Open books may ease sales
Open-book accounting could encourage virgin licensees to enter the trade and make pubs easier to sell.
Last week MA reported that Marston's Pub Company had introduced open-book accounting for all new licensees - even those taking assigned leases. Newcomers will be required to work with a specialist firm of accountants in their first year, with Marston's alerted by accountants if problems arise.
Guy Simmonds managing director Steve Taylor welcomed the system.
"Good accountancy practice is always welcomed. We recommend to all people on our training courses that they should have a specialist trade accountant."
Taylor said that the practice will make selling pubs easier.
"So often, sales fall through or are delayed because the accounts are out of date or non-existent. We're not
selling bricks and mortar, as with houses - we're selling a business."
Taylor said that he thought accountants should act on behalf of the operators rather than the pub company.
Davey & Co's Paul Davey said there were good and bad points to the system.
"Generally it's a good move on behalf of the pubcos. Greene King reported that since they introduced the approach, failure rates in the first year of business have dropped from 30% to 8%."
But Davey warned that new lessees are owner/operators, not managers, and some newcomers who have given up managerial positions might see the move as interference. "It's important that they strike the right balance."
Another aspect introduced by Marston's, in response to the Trade & Industry Select Committee's inquiry into pub company power, is to abandon upward-only rent review clauses.
Davey added: "Any relaxation in terms of onerous lease conditions will encourage newcomers to the trade."
Davey agreed that a better accounting system will make pubs easier to sell further down the line.
"Licensees should start considering their sale at least 18 months before going to market. At the end of the day, you're selling profit performance. That means it's of vital importance to keep the books up to date."
