BBPA survey shows pub operating costs at 35%

The figure has been derived from BBPA member companies and is based on a combination of actual accounts and average estimated figures. The report could now be used to set an industry standard of operating costs during rent assessments and to help newcomers draw up business plans.

The survey — Running a Pub — Guide to Costs for Tenants/Lessees — represents a big step forward for the BBPA after it previously came under fire from the Business, Innovation & Skills Committee for not being involved in such a scheme.

Its release also comes in the same week as the publication of the final select committee report, which recommended a statutory code of practice backed up by a full suite of sanctions.

The BBPA hopes the its costs report will complement the Association of Licensed Multiple Retailers’ (ALMR) benchmarking survey, which puts operating costs at 46% of turnover. The key difference between the two is the BBPA’s report excludes a manager’s salary, amusement machines and entertainment such as Sky.

ALMR strategic affairs director Kate Nicholls said the two sets of figures were “in line” and “mutually reinforcing” if the excluded costs were added back in.

BBPA chief executive Brigid Simmonds said the report provided an “indispensable tool” for lessees and tenants and hailed it as “another step forward in transparency”.

But not all parties are convinced by the data produced by the BBPA. The main sticking point is the exclusion of a manager’s salary.

Industry expert Phil Dixon said that where pubcos invite multiples to take on extra pubs, they must include the manager’s salary as a cost.

“Morally they must accept that as a cost,” he said. “Too often they have been happy to accept the higher turnover from experienced operators, but refused to take into account the extra cost.”

Dixon also stressed that business development managers must be reminded that there is no such thing as an average pub and each case will be different. “Take catering costs. There are so many types. Is it order at the bar or served by a waitress?”

One leading multiple operator also questioned the exclusion of a manager’s or owner’s salary. “The point here is that the lessee isn’t buying a job, they are running a business. If we want professional business people then we shouldn’t expect them to run the bar as well. It’s a hard enough job already. These are operational costs.”

Simon Clarke, who sat on the Royal Institution of Chartered Surveyors panel on rent guidance and is a member of Fair Pint, also stressed that, in his opinion, parts of the report may be misleading.

In particular, he highlighted the fact that it states that “rent is typically 50% of the divisible balance”. He warned: “In the Brooker case, the judge ruled that the rent should be just 35% of the divisible balance.

“Also, the figures may be distorted by the fact that they include tenancies and leases. Most family brewers’ tenancies do not include a fully repairing and insuring obligation and, therefore, the costs would be much less.”

He argued that even an owner-operator pub should include the cost of a salary to the lessee.

BBPA’s five operating styles​

The BBPA survey splits operating costs into five operating styles , giving a minimum, maximum and average across all five:

• Rural character pubs with a 50:50 split on food and drink with an average weekly turnover of £5,000:​ Average operating cost £1,620; average profit £2,465; average divisible balance £845; average rent £422.50

• Community/wet-led pub with an average weekly turnover of £5,000:​ Average operating cost £1,336; average profit £2,106; average divisible balance £770; average rent £335

• Community/wet-led pub with an average weekly turnover of £8,000:​ Average operating cost £2,126; average profit £3,340; average divisible balance £1,214; average rent £607

• Town/country food-led pub with a 30:70 drink/food split and an average weekly turnover of £10k:​ Average operating cost £3,404; average profit £5,102; average divisible balance £1,698; average rent £849

• Circuit bar — a 70:30 drink/food split and turnover of £10k a week:​ Average operating cost £2,814; average profit £4,468; average divisible balance £1,654; average rent £827