Breaking tie will not lead to soaring rents
Breaking the tie will not lead to soaring rents - that is Fair Pint's firm rebuttal to the Campaign for Real Ale (Camra).
Although Camra would like to see another pubco inquiry, it believes Fair Pint's wish to break the tie would be "counter productive" as it would lead to higher rents.
However, Fair Pint says rents could actually decrease because substantial numbers of tied pubs are already at free market rent levels.
It said where rents do increase it would be purely as a result of the extra profitibality the removal of the tie would bring and would not outweigh the other benefits.
"Rent would be calculated by using the industry-wide and adopted 'Profit Test' method," said Fair Pint campaigner David Morgan.
"This method assesses the Fair Maintainable Trade (FMT) of a pub, for an average hypothetical tenant (not necessarily the current tenant).
"The FMT is then used to calculate the gross profitability of the pub, from which the operational expenses are deducted.
"What is left over (the divisible balance) is split 50/50 between the pubco as rent and the tenant as operational profit.
"This fair and transparent rent calculation method will encourage lessees and pubcos to work in true partnership, and maximise potential profit for both parties."
Discount
Fair Pint campaigner and licensee Stephen Corbett added: "It would appear that Camra has not recognised that, at worst, the rent may increase by 50% of the extra discounts which a tied tenant would enjoy were they free of tie.
"For example, the ability for landlords to sell 200 barrels at an extra £60 a barrel as a result of being free of tie could not transmit into a rent increase of more than £6,000, probably much less if the TISC recommendations are enforceable.
"That would mean that the tenant would be better off by at least £6,000 a year.
"This is real money that tenants need to ward off the effects of higher fuel and wage costs. They need the fairness of freedom to survive."
"We would welcome the opportunity to sit down with Camra to allay its fears on both of these important issues, so that we might work together to resolve the current inequitable position in which pubcos and their tenants operate."
Analyst's view
However, a leading city analyst disagreed with Fair Pint's view.
Mark Brumby of Blue Oar Securities said: "Fair Pint claims that rents may actually go down.
"This does not seem credible as any loss in beer wholesaling income in the hands of the pubco would have to be passed on to the tenant (on the whole) in the shape of increased rent."
• Fair Pint has produced an advice sheet on how breaking the tie would effect rents. You can download it here: Fair Pint: Supply free rents.
