Robert Sayles: Ex-BDM turns whistleblower - Exclusive
The revelations that I'm about to share with you have been made by a former employee of a major pub operator.
Employed as a BDM, he worked a total of nine years with the company before leaving to pursue an alternative career.
Given the nature of the allegations made, I have had to guarantee his anonymity.
For legal reasons, I am not permitted to reveal the identity of the pub company.
It should also be made clear at this point that I am not in a position to substantiate any of the claims made. Neither will I offer an opinion.
How did you feel when you got the BDM job?
I was very happy as I wanted to stay in the drinks trade after getting paid off from my previous career in sales for a major UK brewery. The company was expanding rapidly and the share price just seemed to keep on rising. All the talk was of growth and further acquisitions; and I felt my sales and customer care experience would be a major asset in my new role.
What did you think your job would involve?
Recruiting new tenants on developing their sales and offering support wherever I could.
Was that how it turned out?
No. to a great extent it wasn't.
Could you explain what your role was?
There was plenty of talk of developing sales with tenants, of improving their skills and businesses, but from the outset it was obvious that my perception of the job wasn't achievable. My employer seemed to be more concerned about short term results and maximising company profits for month end, half year end and ultimately the year end.
They made it clear that my primary objective was to extract as much money as possible from each site. This short-termism meant that tenants were under such financial pressure they ultimately failed, thus causing my role to become, ever-increasingly, fire-fighting and replacing lost tenants
How did you go about doing that?
Initially it was relatively easy. In the boom years people were literally queuing up to take on pubs; everyone seemed convinced it was an easy way to make quick money and though I insisted on an achievable business plan, it was obvious many regarded it as a means to get some pub keys rather than as a blueprint to make money.
Many had little idea what they were doing. They rarely asked the right questions and invariably took a pub on our terms. It was a condition that inexperienced or first time publicans had to go on the training course. It always amazed me how many would pay for the course then not attend, or miss sections of the course. The most popular day to avoid seemed to be the finance section!
How did you view your tenants?
I regarded them as a valuable and valued business partner - if they succeeded, then so did I. This view was not shared by many colleagues. And it was not a view shared by senior colleagues who regarded them not so much as a partner but a resource; one we as BDMs were expected to exploit.
Head office staff particularly could be very negative. The credit control department was convinced that tenants had loads of money, but chose not to pay us. It was a system geared to extracting rather than supporting. I had colleagues that could neither compile nor read a basic profit and loss account, nor could they assemble a basic wine list - were they in the right business?
Was this view shared by your colleagues?
There was a mixed attitude depending on the BDM's background. The bonus systems encouraged short term thinking and whilst I could take a more relaxed view of the bonus having no mortgage and a grown family, many of my colleagues were desperate for the rewards. BDM's regularly got together for social events sponsored by a supplier and we had many trips abroad to major European breweries.
Talk often centred on bonuses, share options, new cars, etc it's what motivated many and was what many worked for. One or two of the BDM's spent many hours working out new ways of spotting buying out (pre Brulines). They never figured that in the majority of cases a bit of mutual respect and support would reduce the buying out significantly.
So how did the bonus system work?
Bonus systems were geared toward short term performance and paid bi-annually based on a return on capital. There were many ways of triggering it. Raising rent was the swiftest, even if we knew it was unsustainable (one colleague changed a tenancy three times within a year, each time increasing the rent despite the previous tenant failing financially)!
Forget all this talk about divisible split, it's a good theory but one that's rarely adhered to. We held all the trading information so we knew pretty much what a pub was likely to turn over. And all this info was freely available to existing tenants or prospective tenants. But it was amazing how many times some colleagues could succeed in telling a prospective tenant that the information was not available, although the barrelage figure for "Fair Maintainable Trade" was available!
How else did you enhance your bonus?
We were encouraged to manipulate the tenant's product range. Some beers are more profitable for pubcos than others, so many BDMs did their best to turn their pubs into what can only be described as a supermarket shelf!
We were also cajoled into installing additional AWPs wherever we could as these were good revenue earners for us, even where there was insufficient demand. Reports were raised highlighting pubs with no AWP, pressure was exerted to install even if there was no space or demand.
We were always encouraged to catch people buying out so that we could levy fines.
Monthly offers were touted to encourage bulk buying. For example if they signed up for bulk purchases, say twenty cases of beer, we'd give them a reward, usually something pitifully small, perhaps a 70cl bottle of spirits or a few T shirts and the offer was often confined to the first 100 orders, so many tenants were left without the fragment of incentive offered.
Finally, when tenants did eventually leave, the property department always made sure the maximum dilapidations were charged at some ludicrous price, even if the dilapidation had been there for years - beware the "put" clause in the agreements!
What about capex?
We were encouraged to push capex investment. We projected around a 15% increase in rental premium to cover costs. This way we made sure all costs, including some exorbitant professional fees, were paid for by the tenant. We benefitted from any upturn in sales through increased wet rent, though it was amazing how often very little incremental sales were realised. Quite often the capex was merely putting the pub back in the condition it should always have been in.
If the projected growth in footfall didn't materialise initially it wasn't the BDM's problem; it just meant that the tenant had to make do with a smaller slice of the cake. In the longer term of course it was a problem to the BDM as he or she would be left with the embarrassment of a newly refurbished pub and a departing tenant, as well as some under-performing finance.
Were you encouraged to take a long-term view of your pubs?
As long as the money kept coming in the pubco didn't seem to really care where it came from. It got to the stage where tenants in arrears were allowed to pay their rent and beer by credit card. Not exactly a long term strategy.
The Divisional Director's bonus was based on what his team members earned in bonus, so you can imagine the pressure being exerted.
The truth is the industry became overly complacent. Tenants were seen as two a penny so nobody was unduly concerned if one left. After all, there was always somebody ready and willing to take their place. The golden goose was killed for the last golden egg!
Did bullying take place?
Unfortunately it did. For many tenants, the pu
