Chris Maclean: A fair rent?

Tonight I walked through the town. Autumn leaves rolled down the High Street. I passed pubs closed early for the evening. I passed pubs with no customers. There really is no denying it ~ the credit crunch, or whatever you choose to call it, is among us right now.

Today there has been an an LVA meeting. We are lucky here in Faversham that the LVA is a strong, sociable and gregarious group. We enjoy each others company and there is no animosity.

But it was obvious many of the licensees had issues. Undoubtedly the first amongst them was the issue of rent.

My understanding of the traditional tenant's position has always been that the "dry" rent, the fixed amount paid each week, was generally determined in reference to the property's potential sale value.

The "wet" rent was the additional levy added to the purchase of drinks. The idea was, perhaps naively, that the dry rent was fixed at a manageable level but the wet rent meant that, if things turned out well and the pub traded at a decent level, the brewery/pubco would have a slice of that action.

If a pub simply ticked along it could afford the "dry" rent but, if things were really good, the pub co would get extra benefits in the form of it's "wet" rent. A nice arrangement.

Rent is a particularly thorny issue because is is a significant bill often negotiated in surreal circumstances prior to signup with rarely any reference to other rents of other pubs and often agreed based on instinct and impulse rather than cold, harsh reality.

From the comments on the forum here, and from discussions I've had with other licensees I can see two problems. Firstly, licensees are seduced by the attraction of owning their own pub, roses growing around the front door, chatting with mates whilst supping fine beer, sufficiently to leave all sense of reasoning at home. A sailor at sea for nine months would scarcely be as excited getting into port and into the arms of a loved one, as a new licensee getting their own pub. Is it fair that, in this fevered condition they enter into some Faustian contract? I think not. But many do.

The second point is that for many pub companies there are three levels of interest. The licensees, the pub companies themselves and, over them both, the shareholders. This last group, for more compelling reasons in the last two decades, hold a disproportionate role in establishing revenue from all quarters.

I've always held that my brewery is patriarchial. Benevolent and caring, it rewards those loyal to it and punishes transgressors.

But for many pubcos the pressure of shareholders demanding increasing returns inevitably leads to comparisons. Why are shares in "X" pubco increasing whilst ours remain static? Increasingly pubcos have had to deliver results and have done so by squeezing the bottom line producers in order to compete. Rents are an obvious target.

What I would suggest is that for many pubs the rent they pay now has been set at a rate based on good times, high volumes and a confident economy. This exceptional trading scenario is deemed as "normal". Rubbish. What we have now is "normal". Rents should reflect that. If the shareholders don't like that they should go and invest in Iceland.

I've heard it said that a local pubco has rejoiced in the current market situation - with all those new redundancies maybe there will be plenty of new applicants, with fat redundancy cheques, ready to take on one of their pubs. I hope not. The dewey-eyed, cash rich tenant/lessee has got to be an endangered species and, if not, the pubs themselves will be.

Its going to be cold this winter... I hope you've got a fair rent to see it through.