Provence calls halt to tenanted estate
Provence, the pub operator that sells freeholds at auction with a lease to itself, has decided to stop expanding its tenanted estate.
The company, which has more than 300 pubs, will manage its pubs from now on because it can't find enough high-quality tenants.
Recently the MA has carried numerous stories describing tenants' struggle to pay rents.
Provence has claimed it is offering tenants a low-cost entry - there are no premiums and licensees can enter its pubs within 48 hours.
Critics have accused Provence of creating misery and hardship for naive licensees who struggle from the start at its over-rented pubs.
Provence founder Paul J Kiely said: "We have encountered problems with a number of tenants. Our contract offered an extremely low-cost entry into the licensed trade, together with a high level of commercial freedom.
"This policy appealed to a large number of people, but it appears that not every-one is capable of exploiting the business opportunity Provence presents, or of keeping their side of the bargain - paying the rent agreed when they entered into their lease agreement.
"However, we can't fail to take notice and conclude that there isn't an adequate supply of qualified tenants to meet the demand of our business growth rate.
"Unfortunately, despite our best endeavours to keep barrier to entry low, we failed to realise the severe shortage of people with all the ingredients required to make a success of running their own business. Many tenants are very capable, but simply don't have sufficient capital; others have capital, but not the capability. We will accept full commercial responsibility for operating all our sites on a managed basis.
"Clearly, this will require us to put our money where our mouth is - a challenge we are happy to accept. Failure is not an option for us and we will succeed."
Kiely insisted that agreements with existing tenants would continue, adding: "Our aim is to have a portfolio of thriving operations run by Provence or individual entrepreneurs."
Industry consultant Phil Dixon said: "If Provence can run a managed estate on such low turnover pubs it will be a considerable achievement. How can its pubs support a managed pub structure without making a loss?"
Your CommentsRobert Feal-Martinez via email 04/08/2006"Phil Dixon is absolutely right Provance cannot possibly succeed. The managed house sector now looks for a minimum of 15K per week to survive the high costs involved, that is why many have moved from managed to lease. The only way Provance got tenants was because they targeted naive, non professionals. Any one with even a basic grasp of business would have seen that these pubs would not have the turnover to even cover costs. They were the 'runt' end of the market, the cast offs that no one else wanted. I warned at the outset that this company should have never been allowed to advertise their pubs in the trade press, it was so obviously a flawed model. Being right is no consolation when some many people have lost their livelihoods and much more. It is time that all pubs in the Leasehold sector were properly regulated by the DTI and for them (DTI) to stop pretending all in the garden is rosy, it isn't as daily news stories in the trade press tell so graphically."
