So you want to run your own pub? There are a few things you need to know first.
Most people who take a fancy that they'd like a pub understandably go on looks. It is the building itself and maybe the location that attract them. This, however, is their first mistake - especially if it is a tenanted or leased pub they are after. A pub is a business. It's not like buying a house. If you rent a pub you are entering a business deal and, as with all deals, there are upsides and downsides.
You must find out as much about the landlord of your prospective pub as you can. Our listings should help. They list the biggest players in the tenanted and leased sector and give you an idea of the different agreements they offer. You can access them using the link at the botom of this page.
There are three basic kinds of deal:
- the traditional tenancy, still favoured by most regional brewers
- the long lease, chiefly found in the big independent estates, although growing in popularity across the industry
- the franchise, mostly offered by one company, Scottish & Newcastle Pub Enterprises, but other operators are experimenting with the idea.
Decide which of these would suit you best. For instance, the tenancy requires less cash on your part, but in general there are fewer returns. The lease can be a great way to quickly build a small chain of pubs, but you'll need to put more into the business. The franchise may be the best bet if you don't have too much capital or experience and need plenty of support.
Within those three there is a myriad of deals you can do. Variables, which may or may not be open to negotiation, include:
- the term of the lease
- rent
- period of rent review
- whether and when you are allowed to assign, or sell on, the lease
- the products (chiefly beer) you are obliged to buy in from the landlord (known as the tie)
- discounts on those products
- your cut of machine income
- your responsibilities as regards upkeep of the property
- the support, such as training, business advice and promotions, that the company offers.
If you are serious about taking a lease or tenancy, all these and more should come into your calculations - not to mention whether you can attract enough customers! And whatever you do, take professional advice before you sign anything.
Glossary
Here's some of the jargon you might come across in your hunt for a pub.
- Assignable: lessee has the ability to assign, or sell on, the lease to another operator after a certain period of time
- Barrelage: the volume of beer sold at the pub in bulk barrels (288 pints)
- BDM: business development manager, also known as area manager
- Code of practice: a separate document to the tenancy agreement which sets out guidelines on rent reviews and how any dispute between company and tenant should be resolved. Some pub operators will also have a set of agreed service standards for their dealings with licensees
- Discount: reduction on the market price of beer. This can either be from "barrel one" or may be linked to sales
- Fair maintainable trade: an assessment of how the business is expected to perform under an "average" licensee. Used to calculate rent
- Franchise: an "open book" leasehold offering the licensee extra support
- Fully repairing: lessee has responsibility for maintaining the fabric of the property
- Lease: long-term leasehold of at least five years term, usually assignable and fully repairing
- Tenancy: traditional short-term non-assignable tenancy, most commonly of three years term
- Tied: tenant is obliged to buy beer and sometimes other products through the company.
Pictured: The Bottle & Glass at Scothern, Lincolnshire, is a 19-year Enterprise Inns lease on sale through Christie & Co at an asking price of £158,500.
Have a look at which pubco is offering which deal - click here for our full listings.