied tenants.

Pint-holding lionThe trouble with trying to have a rational debate about the tied pub system, where pub tenants have to buy their beer from a list provided by the company that owns their pub, is that a fair number of pubco tenants have lost a great deal of money trying to run their pub, and, understandably, they’re angry – very angry. Naturally, they’ve looked around for someone to blame for their losses, and the obvious culprit, as far as they are concerned, is the pub company. Clearly, they say, if the pub company had not been charging them so much rent for the pub, and so much extra for their beer than that beer costs on the open market, then they would have been able to make a success of their business.

If anyone tries to suggest that maybe the pubco isn’t totally responsible for their failure as pub-running entrepreneurs, that person will be subjected to howls – screams – of outrage and fury. The pubco, its failed tenants will insist, is a scam, a conspiracy designed to rip off people who only want to make a reasonable living and who are prevented from doing so by the despicable activities of the company that owns their pub and conned them into signing a lease on it. You, however, for daring to suggest anything otherwise, are (and this is only a selection of the names I’ve been called in the past couple of weeks) a writer of “inaccurate, delusional gumph”, “peddling, paid or not, pubco propaganda”, a “lazy sofa-lounging beer blogger” (I like that one – I might have it printed on a T-shirt), “a zombie”, “a lazy journo who can’t grasp the subject”, someone who “very obviously [doesn’t] know what you’re talking about, either that or you are a liar”, “arrogant, patronising, blinkered and myopic”, and “a denier, a make believer, a fantasist”.

However, it’s clearly nonsense to suggest that the pubco model is responsible for every operator of a tied tenanted pub who goes belly-up, when you consider the following simple fact: one third of all small businesses – regardless of the sector that they are in – fail in the first two years. You would expect, therefore, even given the cushions that tenants of pub companies have around them (the cheap start-up costs inherent in someone else leasing you the premises in which a going business is already running, free training on how to run a small business, free advice on tap from the pubco BDM, or business development manager, assigned to them to help out, help with promotions, discounts on everything from insurance to Sky TV, and so on) that a considerable number are going to crash quickly, simply because that’s what small businesses do.

Even if they get through the first year and are beginning to succeed, counter-intuitively, perhaps, it is when very small businesses start to expand that they are most in danger. According to the credit monitoring company Experian, when a business grows to six to 10 employees, the flexibility it benefited from as a micro-business starts to disappear. Fixed overheads become greater and cash flow starts to cause more serious issues if not carefully monitored. From cases I have studied, it is cash flow that seems to do for most, if not all pub tenants whose businesses collapse: not having the ready money to pay the VAT man, the rent, the bill for the beer, the power companies and so on. Indeed, cash flow problems probably cause most small business failures: I had a mate who ran a micro-brewery in Hertfordshire, and his business went under because, although on paper it was profitable, his cash flow was wrecked by pubs not paying him for the beer he had delivered, and the taxman wouldn’t wait for his own slice.

Despite the fact that one in three new businesses of all sorts fails within 12 months even though it doesn’t have a pubco as its landlord, the idea that the tied pubco model is responsible for all the woes of the tied pubco tenant, and, if you believe some, all the woes of the pub sector, seems to be driving public policy. In parliament, the Business, Innovation and Skills Committee, which has been extensively lobbied by the anti-pubco forces – made up, according to Ted Tuppen, boss of Enterprise Inns, one of the most hated men in the pub industry, of “a high proportion of failed or failing publicans looking for someone to blame”, but I suppose he would say that – is determined to push the government into reforms that would ensure “no tied house tenant is worse off than a free-of-tie tenant”. But there’s evidence that even if that were achievable, it wouldn’t make any difference. The survey of pub tenants by CGA for Camra earlier this year, regularly pulled out to show how poorly tied house tenants do in terms of income and viability compared with free-of-tie tenants, had one question, the answer to which is never quoted by those who hate the tied house model. Asked: “Is your business struggling financially?”, 53 per cent of tied house tenants said “yes” – and so did 52% of free-of-tie tenants. At the Wellington Pub Company, which owns almost 800 free-of-tie tenanted pubs, nearly 40% of its tenants – 300 or so pubs – were in arrears with their rental payments by more than 180 days. It’s not the tied house model causing them problems.

The problem is that if the government listens to those pubco tied-house tenants with a strong interest in blaming the pub companies for their problems, and brings in the reforms the anti-pubco campaigners want, there is a good possibility that instead of saving the pub industry, the reforms will hasten the closure of many hundreds – perhaps many thousands – of pubs already teetering on the edge of viability. That was the conclusion of a report commissioned by the Department for Business Innovation and Skills from the financial consultancy London Economics on the likely impact of the proposed reform of the tied trade. That report, which came out last week, has been extensively slagged by the anti-pubco activists, who declared it “full of inaccuracies and guesswork”. Their attack on the report, it seems to me, is because its verdict, distilled down, is that closures in the pub trade, and the problems of tenants, are pretty much due to this country still having several thousand pubs more than there is commercial room for. Since that, if true, wrecks the claim by failed pub tenants that it was the pub company, and only the pub company, that was responsible for the collapse of their business, naturally, they howl with rage, again.

Here’s what I said about the London Economics report over at the day job:

The words nobody wants to hear about the on-trade

In 1908, Herbert Asquith, the then Prime Minister, made a powerful and eloquent speech at a public meeting on the controversial Licensing Bill that his Liberal Party government was trying to steer through a hostile Parliament. After the speech, according to the Manchester Guardian in 1952, a lady on the speakers’ platform asked Asquith if she could have his notes as a memento. He handed her an ordinary envelope with a few words scribbled on the back of it. The only ones legible were: “Too many pubs”.

Move on 105 years, and one big message given to the Department for Business Innovation and Skills this week in the 44 pages of the report it commissioned from the financial consultancy London Economics on the likely impact of the proposed reform of the tied trade looks as if it could be summed up in the same three words as were on the back of Asquith’s envelope: “Too many pubs”.

The authors of the report appear to take a grim pleasure in declaring that, even after the decimation the pub industry has suffered in the past decade, “there is clearly surplus pub capacity, in quite a volatile market … with so many pubs on the margin of viability.” The report failed to give its own estimate of how many surplus pubs there are in the country, but happily quoted others’: “A number of stakeholders interviewed noted that the UK is probably still operating excess pub supply of approximately 6,000 pubs, suggesting a sustainable number of pubs of approximately 45,000.”

That 6,000 pubs – 12% of the current stock, one in eight pubs, an entire large pubco’s-worth – need to close to bring the sector down to sustainability is not a message anyone wishes to hear: not licensees trying to make a living, not pub customers who love their locals, not the communities already fighting to keep threatened pubs open, not brewers and other suppliers anxious to have as many outlets as possible for their products to be sold in, not pubcos keen to continue with the maximum possible advantages of scale, not anybody who loves the British pub for what it is, a unique institution and an important and vital part of British life.

Delivering that message, however, meant the report’s authors were able to make the main thrust of their report – that whatever choice was made among the various types of reform suggested, “although there is very great uncertainty about the precise value,” it was “our conclusion that the reforms proposed in the consultation will close up to 1,600 pubs” – seem almost a relief. After all, with 1,600 pubs out of the way, plenty of customers would move to the pub down the road, with the result, the report suggests, that “on average, pubs which remain will see footfalls 7.2% higher than present. This would be sufficient to turn a poorly performing pub into a more attractive prospect.” Would the many pubco tenants clamouring for the reforms to be brought in be happy if the result was 1,600 fewer pubs, but more custom for the ones that survive the cull?

The proposed reforms are meant to ensure that no tied-house publican is worse off, in the percentage of profit he takes from his pub, than a free-of-tie tenant. There are two big problems here: the first is calculating “no worse off”. As Bernard Brindley, chairman of the British Institute of Innkeeping, said in his evidence to the Business, Innovation and Skills Committee on pubcos and the tie in June: “The difficulty I have is how you get to the point of proving or analysing the figures as to where a tied tenant should be no worse off than a free-of-tie tenant. I have spoken to several chartered surveyors who have told me that it cannot be done, because you cannot compare apples with oranges.” The second is that messing about with the tied house system could cause an implosion: as the London Economics report says: “There is a real possibility that each of the proposed policy reforms, except possibly the code without permitting guest beer, instead of delivering the policy objective of ensuring tied tenants are treated fairly, ie, ‘no worse off’ than free of tie tenants, may lead to the end of a large-scale tied pub system.” In other words, the big tenanted and leased pubcos might feel the attraction of their business model had been wrecked by the reforms, and simply pack up, in an Everything Must Go distress sale. Some might feel that no more pubcos would be a Good Thing. But here’s Bernard Brindley again: “There are a lot of free-of-tie tenants who would rather be in a tied-tenant situation. The equation works both ways.”

To quote the wise Phil Dixon, from his own evidence in June to the BIS committee: “The problem we have in our industry is, everything is about estimate.” The London Economics report runs a host of reform scenarios through the computer, and comes up with a wide range of estimated results, though all result in the closure of pubs: bringing in a statutory code on pubco-tenant relationships without the “guest beer” option many want could see between 1,500 and 4,800 pubs close in the short term, the report suggests, which for an estimate is pretty wide. Other options, including having a “guest beer”, and banning the beer tie completely, because those options make many already barely viable pubs unviable for pubcos trying to cover their own associated costs, could see between 4,600 and 6,400 pubs close. (Though the report suggests around a third of those would open again, run by operators without the pubcos’ financial burdens.)

With respected economists saying the inevitable result of proposed legislation is the closure of huge numbers of pubs, it should not be a surprise that the government has decided, as the Irish say, to put its decision on bringing in a statutory code to cover the pubco-tenant relationship on the long finger. Political memories are usually short, but this government remembers that the whole current mess is a result of the dreadful shambles its predecessor made 24 years ago of the Beer Orders, brought in to try to “solve” the problem of the dominance of five big pub-owning brewery companies. The unintended consequences of that piece of interference in the market were the collapse of the bulk of the British brewing industry into the hands of overseas competitors and the rise of those big pubcos who are now themselves the target of proposed market interference. As the London Economics report says, “irrespective of what changes may be proposed or considered … almost any policy reform may have noticeable and unpredictable effects.” The government knows that, and it wants as long a think about what it should do next as possible. Preferably, some might suspect, until 2015 and the next general election.

The other big point from the idea that there are, basically, 6,000 unviable pubs in Britain working on the edge of survival is that the problems faced by so many tenants may not be all down to the much-demonised pubcos, but too many knives chasing too small a cake. With a scenario like that, it is inevitable a number of people are going to get hurt. If that statistic is true, any proposed reform of the system is unlikely to lead to thousands of tied-pub tenants suddenly freed from the pubco shackles and laughing and smiling over glasses of champagne as the gold and silver pours through the pub front door. Instead, we face – at current rates of closure – six more years of pubs shutting, tenants in distress, communities angry at the loss of important and much-loved local assets, and buckets of vitriol being thrown about as people argue over whose fault it all is. I wonder what Herbert Asquith would think.

I don’t know what will happen if the proposed reforms of the pubco/tenant relationship go through – mind, neither does anyone else – but I fear the worst. I DO know what will happen after this blog appears: more spittle-flecked fury directed at me from the anti-pubco activists, with my intelligence, my motives, my honesty and possibly my parentage all questioned. In 40 years as a journalist, I have met many angry activist groups, from parents fearful that their children had been exposed long-term to health-damaging levels of atmospheric lead to people who bought their council houses with local authority mortgages, only to find the interest rates they were paying soar to levels that threatened their ability to stay in their homes, to democrats in Hong Kong determined to ensure the iron foot of Beijing did not crush all dissent in the city. Not one of those campaigning groups alienated the people whom they needed to be cultivating the way the anti-pubco lobby alienates its potential allies. Guys, if even Pete Brown, who is 150% on your side, says: “The anti-pubco campaigners can be a bit spiky,” you have an image problem.

If you want to gain support for your campaign, you cultivate journalists, in an attempt to use them to get publicity for your cause. You don’t publicly call the editor of the Morning Advertiser, the pub industry’s leading journal, an idiot, thus pushing firmly away someone who ought to be one of your biggest allies. You don’t declare that only someone who has run a pub can possibly comment on how the tenant/pubco relationship operates, because you sound like someone who ran a pub but can’t tell when they’re mouthing self-serving nonsense. You don’t make massive relativity fails like comparing Ted Tuppen to Pol Pot, because it’s not clever, it’s a stupid, unthinking and dismissive insult to suggest pubco tenants are as badly off as two million murdered Cambodians. You don’t tell a journalist/blogger who gets more than 20,000 visitors a month that he is a lazy fantasist, because if you do he’ll be more inclined to think you can’t have a case if you need to resort to insults, and you’ll be missing the chance to reach all his readers with your arguments.. Furthermore, you don’t dismiss his request for evidence to back your case by saying that it’s all out there on the web and he has to go and find it himself: if you’re serious about your campaign, you ought to have a dossier of case histories of pubco atrocities to supply to him and other journalistic enquirers. If the police arrested you for murder, would you insist you were innocent, but tell the police they had to find the evidence for your innocence themselves?

Meanwhile, are the pubcos innocent? Or are pubco tenants victims of The Great Pubco Conspiracy, a scam to rank with timeshare holiday schemes and “boiler-room” share frauds? Peter Martin of the Peach Report, who has been commenting on the general hospitality scene for many years, and whose views I respect greatly, told the Financial Times earlier this year that “There is something wrong with the relationship between some pubcos and their tenants.” There is clearly something wrong with the relationship between some pubcos and some of their tenants, and ex-tenants. Otherwise there would not be so many angry, angry tenants and ex-tenants about. And I’d think it likely that some BDMs have not been as good at their jobs as they should have been, with the result that some tenants have suffered injustices and losses that have not been their fault.

But I’m positive, from cases I’ve studied, that there are plenty of failed tenants who simply couldn’t do a good enough job. Running a successful pub is extremely difficult, especially today, because you cannot just be good at the front-of-house stuff, the bits the public sees: creating that ineffable “atmosphere” that distinguishes a great pub from an also-ran loser is not enough. You have to be able to run the pub as a business, get your cashflow and accounts right, ensure the money is there to pay the bills, be rigorously organised behind the scenes, as well as brilliant on stage. That is a rare combination, I suggest. I’m certain I don’t have it myself, and I feel pretty confident that if pubs fail it’s a combination of there not being enough custom to go round all the pubs we have, and there not being enough great publican talent to go round all the pubs we have, either. If the pubco conspiracy theorists eventually produce a whistleblower to back up their conspiracy claims, I’ll take it back.

Finally, I let everybody have their say after my previous blog on this subject, but I really don’t see why I should again provide people with a forum to insult me, so for this blog post, anyone calling me anything other than the wisest commentator on the pub scene in Britain, or anyone with form in offering me other than praise, will be barred. It’s my pub, and I’ll do what I like in it.

0 thoughts on “The words nobody wants to hear about the on-trade

  1. But if you listen to some of the anti-pubco campaigners, they will argue that the demand crisis in the pub industry is itself largely a product of the pubcos’ business strategy.

  2. I know very little about this subject (dumb American here), but it seems like the same shit people always do: they don’t get their way, look for someone to blame (because it could never be their own fault!), see a very successful business, and blame “the big guy”!
    100% capitalism: lots want it, 100% socialism: the same. The real world is more complicated and no one can get everything they want. People need to pull their head out of their ass and realize that fairness does not necessitate equality! That big company is successful for a reason! Your small company didn’t make it for a reason!

    I try not to agree with anyone who does not atleast entertain both sides of an argument, therefore I have to agree with your points Martyn, the other side is just to radical/polarized/whatever. Not that my opinion matters much. 😉

  3. I thought one of the main problems people had with the pubcos was a lack of transparency over expected incomes. I’m sure I read somewhere that an incredibly low proportion of tenants made the income that the pubco expected.

    If so, I can understand why some tenants are rather cross to find that they make nothing like they thought they would do. No doubt some are badly run and you could say they are rather naive just to take the pubco’s word for it, but I can’t see that the pubco is blameless. I don’t really see why there is all the fuss over the tie.

  4. Nice post Martyn on a very trying topic, It would be very interesting to see a psychological profile of a number of pubco tenants as a comparison between the successful and those less so, but especially those that have turned into Mr and or Mrs Angry! I wonder if any of the pubcos have them? Cheers, have a good Xmas.

  5. The massive debt the big pub companies built up must be a problem for anyone running one of their pubs surely? And I don’t think landlords or demographics can be blamed for that.

  6. Martyn you write very well, and sincerely without wanting to flatter you. I enjoy reading your stuff a lot and particularly respect the fact that you published all the comments that came in on your incendiary piece praising the Pol Pot of the Pub Sector. Our professional experiences are very different but it’s absolutely clear to me that we care for and appreciate much of the same things in pubs and in food and drink and culture in general.

    I am a practical, skilled and very experienced restaurateur and worked and managed some of Manchester and London’s busiest restaurants. I was GM and licensee of an iconic top end club in Mayfair in the 80’s. I have worked in and run pubs too, and have had tied and free of tie leases simultaneously. When you have the right kind of experience and know-how the trade of making pubs busy and essentially successful is not rocket science at all. You will remain unconvinced of anything I say to the contrary of your thesis but I assure you the tied pub sector is massively compromised, inhabited by poor senior management whose vision is all about spreadsheet management and nothing to do with what makes pubs and catering businesses generally, work well. They rely on the skills and endeavour of the people who pull pints or know how to get other people to pull pints for them. My experience is my experience and what I have seen in the underbelly of the tied pub sector is shocking, dirty, outmoded. anachronistic and, as I have said before, is downright abuse and bullying – the model is dependent on raking far too much out of individual pubs’ turnover – and the bottom line is that has to be the way it is or else the pubco’s cannot service their irrational and completely irresponsible levels of debt.

    The margins on tied leases do NOT stack up for the lessees. The lessees who survive are those whose leases are on old terms, those who’ve not been through rent reviews and those whose businesses overtrade beyond pubco expectations and rent reviews have not caught up with their exceptional performance. These businesses, as with any cash business that is VERY busy, make a cash margin that can throw off huge amounts of money in all directions – the pubco wins out royally and the tenant pockets a wedge too – but the tenant’s MARGIN is rubbish.

    The tied pub sector is a disgrace.

    • I have never said, and would never say, the pubco model was perfect, or that it worked perfectly. I am sure that some publicans have been treated badly, because sometimes people get treated badly. However, I don’t believe that Ted Tuppen is Pol Pot.

      Incidentally, I ought to ban you for saying on Twitter that this latest piece was bollocks and I was a tosser, but hey, it’s Christmas Eve.

    • We must not ignore the asymmetry of the arrangement.On the one hand a hard nosed well resourced body of professional business people and at the other very often a keen but inexperienced (in business matters if not in running a pub) couple prepared to work long hours and risk their savings in the venture.The pubcos own the bat and the ball and this can’t be right.
      I well recall a young lady who took over a local pub.We gently suggested that she treat it as a three year project because that would be when the rent review would take place. And of course the greater the success she made of the venture the more the rent would go up.She maintained that she had guarantees from the pubco that this wouldn’t happen, that they were partners together.Of course it did, the rent demand was so large she couldn’t consider it and she left.The pub closed and hasn’t earned a penny since for the pubco or anybody else.Yet it had been making enough money to be considered a paying proposition.The building was long since paid for so it carried few financial overheads.

  7. Martyn

    You won’t receive anything approaching the animosity of that last blog because this one is much better written, even though it does, in essence, say much the same thing?

    I really do think it was the style rather than content that raised so many heckles, because you hear similar views every day to be honest. It’s certainly what made me respond, for the first time ever, so I can only imagine the effect it had on anyone who had been much more heavily involved with Pubcos on a tie, or specifically Ted’s Pubco?

    I don’t agree with using abusive terms or letting emotions slip during a debate (although sometimes we can all succumb to this if the subject is close enough to us) but you can’t really blame somebody who may have lost everything, and especially if you entertain the possibility that some of them MAY have lost everything because of a Pubco? I wasn’t aware, at least not consciously, of your previous work, so everything I knew about your style, position and viewpoint as a trade journalist was in that last ‘opinion piece’; I can therefore only assume others had the same experience?

  8. Just because things are as they are does not mean that it is right, in particular when the situation has been created out of

    1) Government Intervention
    2) An agreed complicity in suspending the operation of market forces.

    When you put a lot of money and resource into a mix with fundamentally under-resourced and fragmented individuals, mix in a home and hearth and allow the stronger party to name its own prices. You are going to end up with exploitation, you cannot fail, it is in the nature of the beast.

    You would be very surprised if you did not, all you need to do is to go and seek the evidence of the exploitation and discover how bad it is. If it is not as bad as all that then fine, but if it is really bad something needs to be done.

    The Market did not create Non Brewing PubCos, The Tie is not for them, they have not earned the privilege and do not have the maturity to use it wisely. It will not work as a purely financial mechanism, but it will, and does, work in the context of a Brewery brand with brand pride and loyalty. There can be no brand loyalty in a PubCo tied Pub, when the Beer pluggers shuffle apologetically into your pub offering glassware and beer towels if they can get your signature on an order for a couple of tubs of beer such is the complexity of the industry that they are not permitted to know or discuss pricing of the product they are promoting.

    A large public company with a bonus driven culture and a testosterone fuelled management style that thinks it is OK to call MPs Morons and to make sweeping statements about the poor quality of the operators his own company has recruited is not going to be a great proposition in the wise, fair-dealing, cuddly partnership stakes. It is simply not in its nature.

    The unfortunate reality is that, with the possible exception of Ted Tuppen, the real villains are long gone,, having mortgaged their excess profits for the next couple of decades and decamped with the loot.

    We are left with a bewildered industry populated at its “upper reaches” by people with decades of experience in an industry which by and large has not existed for fifteen years yet they still try to apply the logic of that long gone and largely successful model to the current disaster, which looks very similar but is, in fact, totally different.

    The time approaches when it will finally all come tumbling down and a new truth will emerge. It is said that history is always written by the victors which is why the current “history” is as it is. However there may come a day when the situation is reversed and a new truth will emerge.

    In that coming time there will be some satisfaction for those who spotted the warning flags and followed up on the instinct that said “Something is wrong with the PubCo / tied tenant relationship”, who bothered to go past the spikeyness, anger and anguish and investigated what was really going on and used their gifts of articulate communication to make a difference.

    It is not really good enough to jibe at a group who do not have the skills to communicate effectively or to know how to engage from their well of misery. There is a real story to be told here but who will tell it and will it be told before it is too late?

  9. There you go Martyn, a perfectly timed example (see link below). Before you say it, I agree neither of us know all the facts and yes, no contractual rules have been broken, but can you really defend this sort of logic as “simply business”? As this licensee says himself, if this is how they behave with a national award winner, what chance do ‘average’ licencees have?

    This story is typical of how they have no interest in their buildings as pubs, only as assets, and if maximising their profit means ruining the businesses (and sometimes lives) of a succession of licencees then so be it. Of course, if you’re one of those people who thinks business is ONLY about profit and should not be concerned about any wider social responsibilities, then you’re never going to be convinced and it’s pointless trying…

    http://www.morningadvertiser.co.uk/General-News/Great-British-Pub-Award-2012-Pub-of-the-Year-forced-to-surrender-lease/?utm_source=newsletter_daily&utm_medium=email&utm_campaign=Newsletter%2BDaily&c=Bfw0eRzm6mRmMoaRzzNmjB%2Br%2BQFN7I4b

    • Steve, you say, correctly, that “neither of us know all the facts”, and then you declare: “This story is typical of how they have no interest in their buildings as pubs, only as assets.” That’s simply an impossible conclusion to draw, without all the facts. And frankly, the fact that someone has won awards is irrelevant to how good they are at running a business. (I’m allowed to say this, as I have half a shelf-full of awards myself.) What too many commentators on this sort of situation don’t, or won’t recognise is that running a successful pub is very much not the same as running a pub successfully. I can think of all sorts of entirely legitimate and reasonable business reasons why GK should wish to end its relationship with a tenant, no matter how wonderful that tenant has been, front-of-house. Do you really think GK’s CEO could stand up at a shareholders’ meeting and say: “Sorry, there’s no dividend this year, but here’s a lovely picture of all the silverware our award-winning publicans picked up.”? No, running pubs isn’t ALL about profits, but it’s certainly not all about winning awards. And incidentally, I believe GK has now found a new tenant for the Lass O’Gowrie who is a very experienced Manchester pub person, and who presumably knows exactly what has been going on, and what is possible there.

  10. OMG
    Martyn I cannot believe you have said that – where does one start to talk about loyalty, partnership through thick and thin and trust.
    No, in your view anything any one does to prove competence in a game where the freeholder is allowed to set the rules and prices is just fine. If the freeholder decides it is randomly and suddenly not ok that is just fine as well, no discussion and if you try to fight your corner well you deserve everything you get lots more fish yadda yadda

    what a disgusting world you aspire to live in. Thank the lord I live elsewhere.

    • where does one start to talk about loyalty, partnership through thick and thin and trust

      Not in a business relationship. One would hope for fair treatment, certainly, And there is a good argument for saying that companies that treat others fairly will, in the long run, do better than those that don’t. But anybody who expects to rely on loyalty and trust in a business situation is an idiot waiting to be relieved of their money. That’s not a world I “aspire” to live in, that’s the world I recognise we all DO live in. If you want loyalty, partnership through thick and thin and trust, get a dog. And make sure you feed it regularly.

      • Oh sorry I thought PubCos regarded their tenants as a Partners they call them that and your “day job” has just circulated a recruitment ad for one of them extolling how partnery they were. Other PubCos aspire to be the MOST TRUSTED.
        I thought the OFT disregard the view that PubCos were in the business of relieving their partners of money because that is not in the PubCos interests but it turns out that in your world this is to be expected. So which world does the the OFT surveil I wonder – not this one.
        .
        So it looks like you regard the entire foundation of the PubCo business proposition as just one huge and quite predictable confidence trick. Welcome to the club.

        • it looks like you regard the entire foundation of the PubCo business proposition as just one huge and quite predictable confidence trick.

          I never said that. It’s a commercial partnership, and both sides are out to maximise their own returns: that’s the only basis upon which commercial partnerships can work. The pub company has a costly asset, which it needs to make a return on, and it lets the tenant use that asset to make money him/herself, on the understanding that the pub company gets a cut of that money in return. If the tenant appears to be codsing it up, and not bringing in an adequate return on that asset, it’s entirely reasonable that the pub company should want to take its asset back and let someone else who could do a better job have a go.

  11. Martyn – I think you’re just being too simplistic in this, maybe just to get your point across? Of course one has to be wary in business, legal contracts wouldn’t exist otherwise, but there is a definite line of morality or trust or loyalty (call it what you will) beyond which any person can reasonably expect no company or business partner will tread, regardless of whether or not it is implicitly stated in a contract. In fact, if you had to write a contract that covered every single possible deviation from a trustworthy business partnership it would cost more in legal fees and paper reams than any business could possibly hope to recover from trading. It would be impossible to run any business without some expectation of trust, wouldn’t it?

    But we’re not talking about some shady guy on a market with a line of watches stitched into his coat. We’re talking about listed companies who consistently advertise the fact that they ARE trustworthy? Whose every advert mentions the incredible levels of support they offer? Who actively chose to start calling their lessees ‘partners’ (what does that word mean to you)? With every uttered word from their staff designed to make you think that they will always do everything possible to help YOUR business and put YOUR business before theirs, because it’s crucial to their survival too? Even their category name suggest that the pub comes first…they’re PUBcos, not ‘licensed trade cos’ (or anything else you could think of).

    But the Pubcos also get away with ignoring many things implicit in their contract, for no other reason than they hold all of the power in the ‘partnership’. My (now ex) Pubco’s contract implicitly stated they’d answer any correspondence within a time-frame that was in reality rarely achieved. It implicitly mentioned all of the things that were their responsibility, few of which were ever attended to without, quite literally, months of wrangling. It implicitly mentioned processes to be adhered to when, for example, setting rent, which were quite obviously never followed. That’s the sort of thing I’m thinking of when I say you need to run a Pubco pub before you can comment on it? Not in a childish, no argument, “you haven’t done it so you can’t say anything, nah nah” sort of way, but in a “you really wouldn’t believe it until you’ve experienced it for yourself” sort of way…

    • I’m sure you experienced all those things. The world is full of people performing badly at their jobs. Yesterday I and a large number of other people trying to complete a train journey were told by a railway employee to get on the train standing at the platform, which would stop at the next station, where we could change to another line. Of course, the train then sailed through the next station without stopping … I don’t think that was a conspiracy, however, just the usual sort of idiot cock-up. Minor compared to what you were apparently on the end of – but I’d be still inclined to think yours was the result of cock-up and incompetence rather than conspiracy.

      • Martyn, from the many, many other examples I’ve seen and heard of, I regard my ex-pubco as one of the best! By the way, not sure if I said before but I wasn’t ‘evicted’, I terminated the contract correctly at the renewal date, to the surprise of the pubco (I think), due in no small part to the unviable future the business had working with them. I await the time when the freehold inevitably arrives onto the market…

      • Well Martyn I beg to differ – I will allow that many problems are possibly down to cockup and incompetence but the main one that causes the current problem with PubCos is the monumental cock up perpetrated by your mate Tuppen, and Osmond, Hands and Thorley in their ego fueled race to have the biggest PubCo and pay what all now acknowledge to be far too much for the pubs. If you pay too much for your house and the market moves away from you you end up in negative equity and it is eventually reposessed. There seems to be an assumption that the PubCos have a god given right to make a return on their investment even if their investment was a spectacularly bad one. Sorry the world does not work that way as will eventually be proved.

        I took on my pub in the early days of this when it was all about building purchasing power, high rents and low beer prices giving me “flexibility in my retail pricing strategy” it made sense to me – a property company rentalising its risk in beer volumes and putting the reward for beating the trend by selling high volumes of beer in the hands of the operator. That this was not working was evident quite quickly and now I discover after 11 years that it was never a high rent low beer price deal at all, according to the most senior executive in the company it was a low rent high beer price deal with low cost entry etc.. – but someone forgot to review the rents when the policy changed and my deal is still the other one. From that all else flows and I am sorry – that was not cockup – it was very deliberate.

        I make an observation that anybody in any kind of business who has to say so frequently “your signed the contract” in a partnership situation has something very seriously wrong with those contracts.

        in every other “partnering” type of business relationship I have had, the deal has always been done on the basis that “the day we have to look at the contract again after we signed it will be the day we will know we have failed in our partnership.”

        It does not take long with PubCos it seems.

        • Chris, they’re not my “mates”. And I’ve heavily criticised the pubcos’ debt-funded growth in the past, eg in the Summer 2011 edition of Host magazine (which used to be online but appears not to be any more, alas”, in which I described Punch as “like a very slow-motion car crash”.

          • Point taken Martyn, a misunderstanding, I had read into your recent pieces in praise of the PubCo model that somehow you were supportive of the perpetrators of this scandal which is destroying our industry. I am delighted to see that this is not the case even if your polemic on the topic has been deleted from the internet.
            The debt funded growth has now changed into debt fueled destruction. with recent announcements from Punch suggesting that their slash and burn strategy has been held up by tenants inconveniently not vacating their Pubs as fast as it had been hoped. So the Bondholders are going to have to wait a bit longer for their money.
            Punch has been pretty much rudderless for a year now with management preoccupied with the debt restructure and “earning” huge bonuses if they manage to make it stick.
            As to the allocation of blame for the cqar crash I have interacted over the years with many folk in the industry both PubCo employees, brewers and publicans and can honestly say i have met very few who believed Pubcos made any positive contribution to anything and all of those were senior managers of PubCos.
            The Brewers and Publicans to a man have without exception pointed to one or more of the manifest problems that these companies inflict on the industry and employees tend to prefer not to be drawn into areas that they cannot fathom themselves.
            It may be that I have been unlucky and the invitation that has been outstanding for 9 years now for my PubCo to introduce me to an experienced leaseholder who is happy has somehow been forgotten about.
            The reality is that think very few folk working for PubCos have any idea of what they are trying to achieve apart from surviving the unholy mess the folk I wrongly referred to as your “Mates” have inflicted on our once proud industry.

        • I’m puzzled when I read about the partnership bit.
          I had a long chat with a local landlord yesterday.He has received notice of a massive rent increase which he isn’t going to pay .Being good at his job he expected the rise and was already looking round for another pub.
          While running the pub he doubled or trebled its turnover and made it into the village hub.All his drink came via the pubco at their prices.
          So when he goes the pub will again be offered at an introductory rent and to be honest it’s unlikely the sales will be anything like what they are now.particularly as the present customers will be pretty well cheesed off with the pubco.
          I find it difficult to see much evidence of a partnership or even of competent business sense.The pubco could work along with the landlord and gain the benefit, it chooses to discard the opportunity and lose money doing so..

          • Without knowing (1) what the current rent is and how it compares to other pubs in the area (2) how the proposed new rent compares to other pubs in the area (3) how much the new rent is as a percentage of the pub’s turnover, and how it compares to the old rent and the old rent’s percentage of the original turnover (4) what the pubco’s total take was, wet and dry rents together and what it would be under the proposed new regime, wet and dry rent together (5) how much the pubco’s return from the pub is increasing percentage-wise compared to the tenant’s return from the pub, and a number of other things, it’as simply not possibele to comment.

  12. Martyn,

    The subject came up on Radio 4 “Today” programme this morning (a slightly pointless attempted barney between the presenter and a representative of the pubcos), and I have rarely felt such an informed independent listener… Ha! You’re both wrong! Thanks for that,.

    Mike

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