My Shout

Exploitation of loyal licensees continues today

By Phil Dixon

- Last updated on GMT

Abusing loyalty: 'are long serving, British publicans also exploited for their loyalty and service? Sadly I suspect the answer in the tied sector is a resounding, yes,' says Phil Dixon
Abusing loyalty: 'are long serving, British publicans also exploited for their loyalty and service? Sadly I suspect the answer in the tied sector is a resounding, yes,' says Phil Dixon

Related tags: Pub, Public house

Pub trade consultant Phil Dixon ponders whether or not long serving publicans are being exploited for their loyalty and service.

Generations differ in behaviour and attitudes. My late parents thought ‘going all the way’ was simply staying on the Yorkshire traction bus to the Barnsley depot. They had their mortgage from the local building society and their banking/ insurances were always with the same companies.

We now know for their loyalty, they, and their peer group paid millions more than the rest of us. It’s a point of satisfaction that in my work for the ‘Pub is The Hub’ organisation, we can support internet facilities in pubs. Volunteers can assist typically elderly members of their community with on line shopping, car, home insurance, etc.

The question I have to pose is: are long serving, British publicans also exploited for their loyalty and service? Sadly I suspect the answer in the tied sector is a resounding, yes.

Here are three examples all from the, so-called, ‘big six’ companies.

Case 1:​ Midlands lessee with a 21-year agreement from 1998, in a 300-plus barrels pub, predominately wet-led. His biggest seller by far is Carling. He is – by 30p per pint – the most expensive in the vicinity but with his historic level of discount, he is making 32.85% margin. The overheads are in excess of 37% typical for a full repair and insurance (FRI) lease. I point this out to his pubco, which, to its credit and at its discretion, increase his discounts so he’s making 42% margin – not great, but helpful.

Case 2:​ East Midlands city centre pub, halfway through its second 10-year lease. Brewery proposes new rent based on its £65 a barrel discounts. I look at the pubs the company have to let within 20 miles of its location. There are 37! All bar one have discounts of £150-plus per barrel so it seems you are more than twice better off­ if you join this company than if you have been there for 15 years. Fortunately, they have the market-rent-only (MRO) option and a deal is struck – lower rent and £150-plus discounts.

Incidentally, all 37 pubs have rents set on a higher barrelage than they had been achieving. So all 37 can increase their beer sales in a declining market. I thought rent calculations had to be signed o­ by a member of the Royal Institution of Chartered Surveyors, not The Magic Circle!

Case 3:​ Small town lessee coming up to 40 years in the pub. New rent proposed on his £30 a barrel discount. He trades at 400-plus barrels but although it is the highest price in the locality, there’s not much profit. When confronted with the question ‘How can you justify £30?’ the brewery uses the old cliché ‘It’s what he signed up for’.

So all those brewery/ pub companies’ directors who express concern at the exploitation of our older generation, may I suggest they look in the mirror.

Related topics: Licensing law

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