Same MRO issues playing out ‘over and over again’ says workshop host

By Stuart Stone

- Last updated on GMT

No precedent: given the confidential nature of the process there is no precedent being set by successful MRO cases, says Michael Erridge of MDE Pub Consultants
No precedent: given the confidential nature of the process there is no precedent being set by successful MRO cases, says Michael Erridge of MDE Pub Consultants
Michael Erridge of MDE Pub Consultants spoke to The Morning Advertiser about how his market rent only (MRO) workshops are helping operators navigate a “far from perfect” process.

At the time of writing, Erridge has had ben involved in more than 120 MRO proposals since pubs code legislation was introduced in July 2016 and has, for the last 12 months, been hosting free workshops with publicans to debunk myths around the legislation and the MRO process.

"We started doing workshops about a year ago when the Pubs Code Adjudicator (PCA) issued a survey highlighting the lack of awareness among tenants,” Erridge explains. “So we offered them a free event to invite pubs in whatever area we're hosting them and try to raise awareness.

“Besides some of the actual flaws in the legislation there’s a lack of awareness and understanding as to what it is and what rights it actually affords publicans."

While Erridge highlights that there’s a lot of misinformation about the legislation, which in his words is “far from perfect”, he has seen a large number of tenants improve their position as a result.

“It's a very powerful lever when you're looking to renegotiate the terms of your current deal.

“Because  pub-owning business generally make a very good margin on the beer sales, it's quite empowering having another option when you're trying to negotiate a tied deal, or having the right to see it through and take it free of tie.

"The biggest misconception is that people believe it's a complete waste of time when the reality is that it's not. It’s not perfect but it's a hell of a lot better than before it was introduced.

“People read the negative press and think that there's no positive side at all.”

Flaws and imperfections

“I have the same conversations with pub-owning businesses as I do with tenants and I think both parties are just very frustrated by the lack of clear guidance on key issues that play out over and over again,” says Erridge.

"The first thing is that the time scales are very prohibitive. We've had people miss out by a few days because they've contacted us late - things like that.

"When the lease is proposed by the pub-owning business, you only have a 14 day window following the end of the full response period to reject the terms. Quite often that means we have to refer a lot of things to the PCA that might be better resolved during negotiation but there's no time to do that.”

“We find the same issues playing out again and again because there's no clear guidance being issued.

“The arbitration process itself is confidential between the parties so even when we have a result for one particular client we can't rely on that with another one.

“There's no precedent being set by these cases, so each time, even with MRO proposals we receive now, quite often we still have to go through the process all over again as if it hadn't existed.”

Dialogue with suppliers

The host of a workshop in September 2018, the Garricks Head pub in Urmston, Manchester, had itself come through the MRO process.

"The nice thing about the workshops is that because we've now dealt with quite a number of cases there's usually always a number of pubs we've already worked with that will come along,” says Erridge, “so anyone who's thinking about going through the process, or is not necessarily understanding it, can talk with real publicans that've actually gone through it.”

Revolving around a thorough Q&A session, the workshops also encourage contribution from the wider industry to help ease concerns about trading after the MRO process.

“We invite suppliers to give a presentation about becoming free of tie and what offers are actually out there - at the Manchester event we had a couple of reps from Coors come along,” says Erridge.

“Some of the things that most people worry about when they go free of tie is 'what support is out there?'; 'where will I go to for my products?' and 'what will I pay?'

“Probably the biggest irony about the whole thing is that the majority of the sites we've taken free of tie have committed to a supply deal with a free trade supplier to secure their best prices.

“If they're prepared to commit to a supply deal after having gone free of tie, the tie often isn't really the issue.”

Erridge highlights the fact that a number of recurring themes have emerged during the workshops’ Q&A sessions.

"The main one is cost, because generally if you go through a tie, the pub -owning business will propose a new lease agreement and some of the clauses in that new lease agreement will probably be quite different to their current tied agreement.

“For example quite often we have to accept quarterly rent payment, a greater deposit, and other things that mean the terms of actually completing a lease can make the costs quite high.

“This is where we invite suppliers along, because quite often a supplier will come in and, in return for the trade, will often cover a lot of these costs.

“There's the cost of an independent assessor if we need to have the rent fairly determined and then there's the completion cost such as generally three months rent, which on an MRO rent can be quite a lot. Although it's mainly a cash flow, it could be quite a lot to find in one hit, especially if the pub has been struggling.”

Related topics Legislation

Related news

Show more