Isn't it time the pub industry got real?

By Robert Sayles

- Last updated on GMT

Related tags: Greene king, Renting, Mark

Sayles: "Why are so many good operators now calling time on their businesses?"
Sayles: "Why are so many good operators now calling time on their businesses?"
It was sad to see that fellow blogger Mark Daniels has decided to call time at his Greene King pub.

Whilst I certainly don’t agree with everything Mark has written, one thing is obvious from reading his blogs. He clearly knows his stuff; a consummate professional in every sense.

This is something I’m sure Greene King are all too aware of; a fact that perhaps poses something of a dilemma for them. After all, if a reasonably efficient operator turns around and tells you that he can no longer make a go of one of your pubs then what does that say about the business?  

Of course, it’s possible that Mark suddenly become less efficient; let his standards drop, took his eye off the ball. I doubt that somehow. It’s more likely that, like many, he’s combating a tsunami of negative factors that no longer make the terms of his agreement workable.

In fairness, Mark says Greene King have tried to help, although he gives no indication of what form such help took.

The one consolation is that by signing a tenancy agreement, Mark ensured that he had the option to vacate the pub at a time of his choosing. I suspect there are a number of publicans out there right now who wish they had a similar degree of autonomy.

Loud and clear
I don’t need to tell any of you that Mark’s concerns are being echoed by publicans the length and breadth of the country. Soaring costs, combined with falling footfall are condemning increasing numbers of publicans to a hand to mouth existence.

That message is coming across loud and clear on all the licensee forums; the surge in the number of tenants leaving pubs only serves to reinforce the validity of such concerns.  

Remember the BISC finding that around two thirds of tenants earned 15,000 per annum or less? I suspect that figure has dropped considerably since then. It’s also worth remembering that in many cases, that’s an income for two not one!

Many of the pubcos still appear oblivious to such concerns. After all, tenants have got a roof over their heads and a few bob in their pocket, what are they complaining about? The real problem of course is that we have an establishment that rigidly adheres to the party line. If they’re to be believed, then the demise of the pub is solely down to factors beyond their control.

On a recent You and Yours​ programme, Brigid Simmonds continued her long running diatribe against government fiscal policy. It would appear that for the BBPA at least, taxation is the only issue in town. But then again, politicians have always made convenient scapegoats, haven’t they?

No mention of the fact that many rents continue to rise, courtesy of the link to RPI, or that brewers have just hiked beer prices by around 6% to combat another circa 5% fall in volumes. All this at a time when the BBPA’s own Beer Barometer shows further catastrophic falls in on-trade beer sales. Talk about pressing the self destruct button!

Do they seriously think that a tweaking of the duty escalator and a few sunny days will reverse such a well established trend?

What of course the BBPA’s beer measuring mechanism fails to highlight is the number of publicans exiting the trade through the back door. Looking around, it’s not difficult to understand why.  Many have long since lost patience with their partners; perfectly understandable given the level of unashamed intransigence on display. 

Several months back, Sir Mervyn King, Governor of the Bank of England affirmed that it would be 2017 before we see any perceptible improvement in the UK economy. He went on to talk of a “black cloud of uncertainty” and lament the fact that “problems have been pushed down the road”.

He could just as well have been talking about the pub trade, couldn’t he?

Leaking dam
From where I’m sitting, the industry gives all the appearances of frantically inserting fingers into a leaking dam; trying their damnedest to keep the ‘flood’ at bay. But for how long? They’re trying to buy time, that much is clear. But to what end?

Let’s face it, cash strapped customers aren’t going to find any extra disposable income any time soon, are they?

Wetherspoon pubs bear testimony to the fact that if the price is right, people will continue their love affair with beer. The problem is that in tied pubs, the price isn’t right, is it? (A fact continually reinforced by earning reports highlighting the disparity between the managed sector and leased and tenanted pubs). If nothing else, it dispels the notion that customers will opt for the ‘pub experience’ over price every time.

Of course, pubcos continue to insist the price differential reflects the ‘support’ they give their tenants. Many tenants would beg to differ.

One tenant I spoke to around this time last year had rather more pressing matters on his mind. He couldn’t understand why he was being asked to pay £124 for a nine of Dark Star Hophead when the brewery was only charging £62! Needless to say, I wasn’t able to offer too much in the way of reassurance.

Then again, if the ‘support’ is as good as pubcos maintain, why are they so reticent about offering tenants a viable FOT option? After all, there wouldn’t be many takers, would there?

The fact of the matter is that pubcos have become far too accustomed to manipulating the business model to maximise profits; showing scant regard for the tenant and frequently justifying inflated charges on the basis of vague, ambiguous benefits.

Many seem to feel they have a divine right to take a set premium from each outlet, regardless of the market. Then again, it’s never easy to make the decision to accept less, is it?

When Mark vacates his pub, will Greene King likely find a tenant that can make a go of a business on the terms they’d like? I suspect we all know the answer to that.

Pubcos need to face up to the fact that the gravy train is rapidly de-railing. Agreements signed in the ‘good years’ no longer reflect the trading reality for publicans today and aren’t likely to going forward.

The market is only headed in one direction. If the figures don’t add up today, chances are they won’t in the future. I’m sure Mark is as aware of that stark fact as the rest of us.

Unfortunately, the eyes of certain companies remain as firmly focused on the shareholder as ever. Perhaps a cursory glance at the tenant might be long overdue? After all, without them dividends are likely to be pretty thin on the ground.

Others continue to inhabit the world of denial; content to apportion blame to partners they selected to run their pubs. ‘They don’t get up in the morning’ pubcos lament, ‘they treat the pub as a home not a business’.

What of course is becoming increasingly more difficult to explain is why so many good operators are now calling time on their businesses. Presumably a credible explanation will be forthcoming in due course. And are pubcos really complacent enough to believe there are hordes of entrepreneurial Houdinis out there who can do any better?

The current pubco business model is terminally ill, that much is clear, and has been for some considerable time. The ‘patient’ needs to acknowledge that undeniable fact and seek medical attention while there’s still time.

The crux of the matter of course is whether the industry has the courage and collective will to put short-term self-interest to one side and make the decisions that need to be made?

In short, does it have what it takes to get real?

Related topics: Legislation

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