'£1,000 per week rent isn't viable'
A fortnight ago, the Morning Advertiser revealed that many Provence licensees are struggling to pay steep rents. PAUL CHARITY takes a closer look at how tenants are faring at the company's pubs in one area of the country
A survey by the Morning Advertiser of 14 Provence pubs in the East Midlands and East Anglia has found high levels of business closures and financial distress among licensees. Eight of the pubs are currently closed with licensees at other pubs struggling to survive because of rent levels.
The Bolton-based company buys bottom-end freehold pubs and sells them on to private investors at greatly increased values with a lease to itself promising a high rent.
Licensees are offered the pubs on a no-premium and free-of-tie basis - but with steep rents. John Wade, who runs the Woolpack in Walpole Cross Keys, north Norfolk, is facing a stepped rent bill that's set to climb to £1,016 a week next year - he is paying £500 a week now.
The pub is taking around £2,000 a week. He said: 'This is a survival pub. Even if it was taking £3,500 a week, a £1,000-a-week rent is not viable - £500 a week is a fair rent at this pub. I've not taken a penny in the time I've been here.'
Duc Phi Pham has taken a five-year lease on Provence's Queen Victoria in Thorpe St Peter, near Skegness. Provence has reduced his rent from £1,100 a week to £750, but he is losing between £600 and £800 a week with takings below £1,000 per week. The previous tenant left the pub after the high rent forced him to raise his prices three times and many customers left to drink elsewhere. Pham has invested £25,000 in providing Cantonese food. 'My savings have been going down day by day. I would like to stay for the full five years - I won't move until Provence throws me out.'
Helen Richardson, who has been running the Star at Whaplode, near Spalding, Lincolnshire, is the longest-surviving Provence licensee of the 14 pubs - she has been there for just over a year.
The pub takes around £2,500 a week and her stepped rent, which started at £355 a week has increased to £710 a week and is due to rise to £785. Richardson said: 'We're breaking even.'
Another Provence licensee in the county, who asked to remain anonymous, is paying £400-a-week rent but is due to pay £1,000 a week in 18 months' time. 'It's not going to be easy,' he said.
The six Provence pubs that are open are taking a combined sum of £15,800 a week with a total weekly rent bill of just over £4,000. But three of the six pubs are on reduced or stepped rents that are set to rise by a total of £1450 a week.
Two weeks ago, the MA reported that four Provence pubs in Lincolnshire had closed in recent months after tenants were unable to afford the rents. An expert on Lincolnshire property said: 'Many of Provence's pubs are massively over-rented.'
l Heat's on for over-rented pubs - p14
The rents paid at Provence's 14 pubs in the East Midlands and East Anglia
l The Anchor, Sutton Bridge, Lincolnshire Taking £4,000 maximum a week with a rent of £680 a week
l The Golden Cross, Billinghay, Lincolnshire Taking £3,500 maximum a week with a rent of £995 a week
l Pub X, East Lincolnshire. Taking £3,000 maximum a week with a rent of £400 a week rising to £1,000 in 18 months
l The Star, Whaplode, Lincolnshire. Taking £2,500 maximum a week with a rent of £710 rising to £785 shortly
l The Woolpack Inn, Walpole Cross Keys, Norfolk. Taking £2,000 maximum a week with rent of £500 rising to £1,000 next year
l The Queen Victoria, Thorpe St Peter, Lincolnshire. Taking £800 a week with rent of £750 which was reduced from £1,100
l The Red Lion, Baumber, Lincolnshire. Closed after tenant failure
l The New Midge, Hatton, Lincolnshire. Closed after tenant failure
l The Cross Roads, East Barkwith, Lincolnshire. Closed after tenant failure
l The Crown, Maltby le Marsh, Lincolnshire. Closed after tenant failure
l The Lincolnshire Arms, Luddington, Lincolnshire. Looking for a tenant
l The Fakenham wine bar, Norfolk. Looking for a tenant
l The Ploughshare, Beeston, Norfolk. Looking for a tenant
l Capones, Worksop, Nottinghamshire. Looking for a tenant
Provence needs to focus on tenant retention
by The PMA Team
There is one simple truth about many of Provence's pubs: the rents are too high. Licensees need to earn a living. Many of Provence's pubs are over-rented - or are on the way to being over-rented as their stepped rents increase.
Provence is a commercial property firm that does not understand key aspects of the pub business. Many of the pubs it is buying are in remote rural hamlets. They are the sort of pubs that lend themselves to two types of owners: licensees with the cash to buy the freehold and run a lifestyle business; or benign family brewers prepared to take a long-term view and charge a gentle rent to ensure tenant continuity.
Tenants are passing through some Provence pubs at a frightening speed. They are, no doubt, tempted by the very low-cost of entry. Many are pub novices who need a tremendous degree of support in their early months to stand a chance of survival. Many also have little in the way of the capital they need to invest in the tired pubs that I have visited. A rent of £1,000 a week in a country pub is a daunting sum to pay up. It is no wonder that many tenants fall into the debt trap. As tenants move through pubs quickly, replacements may find themselves with an even harder job.
The Queen Victoria in Thorpe St Peter lost many of its customers after a tenant raised prices three times to cover his rent. The new tenant, Duc Phi Pham, is a man who admits to having no experience of the bookwork required to run his own business.
Rejected by other pub operating companies as a potential licensee because of his lack of experience, he moved from Manchester to take on the Queen Victoria because of the ease of entry. He faced taking on a pub with broken equipment, tired fittings and a disaffected customer base. Charging him a rent of £1,100 a week will guarantee he fails.
Another pub, the Woolpack Inn at Walpole Cross Keys simply will not afford the £1,000-a-week rent that Provence plans to charge in the new year. Its licensees are petrified that Provence will pursue them for their debts if they leave.
Provence needs to focus on how it recruits, checks and retains its licensees. Those I have met have never been asked by Provence to provide a business plan. The company, which has completed on 30 pubs this month and already owns 200, should give more thought to what is a sensible rent at a pub like the Queen Victoria.
As someone who has successfully run seven pubs over the years in Lincolnshire, if I was taking the pub as a tenant, I would seek a three-month rent-free period. I would pay nothing for the fixtures and fittings. I would ask Provence to provide a full structural survey. I would ask it for a £15,000 contribution to a complete refurbishment in the public parts of the pub.
The maximum rent on a non-tied basis I would pay is £360 to £400 a week. I would seek a break clause at the end of six months. If all goes well, I would expect no more than takings of £3,000 a week and count myself lucky to earn £400 a week. That's the kind of pub this is. Provence is making substantial profits selling pubs at auction on a high rent guaranteed by itself. But Provence is not, in any sense, a pubco-type operator of pubs - it is a property landlord with a high-rent policy.
Tenants take under-leases to help pay Provence's rents. Provence is completely reliant on its licensees' operating skills to pay them. But if the rents are too high and licensees continue to fail, Provence itself will run into trouble. It is time for Provence to focus on the steps required to retain li
