The issue with the machine tie
Some of those in attendance would look at me bemused, clearly wondering if I was a member of some ‘Terminator Appreciation Society’ spending weekends putting together replicas from the film series. As with drinking Kaliber or enjoying a day trip to Mablethorpe, Airfix modelling is something we should all try once in our lifetime.
Although from my personal experience there was an immediate side effect-glue sniffing! It got everywhere; hands and fingernails in fact everywhere apart from my 1962 Cold War fighter plane! The machines Neil was refereeing to is good old fashioned AWP (Fruit) machines, which is something of a paradox as I can’t stand them.
Maybe it’s Yorkshire DNA but why put a £1 into something that’s programmed to give you 70 odd pence back? Indeed in my BII gap year (2000-1) when I was advising NUS on its University bars I was with a rep from Rank Leisure who informed my that my ‘Alma Mater’ Warwick, had finally allowed an AWP onto their premises.
‘They have had a policy against them since God knows,’ he proclaimed. ‘Actually the first week of October 1975’ I interjected. ‘How do you know that?’ he queried. ‘Because I spoke and voted in favour of the motion to ban them!’
The reason I get so passionate about machines is that for the most part of the last decade the treatment of tenants and lessees by most Brewery/Pub Cos in this area has been tantamount to extortion. Royalties were levied on machine companies inflating the rents charged to licensees whose share (typically 50% of the net) was then factored back into the rent calculation.
The Landlord took another slice (50%) added that to the rent subjected it to RPI so within a couple of years Publicans were in reality receiving almost nothing except they still had to pay (100%) for the cleaning and energy supply. There were exceptions; Greene King and a few family brewers take a bow.
As I have stated publically on a number of occasions when it came to machine income no one could accuse Pub Cos/Breweries of being ‘one-armed bandits’ as they took nearly all of it with both hands! Incidentally when I announce this there has been a squirming of posteriors only surpassed by the recent Lib Dem Conference debating ‘What ever happened to our tuition fees policy?’
In response to complaints from select committees all this has changed or has it? Royalties should be phased out and Brewery/Pub Cos as Brigid Simmons (BBPA) stated in her evidence to BISC now only take a share once but do they? Enterprise have made a welcomed and transparent drop in their royalty fee from £20+ to £3.50 per machine per week renaming it as an ‘admin fee’.
Others have removed it all together but some have rushed to follow Enterprise’s example with all the haste of a constipated tortoise. From my sources companies are still levelling £5-6. A major brewery are surprisingly still at £8-10 a site but in ‘gold medal’ position are a large Pub Co receiving £15-£18 a machine and £5 on pool tables.
Whilst I accept machine management may come at a price these royalty levels are in my opinion indefensible. One company has begun and we have given a warning on the BII website to try to reintroduce rentalisng the tenants share of machine income. Their argument goes like this: Dixon, you must be a complete muppet if you think the fact that there is £30 -£40 a week in an AWP machine is not going to affect the rental bid from a perspective tenant.
To which I reply that you really believe that someone is going to come along and say ‘I’ll pay you 50% of your fictional profit and though you have already had a majority of the machine income please take half of mine and add it to the rent (+RPI) and I’ll happily pay for the other costs e.g. energy forever’.
I asked a number of leading Chartered Surveyors the following question: ‘Have you ever increased a rental figure because of the amount of a tenant/lessees shared machine income?’ No’ they all replied. (NB if you are free of tie for machine then the income is taken into account in determining the rent for the pub).
So my view to the Pub Co is you may have an argument in theory but in practice you are talking b*****s! Ironically of all the ties involving licensees the machine one should be the easiest to defend. We provide professional management in this specialist area, we use our buying power to obtain the best possible machines on very competitive terms to maximise income which we share fairly and equally.
How difficult is that?
