What Price A Pub?

It’s no secret that pubs are having a hard time of it and have been for some time. There are various theories espoused for this, but one partial explanation is the behaviour of the pubcos themselves. Far from nurturing their assets, it seems that they far too often frustrate their licensees and put barriers in their way.

Whilst they stand accused of poor management and restrictive practices; they themselves act as coy and innocent as an Irish dairy maid. But what is the truth? Do they really mislead potential landlords as to the viability and potential of pubs before tying them up in punitive contracts? Or is it a case of caveat emptor?

Well, to try and find out, when the lease of a pub I know well came up for sale, I took myself along to the open day to discover just what Punch were offering. The Railway is located at the tail end of Ramsbottom. Its main asset is its proximity to the East Lancashire Railway which is particularly useful in summer and during special events. However, it’s struggled in recent years and a succession of licensees have failed to improve it.

Punch were, naturally enough I suppose, marketing it as “an exciting business opportunity”. They were asking for an initial investment of £17,953. This included items that I thought they should provide for free. For example, as they have a vested interest in the pub’s success, charging me the princely sum of £1,195 to go on their own training course seemed rather mean.

The annual rent was initially pitched at £16,076. However, it soon emerged that, realistically, this would actually be at least £23,027 as this was the minimum required to join the Punch Buying Club. The PBC is heavily promoted along the lines of offering free of tie options on wine, spirits and minerals, and a tied barrel discount of £100.

But to me, an equal incentive for joining the PBC would simply be access to rights that I would take for granted. You have to pay for the privilege, but it’s the only way to ensure that you are fully covered for repair costs. Interestingly the more you pay, the more rights you seem to acquire. So if you want to be free of the controversial beer flow monitoring system, then you can be; but your rent will be £35,172 a year.

What you don’t get for this large sum is the freedom to buy your cask beer from whom you choose. They don’t really have an explanation for this restriction. This is particularly disappointing given that they do mention the importance of cask ale in their promotional material about the Railway.

What you do get from the PBC is BOGOF on real ale. So you have one line tied to their product list, but the second one can be chosen from their Small Brewers list. Ramsbottom is very competitive in cask ale terms and for £35,172 a year, I would really expect to be able to pick the beers that I want. In the meantime, you were committed to taking 271 barrels a year from them.

But now to the real nitty-gritty. What are your expected annual earnings? Punch estimate £20,150, but were keen to stress that it could be considerably more. For example, they were projecting food turnover at £10,833 which possibly could be increased. Even so, and accepting that their figures aren’t optimistic, the returns for your hard graft seem minimal.

What did I make of the whole experience? They seemed overly enthusiastic as to the pub’s potential and any tricky questions were batted aside. They kept on stressing their professional support system. Not one, not two, but 16 (count ‘em) support teams. But the real impression you are left with is that they blind you with science and then take your money and run.


RedNev said…
As one licensee put it to me, they couldn't do enough for him before he'd signed up. But once they had his signature and money, it was almost impossible to get anything out of them. Take the money and run is correct.
zythophile said…
On the other hand, if you want a McDonald's or Pizzahut franchise, it's going to cost you the thick end of £100,000. I'm not defending the pub chains (though they're no worse than the brewers used to be when they owned the pubs) but it's a fact that becoming a pub tenant is still easily the cheapest way to start up a business that is going to have at least some degree of guaranteed income straight away.

Martyn Cornell
Tyson said…

Thanks for that. It appears some things never change.
Mark Hayes said…
It's very interesting to hear just how much money Punch expect you to invest in the Railway. I know it quite well and have to agree with you that it's not really feasible.

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