Marston's to roll-out free-trade price rent deals

Marston's Pub Company (MPC) plans to trial a new lease agreement later this year which it believes will boost profitability for its licensees, attract better people to run its pubs and slash the drop-out rate among its operators.

Called 'Advance', the new agreement will enable licensees to buy beer at free trade prices in exchange for a rent increase.

Advance is be trialled from September in around 60 of MPC's pubs already covered by the brewer's Open House and Pathway leases, which account for some 1,300 sites.

If it proves successful it will be rolled out across the entire leased and tenanted estate early next year and will be open to all lessees, irrespective of when an individual's existing lease agreement is due for renewal.

MPC managing director Alistair Darby said that as well as the new agreement MPC's operation was being re-jigged. Two new divisions were being created: Apollo would hold around 1,350 pubs, with BDMs taking on 60 pubs each, versus the previous 45, and Phoenix, a 350-strong "intensive care" operation, which would see area managers oversee 25 to 30 pubs each.

On the new Advance deal, Darby said it was designed to "give something back". Pubs would remain tied deals but it would allow lessees the freedom to buy beer from Marston's at freetrade prices in exchange for a rental uplift.

The brewer had been experimenting with how it could move some of its margin into those pubs that were suffering but which did not merit the level of support offered to pubs that were experiencing more testing times, he added.

"There will always be a limit to what we can do, support-wise, so we looked at how we could make licensees better off without collapsing the profitability of the group as a whole," said Darby.

The agreement, which would 'overlay' a licensee's existing lease terms, would result in projected discount over a three year period of around £120 a barrel.

The aim was to try and ensure licensees were around £5,000 better off in the first year, Darby said, and provide a "genuine motivation to increase beer sales".

With Advance potentially costing Marston's upwards of £5m in beer discounts, Darby said it would benefit from the deal via licensees driving up volumes, attracting entrepreneurial operators, and reducing lessee churn.

There would be a rent uplift under the new deal of around £25,000 a year, Darby conceded, "but the licensee can effectively determine at what price to sell his or her beer".

In return for an Advance agreement licensees would be expected to be trade debt-free, and would still be tied on machines, he added.

One crucial impact of the new arrangement would be the effective removal of Brulines systems from participating pubs. "As licensees will be buying beer from us at freetrade prices they will not need to buy out of the tie, so there will be no need for Brulines," Darby said.

As well as the Advance deal, MPC is trialling another rental agreement aimed at those of its pubs that need still more assistance.

Called 'Phoenix', the arrangement sees MPC pay for stock, utilities, till systems and - if the pub has it - Sky, with the licensee paying only a deposit. He or she will then take 20 per cent of the net take, ex-AWP income, out of which he or she has to pay themselves and any staff.

Darby said the agreement was a "quasi-managed" system, designed to return to profitability those pubs that had "gone off the boil".

"Phoenix will give people with retail, but not necessarily pub, experience the opportunity to take one on. While training will be mandatory we are removing the barrier for many potential licensees by taking the risk out of these particular sites," he said.

MPC hopes to implement Phoenix agreements into 90 pubs starting in September this year, Darby said.