Greene King's brave new pubco model

Greene King Pub Partners is to offer a range of new terms in a bold move to support incoming licensees and attract more entrepreneurs and multiple lessees.

The terms include freeing parts of the tie, rolling fixed-term rents and, in some cases, an option to buy the freehold. All Greene King tenanted licensees will be given increased business advice through reducing from 60 to 44 the number of pubs looked after by the group's business development managers (BDMs).

And from January, the cut-price drinks deals on Ruddles, McEwan's and selected wines will be extended to another 250 to 300 pubs from the current 170.

As part of the initiative, Pub Partners has been split into two divisions: independent, which comprises 400 mainly leased pubs; and core estate, containing the remaining 1,060 tenanted pubs.

The independent division, which encompasses Greene King's most entrepreneurial licensees, is seen to be in less need of support so BDM ratios remain at around one per 60 pubs. But as part of the company's efforts to attract multiple operators, for the first time a number of lease pubs could go free of tie on wine, spirits, minerals and possibly machines. Rents would be agreed on a per pub basis.

This development is not being driven by the current state of the market — it's all about the evolution of the pubco model.​David Elliott

In the core estate, similar free-of-tie terms will be offered to some new tenants. And for some newcomers, a new three or five-year agreement will be offered with a fixed rent that increases annually in line with the Retail Price Index, but has no rent reviews.

In addition, up to 40 pubs, as they become available, will be offered to new tenants with an option to buy after they have traded in them for two to three years.

Evolution​

Greene King Pub Partners managing director David Elliott told MA: "This development is not being driven by the current state of the market — it's all about the evolution of the pubco model. We believe in the tie but we also want to be as supportive as possible to licensees who are running their pubs professionally and have earned our support. We believe these new measures will bring us and our licensees closer together and create more sustainable businesses.

"If you look at what the managed groups are doing at the moment, I think they've reacted faster to what's going on than tenanted estates, with different menus and offers. I want our licensees to get the support to match that."

Elliott stressed the developments were not driven by distress in the estate. "We're not doing this because we can't sell under-performing pubs at present and therefore we have to do something with them until the market picks up. We have already sold most of the pubs we wanted to sell. And if you look at our vacancies, they're at 12%, which is one of the lowest in the business."

• MA Opinion: Pubco model begins to evolve​​.