Punch Taverns' new lease of life

Patience, they say, is a virtue. Punch Taverns will have to wait a while before being able to assess the popularity of its new lease agreements, which it argues will demystify the way its beer prices and rents are linked.

The new deals, flagged earlier this year, were rolled out last week across a number of its South East pubs and link the amount of rent paid with the price paid for tied beer.

To sign up, licensees must join Punch's new online product supplier, the Punch Buying Club (PBC), through which they will be required to buy products and services.

Proof of commitment

Roger Whiteside, managing director of Punch Partnerships, home to Punch's 6,000-plus leased and tenanted pubs, claims the new deals - backed by the pubco's recently BII-accredited Code of Practice - are proof that group is committed to an open relationship with its licensees.

"We're laying out in the most transparent terms possible what is required when taking on one of our pubs. You can choose the level of risk you want to operate under, how much rent you decide to pay and subsequently how much in the way of beer discounts you are entitled to," he says.

Whiteside noted that free-of-tie pricing kicked in once barrelage targets were beaten, plus licensees could choose to buy a non-tied beer from a list of 400 progressive beer duty brewers drawn up by Punch. And those pubs taking the higher barrelage target lease would not be required to have Brulines flow monitoring in their cellars.

Punch will also calculate rents via CPI (Consumer Price Index), rather than RPI (Retail Price Index). Whiteside denied this was installing upward only rent reviews by the back door. "We just think CPI is more consistent and less volatile," he says.

Initially, around 140 Punch pubs currently being let in the South East will be offered on one of three new deals - a short-term tenancy of five years and two different 10-year leases. Whiteside envisages a national roll-out next year.

The leases will be offered to new operators, but existing Punch licensees will be able to convert at their next rent review, Whiteside says. And if existing lessees aren't interested? "Not a problem. They can carry on as before. But we will try to persuade them, using things like membership to the PBC, of the benefits," he adds.

Attracting entrepreneurs

The pubco says it wants to attract those who have the potential to be entrepreneurial operators. "We won't be presenting these to 'lifestyle' licensees," says Whiteside, "so there will be a limit as to how many pubs they're offered to."

A lot will be attracted by the prospect of no rent reviews, he says. "They can have one if they think we're over-renting them, but otherwise they don't have to," Whiteside explains.

And if the agreements don't prove popular? "The presumption is they will work," he adds. "If they don't then we will tweak them where necessary, for example, with things like additional discounts. But there is no question of our removing these deals. We plan to roll them out nationwide in January."

Whiteside says Punch has yet to work out precisely how to handle those lessees on existing agreements that are longer than 10 years who wanted to move over to the new deal, although he doesn't foresee such situations "being a big problem".

There are those who say never mind new-fangled lease deals - what about support for existing licensees who are struggling now? Whiteside is emphatic about the help available, but there is a catch.

"We will support people who we believe are trying to do a good job. But if they aren't trying, then we can't help them," he says.

In addition to the new lease deals, Whiteside says the pubco's business relationship managers (BRMs) bonuses will be linked to compliance with the pubco's new code of practice. The document has to "live and breathe".

He adds: "It is already driving the way we behave. It creates consistency rather than being open to interpretation."

New leases, new codes, new chief executive. Whether a new era beckons for the UK's largest pubco and its licensees remains to be seen. Patience, and all that…