Tied rents remain higher than free-of-tie rents for second year

By Rob Willock

- Last updated on GMT

Tied rents (blue) remain higher than free-of-tie rents for second year
Tied rents (blue) remain higher than free-of-tie rents for second year

Related tags: Renting, Leasing

Rents remain higher as a proportion of turnover among tied pubs than free-of-tie pubs, according to this year’s Benchmarking Report from the Association of Licensed Multiple Retailers (ALMR).

Although rent is now at its lowest proportion of turnover for the past 5 years, and is falling across all pub market segments, there remains a differential of 1.7 percentage points between tied and free-of-tie pubs.

Among tied pubs, rent averages 10.7% of turnover, which is down from 12.3% in 2012, but still higher than the 2010 figure of 9.4%. Among free-of-tie leased pubs, rent averages 9.0% of turnover, which is down from 10.7% in 2012.

Kate Nicholls, ALMR strategic affairs director, said: “Whilst community local operators have seen a resurgence, those operating under tied leases in particular continue to struggle – reporting below average capex, margins and growth. For the second time, tied rents as a percentage of turnover were higher than rents for free of tie and commercial leases.

For leasehold pubs as a whole the average rent is 10% of turnover, though the ALMR notes this figure is slightly skewed by the increasing number of peppercorn entry rent deals, without which the figure would be closer to 12%.

The report also shows that gross margins on wet sales in tied pubs average 61.7%, compared to 66.2% among pubs on free-of-tie leased pubs. Gross margin on food sales in tied pubs average 58.5%, compared with 61.8% in free-of-tie leased pubs.

The ALMR’s Benchmarking Report 2013 survey covered 36 companies operating 2,100 outlets – with all data reported at outlet level. The majority of respondents are small companies – 83% operate fewer than 50 outlets and two-thirds fewer than 20 outlets.

There is a roughly even split between leasehold (53%) and freehold (47%) premises; of the leasehold premises, 56% are with pubcos or brewers, and just 1% of these are free-of-tie (down from 6% two years ago).

Related topics: Property law

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