Family brewers: tenancies with a difference

Paul Wells, chief executive of Charles Wells and chairman of the Independent Family Brewers of Britain, explains why being a tenant of a regional family brewer is that little bit different.

The Independent Family Brewers of Britain (IFBB) represents 27 family brewers who symbolise a distinct and unique sector of the UK brewing industry. Members of the IFBB own regional breweries and pub estates, with the majority private, family-run businesses.

The breweries have been family-owned and run for many generations. They are dynamic and innovative and constantly work to develop new products and brands, while spending millions each year on

pub developments. A common goal shared by all members is to "maintain the traditions of cask brewing in Britain, and to continue to support and promote this healthy, profitable and vibrant sector of the industry."

Member companies can be found throughout England and Wales and include prominent breweries such as: Adnams, Arkell's, Batemans, Charles Wells, Daniel Batham, Donnington Brewery, Elgood's, Everards, Felinfoel, Frederic Robinson, Fuller's, Hall & Woodhouse, Harveys, Holden's, Hook Norton, Hydes, Joseph Holt, JW Lees, McMullen, Palmers, SA Brain, Shepherd Neame, St Austell, Daniel Thwaites, Timothy Taylor, Wadworth and Young's.

Essentially, when a licensee decides to join an IFBB member they have the added reassurance of working with a brewery and pubs at the very heart of their local communities. With a strong sense of identity, pubs are branded with the brewer's name and serve that brewer's brands inside.

This works rather like a business franchise in the sense that the brewer's good name, and the beer brand support, often encourages consumers to choose that pub — a real bonus for any newcomer to the trade.

The benefits of a brewery tied tenancy are considerable for those who choose to take one. In principle, in the traditional brewery tied-tenancy system, the brewer owns and insures the pub and pays for repairs, improvements and alterations. The tenant buys the inventory (tables, chairs etc) and stock at value — the only capital investment they have to find when they move into a pub.

A traditional brewery tied tenancy (inventory and stock) can be acquired for £5,000 and would rarely cost more than £50,000, depending on the size of the inventory and in-going stock value of the pub in question. This offers an excellent opportunity for those with relatively limited capital to run their own business.

For newcomers and experienced licensees, the brewery also provides extensive support to ensure the success of the pub operation. The mutual benefit to be gained from a successful pub is at the centre of this support — licensees are able to look to their brewery for a range of benefits.

The value of support is typically around £8,000 per pub in the first year depending on the family brewer in question. As this backing is not available to freehouse pub operators and any other on-trade outlet, it constitutes a unique aspect of taking a brewery tenancy. It is recognised that the majority of new licensees need this level of support in their first 12 to 18 months in order to build confidence and experience.

In comparison, the free-of-tie operator, normally pays a capital sum to acquire either the freehold or the leasehold of the pub, and thereafter is responsible for keeping the building in good repair and fully insured at their own cost. What's more, they don't have a family brewer to support them.

The IFBB's full support package to tenants, is driven through a business development manager (BDM) who is always on hand to advise on how best to operate the pub and deliver business growth. Within IFBB members' tied estates, the BDM manages an average of just 34 pubs (considerably fewer than most other pub companies, which can be as high as 55).

Additionally, family brewery tenants tend to receive support from head office staff who also visit pubs and give advice and help on a range of subjects like menu planning or wine sales. As with any individual business, the brewery and the tenant agree a business plan and invest, for example, in capital expenditure, training or marketing.

The brewery brings long experience of owning and operating the property, essentially providing retail knowledge and the intellectual property of decades' worth of successful pub operations. This invaluable insight helps ensure that the brewery tenant makes progress in growing their own business.

Freehouse operators do not have access to this higher level of business support. This combination of support services, with expert time devoted to helping the tenant, illustrates the ways in which the brewer, as landlord, provides special commercial or financial advantages to the tenant. Each IFBB member provides a range of services and support free of charge, or at reduced cost to its tenants. Often this support will be offered through their business development manager, or accessible via a central helpdesk at the brewery.

A freehouse operator is unlikely to benefit from such services without incurring cost. They also have to spend their own time and effort sourcing reputable suppliers, and not all consultants and suppliers will have any knowledge of the pub itself. This is a really useful part of working with a family brewer. The benefits might include induction courses, BII membership, Cask Marque accreditation and on-site cellar training. A BDM is likely to visit each of their pubs on a cycle of weeks, depending on need, to discuss business strategy and planning.

Some breweries also offer mystery visitor support, wine advice, commercial support, buildings insurance, gaming machine consultancy, business-rate reviews and help with entry into national and local awards.

In addition to the support services outlined, the brewery regularly alerts its tenants to issues, such as new legislation, which require their attention. This may lead to providing free follow-up advice given by experts on how to meet obligations cost-effectively. These benefits are substantial, but not included in the quantified list.

Many IFBB members provide training programmes specifically designed to help brewery tenancies make the most of their pub.

For example at Charles Wells, a

comprehensive five-day induction programme is accredited to the BII's Level 2 Introduction to Licensed Retail Operations. All aspects of operating a pub are covered, with the benefit of a nationally-recognised qualification at the end.

Similarly, in Lancashire, Daniel Thwaites has developed Thwaites Unique Licensee Induction Programme (TULIP), which is aimed at prospective licensees who are both new to the trade and the brewery.

It's ideal for newcomers looking for a complete career change and a real desire to invest in their future and be their own boss. Experience running a pub is not necessary as a support network is in place via a team of experienced area business managers. All that is required is a healthy dose of initiative and the drive to succeed.

The three-day programme covers everything from setting up your business finance and how to price your products and make a profit, to cleaning your lines and making sure your standards are what the customers expect and deserve. It also covers cask familiarisation, health and safety, employment legislation, wine awareness and development, catering and food safety, maximising machine income and stock control.

Linda Young, a new licensee at the Daniel Thwaites-owned Horse & Farrier in Lancaster and a former prison officer, says: "I couldn't even pull a pint when I arrived, but the three-day TULIP programme really helped me gain a thorough understanding of the trade and what was involved in running a successful pub."

Earlier this year the publication of the Business & Enterprise Committee's report created much comment about the way in which the tie works as though it were one common business practice. In fact it is used in many different ways and pubs operating under a brewery tenancy have been, fo