Business & Enterprise Diary part 2

FSB membership takes a tumble

A number of interesting things emerged in the Federation of Small Businesses' evidence to MPs on the Business and Enterprise Select Committee. First, licensee membership has been in freefall since the Tisc inquiry in 2004, dropping from 3,135 to 1,473 members when the organisation has more generally grown to a record 35,000 members. It surveyed its members on whether there had been changes since 2004: 99% of the 156 respondents claimed they were in "exactly the same situation then and now".

For whom the bell tolls​

Licensee Mike Bell, who runs the Portobello Gold, in Notting Hill, was an early critic of the pubcos — and particularly his own landlord, Enterprise Inns. Enterprise was keen to tell members of the Bec inquiry that not all rent-review arbitration cases go in favour of licensees such as Bell, who was being advised by David Morgan of Cookseys DMP. A rental award of £76,500 was made at arbitration — more than 100% higher than the £30,500 offered by Bell and some 16% higher than the £66,000 Enterprise had offered. Bell was liable, as a result, for both his own and Enterprise's costs.

Turning the tables on the tie​

Progressive Pub Company, a small operator of tenanted pubs in West Yorkshire, submitted evidence to the Bec committee to report that it ran the tie in a benevolent fashion, taking no money from AWP machines. Of the major pubcos, it had this to say: "(We) have to say (we) have found it strange that the two biggest pubcos offer[ed] the worst discounts until recently, when they could have been using their size to give their customers the edge in the marketplace. But the effects of that sort of poor decision-making are clear to see in their share price." It added for good measure: "The practice of increasing machine rents to enhance pubco profits could do with light shedding on it."

Royalties 'reflect pubco power'​

Punch Taverns was a little tight-lipped in response to the MA's lead story last week, in which the British Association of Pool Table Operators trade body claimed it and Enterprise are taking 90% of machine income. For the record, though, here is what Punch told Bec MPs in a written submission: "We believe that royalties should be treated in exactly the same way as discounts are treated on beer. They reflect the purchasing power of the pubco. This also provides certainty of supply for the machine suppliers, enabling them to invest in new product development." Chief executive Giles Thorley was a little more uncertain when he was asked directly about royalties by MPs in the oral hearing: "To the extent we get royalties, I am not entirely sure, because there are a large number of different suppliers and each contract will be subtly different. We have used it to reduce the levels of rent. I can give you statistics, but the levels of rent we charge for machines are materially lower than are available in the freetrade. Moreover, they have fallen 7% in the last year." Punch claims its machine expertise ensures that its sites track at £20 more per site in takings than a freetrade venue.

Once more into the breach​

Just how many licensees breach the tie in a given year? There were interesting figures from Enterprise Inns on this. The company told BEC MPs in a written submission: "We are collating details of 250 instances in the last 12 months where we were required to breach and terminate an agreement on account of failure to comply with the terms of the tie. We intend to pass this information on to HMRC."

Interpub adds weight to debate

Interpub, the company led by Keith Knowles, has put its weight behind tie reform. The operator told MPs on Bec: "We do not believe tied leases are a sustainable model. Many tied rents are set at a level where the "competitive disadvantage" of being tied is in no way addressed by the limited discounting of some products and the so-called added services, such as marketing support."

Ward v Enterprise: bad publicity​

Enterprise Inns has been on the receiving end of a sustained negative publicity campaign at the hands of its former licensee, Inez Ward. Evidence submitted to the Bec committee by Enterprise chief executive Ted Tuppen indicates that he clearly thought it was time to give his side of things: "I have to concur with the observations and inferences of our division director, who has overseen the relationship between the company and Mrs Ward over a number of years. Mrs Ward has comprehensively failed to make a success of her business, not least as a result of time, energy and money she has expended on a completely unjustified campaign against the company."

Mulholland v Enterprise: rent levels ​

It's clear there has been quite a spat going on between Enterprise Inns and anti-pubco MP Greg Mulholland. The pair locked horns over two pubs in Otley a year ago, with Enterprise Inns writing to Mulholland to assure him on rent-setting and other issues. Enterprise told Bec that Mulholland raised the issue surrounding one of the pubs, the Three Horseshoes, in Parliament in November 2008, despite Enterprise Inns setting out the facts to him in letter form. There were rumours that Enterprise had threatened Mulholland with a defamation action last year. Enterprise told Bec MPs that in "the absence of any attempt by Mr Mulholland to correct matters, Enterprise has had no option to take legal advice to protect its reputation".