Pub companies must do something about unviable rent offers

By Phil Dixon, trade adviser

- Last updated on GMT

Inquisition needed: trade adviser Phil Dixon says setting rents way above pre-pandemic levels is ‘bonkers’
Inquisition needed: trade adviser Phil Dixon says setting rents way above pre-pandemic levels is ‘bonkers’

Related tags Social responsibility Multi-site pub operators Pubco + head office Tenanted + leased Sport

As Monty Python famously recorded: “Though there was trouble at the mill they didn’t expect ‘The Spanish Inquisition’.” There is trouble in the pub sector mill and there needs to be an inquisition into the behaviour and transparency of pub-owning companies.

Are tenanted, especially wet-led, pubs being offered to let based on turnover levels that are no longer attainable and overheads that no longer reflect the reality of the true situation?

Let’s look at a few examples from the Pythonesque ‘Third World’ (my native South Yorkshire) all featuring one of the major companies.

The Black Bull, in Ecclesfield, is close to where I was brought up. I actually got paid to sing there one Christmas 1962 (as a choirboy) and, three years later, I read my first lesson in the church across the road. I was almost word perfect to the delight of my mother who had spent the previous five years taking me for hospital treatment for a serious stammer. I still stutter, especially when very excited, which as a life-long Sheffield Wednesday supporter is indeed an extremely rare occasion.

In March 2019, the Black Bull was on offer at only £8,000 a year rent. In the previous five years, its highest annual barrelage was 202 brewers’ barrels so provided you could increase this by 26% to 254 barrels you could expect to earn, after rent, the enormous sum of £7759.00 per annum, plus up to £50 a week from machines. There was unsurprisingly no interest whatsoever. The pub closed in May 2020.

The pub company announced on 26 June 2020, a major £260,000 investment to transform the pub. However, I recall the then pubco announcing a £117,000 investment in the same pub back in 2014. Are these announcements just good PR or do they actually ever happen? (NB: no works to my knowledge have begun as yet).

Ethics in question

The Black Bull is available at post-investment on a fair maintainable trade of £392,000 for a rent of £28,500 (set 13 November 2020). Putting to one side it is a turnover never achieved in my lifetime, what is the asking rent one year later after the dramatic rise in business overheads? Yes it is still £28,500 but the pubco is totally aware that the profit based on 2020 estimated costs is no longer realistic, so is it acting ethically?

The Pen Nook, in Deepcar, around the corner from my sister’s house, was on the market with a rent of £16,750 (6 November 2020) but to my amazement there is nothing in the calculation for repairs and renewals. It was recalculated on 18 May 2021, adding £4,000 for this repairs, etc, and costs are increased in total by £6,153. However, the pubco surveyor tweaks the margins then reduces the cost of food. Really? Wholesale food prices are falling are they? What planet is he/she living on? That adds £5,905 of profit so, today, it is available at a similar figure of £16,500.

Close to Hillsborough, the Pheasant is to let and there is better news. A £20,250 (14 February 2020) rent is now £17,463 but you will still need to increase 2018 pre-Covid volumes by 22% to survive, all in an area where better located pubs have long since disappeared. Yes, it can be grim up north.

Nine miles away, the Green Dragon, at Thurgoland, (I once had a seven-wicket haul versus that village’s cricket team) the rent was £24,250 (2 October 2020). Today, over a year later, it is higher at £24,447 and you need to increase sales by 35% on the best pre-Covid year’s figures. It is, though, going to have an investment involving, apparently, a lot of paint.

So what needs to be done? Quoting British Beer & Pub Association (BBPA) benchmarking figures from 2018 (published 2019) to try to make your allowances appear reasonable to prospective publicans as we go into 2022 is unacceptable. There needs to be far more honesty and greater transparency here. The BBPA need to be more proactive in this area although I accept it’s difficult with weekly changes. Setting rents for, especially, wet-led pubs on way above pre-pandemic levels is just bonkers. It’s an approach certain to end in misery. Recruitment will become an even greater crisis than it is at the moment.

Decent publicans are drowning in the ‘perfect storm’ of rising costs, falling wet sales and impending VAT increases. Pub-owning companies need to act quickly and shore up the businesses in the short term before establishing sustainable terms for the future that reflect realism not ridiculous over-optimism.

A sporting chance

Scrapping or at least capping RPI rent increases in the first instance would be a start. 

In analysing the major companies rents, one issue remains baffling. Stonegate takes the view that if live sports are key then you do it ‘full monty’ ie, BT and Sky. Heineken UK disagrees and with very few exceptions allow for only Sky where they deem ‘live sports’ is an ‘essential’ part of the retail offer.

Yet what does BT show? The Champions League. Now who is a major sponsor of that competition? Heineken!

What does Heineken think of the sponsorship?

“The UEFA Champions League sponsorship is the largest activation platform for the Heineken brand. In our eight-year partnership, research has shown that Heineken awareness has grown to 60% among UEFA Champions League fans.” – Hans Erik Tuijt, global activation director at Heineken. 

So why do Heineken UK directors discourage Heineken UK sports pubs showing Heineken-sponsored sport? Dat is de vraag (that’s the question) as they would say in Amsterdam. 

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