Payne: beer tie not terminal

Ian Payne, chairman of Bay Restaurant Group and of Town & City Pub Company, has told a host of independent retailers that the tie is not the root of a leasehold pub estate's problems.

Speaking at the Morning Advertiser's Top 150 Independent Multiple Retailers seminar Payne, who ran Bass's tenanted division in the 1990s, said that the tie was "not terminal" for a leased business.

He said that US franchise models such as Domino's Pizza and McDonald's involved some form of tie; many European countries operated tie by loan and regional brewers had successfully run tied tenancies for more than one hundred years.

Payne said getting the right net price, with transparent pricing on tied products was essential.

Telling delegates about the 10 things he had learned running a leasehold estate, he said that getting the rent wrong is one of the biggest problems.

He added that in his experience rent calculations had not changed since the 80s, with rent as a percentage of operating profit needing to be around the 45% mark or rent as a percentage of total sales at the 12.5% mark to make the deal worthwhile for the tenant.

Payne described "cash flow as king" and urged operators to pay rent monthly rather than on a quarterly basis.

He said that both of his companies had been working with landlords and that currently 45% of Bay sites and 78% of T&C sites paid rent monthly.

"The risk: reward ratio in tenanted pubs is favourable, with a lot of highly successful operators who have come in at a low cost of entry," said Payne.

"The right tenant in the right site will almost always succeed and a site's trading capacity is constrained by the aspiration of the operator."