Cost of running the average pub increases

By Mark Wingett

- Last updated on GMT

Related tags: Consumer confidence, Renting, Costs, Almr

Cost of running a pub increases
Cost of running a pub increases
Like-for-like sales climbed 5.8% across the UK’s pub sector in the year to October 2012, with community locals and food led outlets outperforming the market, according to the Association of Licensed Multiple Retailer’s (ALMR) latest Benchmarking Survey in association with Barclays.

However, the report found that for first time in four years, the average cost of running the average pub has increased, to just under half of turnover  - up 3% to 48% of turnover with an additional 10% for rent across the leased sector.  The increases are fuelled by those cost centres driven by legislation – payroll and general operational matters.

It also should that while community local operators have seen a resurgence – comfortably outperforming the market with like for likes of 7.6% -  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.

Last year’s survey showed investment back on track, this year’s Report showed capex up more than 66% as operators continue to invest in their estate, their offer and their people.

The study – which benchmarks operating costs, business performance and market trends –shows the first signs of positive growth across the full range of indices since the sector was hit by the perfect storm of smoking ban, consumer confidence crash and recession.

The ALMR said it revealed a sector in robust health and well placed to capitalise on increasing consumer confidence and economic regeneration.

Kate Nicholls, ALMR strategic affairs director, said: “Taken as a whole these findings reinforce our messages to government – we are an industry well able to generate jobs, invest in community facilities and play a full part in the Big Society.

"The fact that small, community operators are now out-performing the market in all these areas demonstrates in spades that we are the real engine of growth and the best barometer of business and consumer confidence. We have the potential; we need to be freed from red tape and punitive taxes to deliver that in full.

“Cost control is a critical determinant of business profitability – particularly in the pub sector where it is a key variable in rent and valuation calculations. Operating costs as a percentage of turnover had stabilized over the past 3 years after peaking at 51% at the height of the recession. That cost control has come at a price, however, and the report shows that overall outlet net profit margins are extremely slim, meaning that the cushion to absorb additional charges from local authorities, Government or suppliers remains stretched.

“There is a strong warning to government in all of this. Whilst the sector is well placed for steady growth, it remains volatile and highly responsive to external pressures. Get it right and we will be able to capitalize on these positive indicators. Get it wrong and investment in jobs, outlets, high streets and communities could all too easily suffer.”

Related topics: Other operators

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