Chris Maclean: There will be blood

By Chris Maclean

- Last updated on GMT

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Twelve and a half per cent. Sounds simple enough. Seventeen and a half per cent is VAT. Fifty percent is the GP. We're used to percentages.So why is...

Twelve and a half per cent. Sounds simple enough. Seventeen and a half per cent is VAT. Fifty percent is the GP. We're used to percentages.

So why is twelve and a half per cent ringing in my ears?

Simply put, twelve and a half per cent is what I should have been told about twenty years ago.

Yesterday I attended a conference where some hard facts were faced.

These are some of the salient points:

We're in a recession

Licensees lie to themselves and each other

Its worse than we expected

It'll be harder than we expected

We must cut away all unnecessary baggage now

We must examine costs.

Crikey! Don't look at it as "gloom-and-doom" but a rallying call for people to prepare themselves for a pretty tough passage. This is about lean, mean and fit for purpose. There will be a lot of casualties. The perceived wisdom of the conference was that around 5,000 pubs will go before things get better. Five thousand. About one in twelve. And nothing to do with the smoking ban.

Put differently, that is five thousand communities with their hearts ripped out. This is close to a national tragedy. But many in the industry believe that is an acceptable price for the emergence of a stronger industry. I disagree.

We've seen the onward march of the pubcos in the past decade snaffling up weaker traders in a bid for market dominance. Now they are bleeding. But, in their painful re-organisation, they maliciously sell on pubs with conditions preventing their continued existence. That is immoral. The market should decide which pubs succeed or fail. Not this.

So what with the twelve and a half per cent?

One particular speaker made an accountant like speech but, in a heart stopping moment, said a tenant/leesee shouldn't pay more than twelve and a half per cent rent - that was the only realistic balancing point. More than that was untenable. I know dozens of pubs that don't achieve this.

Work it out. Multiply your rent by eight. Are you taking more than that each week? Fine. Less, and you should start to worry.

The reality is many licensees are paying significantly more than twelve and a half per cent ~ some in the misguided belief that they can "weather the storm". Fools. Get out. Look carefully at what you have and ask yourself ~ are you one of the 5,000?

It has been suggested that, come January 2nd, some pubcos will find bunches of keys returned to them. So be it. Hopefully the licensees have gotten out before they have suffered too much damage. But I suspect many will hold on dearly believing this is some kind of blip.

I believe this will be a major realignment of the industry ~ a process that could be very exciting. It will herald a new era in pubs. But there will be blood ~ a lot of it. I hope and pray it isn't yours.

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