20 top tips for a fairer pub rent review
How do you go to bed at night and sleep soundly when you are clearly selling out the very people who you profess to want to help?
Well, that was a Mr Stephen Corbett's view on my organising a series of BII Rent Review Roadshows with the Morning Advertiser and the pubcos, plus my opinions on the tie/Fair Pint debate. His view was endorsed by none other than Nigel Wakefield CMBII.
I involved the pubcos in the roadshows (Punch, Scottish & Newcastle Pub Enterprises, Admiral and Enterprise) for two reasons: a) to ensure that everyone understands their policies, approaches, safeguards and appeal processes, and b) to subsidise the cost to delegates.
In terms of feedback, the result was very favourable with well over 70% finding the events very good to excellent. Two leading UK valuers Barry Gillham and Rodger Vickers also sparked off a considerable debate in respect of the rental model and the potential need for reform.
Many BII licensee members see the issue of rent reviews as a battle between David (them) and Goliath (pubco/brewery), with David leaving his sling at home.
Here are my 20 top tips for a fairer rental review:
1. Read your agreement, but, crucially, read your BII-accredited code of practice (charter if with Punch). This is particularly important if, like Mr Corbett, you have a Unique or old Whitbread/Laurel agreement. Though you will have such onerous terms as "upwards only" rental reviews in the agreement, the Enterprise code totally contradicts this clearly stating that such clauses will not be enforced and rents can go down as well as up (page 12 paragraph 1). Even the most intolerant anti-pubco fundamentalists who contribute to the MA website would surely concede that in licensee terms this is a welcome provision.
2. Be professional and courteous.
3. Buy some shares in your pubco so they are dealing with a lessee/tenant and shareholder.
4. Get in early. Nothing is gained by delaying the process. In rent-review terms you can agree a figure and in the current market defer signing till nearer the due date.
5. Don't instigate a price rise two days before the company comes to take down your current levels.
6. You're not an "expert"; mark all correspondence "without prejudice".
7. Discuss the fair maintainable trade (FMT) on which the rent will be based before anything else. Remember, this is a fictional level of turnover of what the good-to-average retailer will achieve.
8. Don't let your BDM talk about the last 12 months' figures — use your Brulines data to get an accurate picture of your business at the present moment. After all, companies claim Brulines' stats do not lie!
9. Have a photocopy available of Mitchells & Butlers' Tim Clarke's prediction on the front of the 12 June 2008 MA (40% decline in beer sales over 10 years) when discussing the FMT. This is not a time for optimism but realism!
10. Request in writing a copy of the profit and loss figures the company has used in its calculation.
11. Check the calculation in detail. Will the wine profitability be accurate? Pubcos can make mistakes.
12. Only provide overheads as a projection against FMT. Do not offer up outdated accounts.
13. Ask if any of the trading level is down to your goodwill. Here the odd award will strengthen your case as to "over-performance". All companies claim to make allowances for this.
14. If it is thought that your turnover should be greater, ask why the pubco has not raised this before at your regular meetings.
15. Machine profits. Don't let your pubco be a bandit! If it has already had its 50% share don't allow it to put your income in the calculation.
16. Make sure any improvements that you may have carried out are disregarded from the calculation; eg, extension/conservatory.
17. Take professional advice and talk to your fellow licensees — share information, but make sure it is accurate. Being secretive is not in anyone's interests.
18. In terms of low-turnover pubs one judge (Booker v Unique 2001) stated there should be at least £20,000 profit left for the licensee and partner.
19. Know when to fight your corner. Do not, under any circumstances, allow a rental review to go to independent determination/arbitration without taking professional advice.
20. Don't get stressed — 99% of rent negotiations end with a handshake.
At the BII we are looking to introduce an independent valuer determination service. We intend it to be fast, fair and with a fixed price, a provision for all parties to have a rent set by a genuinely independent and transparent procedure. I personally want to ensure that not one licensee in the UK can complain they would have preferred to refer their rent to an independent valuer, but were intimidated by the fear of the unknown, especially in respect of costs.
As for the rent-review seminars, I take comfort in the views of a licensee who attended the first "pilot" we (the BII) organised in 2007 (NEC). He recently confided to Chris Lewis (BII UK Licensee of the Year 2008) that he estimated the £25 he spent on attending had saved him £10,000 at his review. So you see, Mr Corbett, I sleep very well at night, thank you.
