Brookes attacks the tie in OFT submission

The boss of multiple operator Head of Steam has told the Office of Fair Trading (OFT) that tied operators are in a dramatically disadvantaged position compared to free-of-tie operators.

Tony Brookes runs eight free-of-tie pubs and one tied pub — the LYH, a Scottish & Newcastle Pub Company venue in Newcastle.

In his submission to the OFT as part of its review of the Campaign for Real Ale's (CAMRA) super-complaint, he compares the competitive position of his bar LYH, which he took on assignment last May and a Marston's pub which is free-of-tie.

Brookes tells the OFT: "We took LYH from the administrator of the previous lessee company, which had failed.

"We knew at the time that it was a difficult lease, but we believed that we could turn the pub round to profitability, by our market development skills — all our other pubs are successful.

"But, to date, we have been proved wrong.

"The pub can only offer the very restrictive range of products on Heineken UK's price list, which comes nowhere near meeting the desires and demands of modern pub customers.

"On the other side of Newcastle city centre is another of our pubs, Tilleys Bar.

"This is much smaller than LYH and was also taken over from a bankrupt lessee.

"It is a Marston's Pub Company pub, but completely free of tie, which we negotiated in exchange for a significant increase in rent.

"By application of our market development skills and careful purchase strategy, we have built the trade up such that the pub is now acceptably profitable, despite the high rent.

"If life in the tied trade in general is anything like as dreadful, financially, as it is for us in LYH, there must be endless lessees and tenants working hard, under tremendous financial pressure, in an unfair marketplace, losing money or only just breaking even.

Losses​

"In LYH, we have lost over £90,000 from taking the pub over on 6th May 2009 up to the end of January 2010 and we are still not profitable.

"It is only the success of our other, free of tie pubs which is allowing us to continue trying to reach profitability.

"In the meantime, Heineken UK, with profit on sales of drinks to us and rent of over £65,000 a year, must have made over £100,000 profit in that period.

"It will not allow us to buy any products other than on its price list, even though we have offered a significant increase in rent. They have done little to help the situation.

"In contrast, Tilleys Bar, being free of tie, has made a profit of over £54,000

in the same period, whilst paying a higher rent.

Dropping Heineken​

"The tie as it operates in the case of LYH pub is a strangulation and the landlord has us at its mercy. Because of Heineken UK's intransigence, we have dropped them and all their products from all our free of tie pubs (Head of Steam delists Heineken over tie​). That is a massive step.

"We fully support CAMRA's claim and recommend that another proper enquiry take place into the tied pub trade, as previous government bodies do not seem to have unearthed the true enormous disparity that exists between tied and free of tie pubs.

"There needs to be a dramatic freeing-up of tied traders' ability to serve their customers what they want to buy and to make an acceptable profit for their labours."

Excellent choice​

A statement from Scottish & Newcastle Pub Company said: "Mr Brookes is an experienced operator who traded LYH for more than five months and was very familiar with the business before signing the lease in September of last year.

"As with any other potential lessee, we made sure we fully explained the terms of the lease to him before he committed. We were astonished that within days of signing, he requested significant changes to our agreement and wanted to extend the product range to include niche products that we do not carry.

"We offer an excellent choice of products and a wide range of winning brands, including cask ales, which we know help lessees grow their businesses. The additional products requested represent a tiny percentage of all on-trade sales and the pub had traded very successfully without them in previous years.

"We have tried to work with Mr Brookes and would like to continue to do so. We recognise that the market is challenging and have offered him a package of support to help him over the next few months.

"We have a number of other successful pubs in the area and are confident that LYH has similar potential."