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I suppose the pubs that qualify for these ‘new’ incentives are the pubs with successful tenants turning over high barrelage figures? Of course not! They are pubs at the bottom end of the scale with high ‘churn’ and very little barrelage turnover. Pubs Green King has effectively washed their hands with or can’t sell. Don’t think for one moment that without the current poor trading conditions or this perfect storm they would ever have considered these options. But then it’s all about survival; survival of the pubco with total disregard for the man at the coalface. Mr Green King, I’ve a better Idea; remove the supply tie, invest the millions of pounds that you took from the tenants back into your estate and then you can really tell us that you have earned the right to act in partnership with your new licensees. Evolution of the pubco model? – Rubbish! It’s driven by a necessity to survive; nothing more nothing less.

Graham, will rents go up if the tie is removed? Possibly, however some will come down as well. Even if rents do go up they would only increase by 50% of the estimated value of the discounts which the tenant may enjoy on the open market. [eg 200 barrels, if extra discount say 60 a barrel = £12,000 the rent could increase by £6,000]. This new fot tenant will be £6,000 a year better off if the tie is removed. You can find the Noddy & Big ears version here should you need further clarification: http://www.fairpint.org.uk/Assets/Supply_Free_Rents.pdf If the tie goes, I accept that the brewers will not give the same discounts to the trade that they currently give to the pubcos, but then why should they? Without the tie, circa £700million a year that the pubcos take out of our industry and use to service debt and feed shareholder dividends, will be kept in the trade and the whole pub sector will benefit from it. Tied tenants will be able to negotiate bigger discounts and invest back in their properties. It’s a win, win situation. At present £700million pounds a year is lost from our great Industry; look at the state of our pubs….. Surely even you Graham can understand how much better off our great industry would be if all of the money was reinvested back into it? We certainly would not need to ask the taxpayer to cover our debts! That just lets the pubcos of the hook. Smoke and mirrors Graham.

Great post Liam, honest, factual and bang on the money.

Vic, a senior pubco director told me 3 years ago that her company was actively seeking around 15% of net turnover as rental figure. She made no reference to the profit assessment method of calculating rent nor did she suggest that there should be a comprehensive breakdown of how the rent is calculated. She just stated that her company was looking for 15%!! In my opinion and having seen many case studies across the whole country I would suggest that this 15% is not too far off the money. Previous to 2001 I worked in the FOT sector and rents generally were set at about 6-10% of net turnover. Here we are in 2008 and the whole market place, tied and free of tie, is distorted to the benefit of the pubcos.

Lisa it’s a simple equation; a large brewer offered Mark Dodd’s £170 a barrel discount based on a fictitious free of tie pub turning over 250 barrels a year. This discount was offered without any negotiation. This imaginary pub would be £42,500 a year better off than if it was a tied pub that wasn’t getting discounts (170 x 250 = £42,500) It is without dispute that a tied tenant is financially worse off than a free of tie tenant and this contravenes EU Competition law, the Court of Appeal & the Trade & Industry Select Committee recommendations of 2004. Whilst there are a whole series of factors affecting the industry at the moment, these are just exacerbating the key problem for the majority of pubs – the beer tie. Without the tie and that extra £42,500 profit you may probably be able to ride out this perfect storm?