'Is a pub ever truly viable?'

By Phil Dixon, trade adviser

- Last updated on GMT

Phil Dixon on the viability of pubs

Related tags Pubco + head office Tenanted + leased Property

It was 1983. I was the Midland’s Senior Officer at the National Licensed Victuallers Association.

"Phil, Geoff the Chair of the Black Country Licensees is on the phone,"’ my secretary informed me.

"Phil how am ya? Yom yom yam yam members bey happy bey happy at all – Ansells Lion Stourbridge them av fower that wer fower gone bump in tow year. Yow tell that Philip Butler yow oppose the license if them put it out for tenancy agean."

I contacted Ansells’s MD Philip Butler.

"Hi Philip, just had Geoff of the Black Country Publicans on the phone."

"What did he want?" enquired Philip.  

"Not sure, didn’t understand most of it!" I replied, "Think they feel your Lion in Stourbridge is unviable."

"They may have a point," Philip responded, "leave it with me." Sure enough 48 hours later, Ansells confirmed that they agreed that it was unviable and put it up for sale.

An entrepreneur minded person bought it, renamed it (Katie Fitzgeralds) gave it an Irish theme and it didn’t seem to stop winning awards for the next two decades.

So, I learnt 41 ago that there is no such thing as an unviable pub. However, in a declining market many will obviously become so, but which ones? That will always be the key question.

It was two years to the day I highlighted concerns over pubs being let post the pandemic on pre-Covid over optimistic sales expectations and unrealistic pre-Covid overheads.

The main pub I featured was Star's the Black Bull in Ecclesfield, South Yorkshire, part of my childhood and adolescence. It’s the only pub in the UK where I have been paid to sing! Apparently I used to do a mean version of ‘Frankincense to offer have I’ as a nine year old choirboy.

Offer fairness

I questioned the fairness of the offer but I did agree that if Star let the pub and it was successful I would be more than happy to write about it adding that I have been known to get it wrong in the past but probably not this century!

The Black Bull was to be let following a major investment/refurbishment (£200,000+) in November 2021 on an FMT (Fair Maintainable Turnover) of £392,443 with a £28,500 rent as calculated in November 2020, with an ingoing of just under £40,000.

So, what has happened? Well, the pub still has not been let! Has the proposed FMT been adjusted by inflation to over half a million?

The answer is no! To Star's credit, the pub is now to be let with a rent of £17,409 based on a proposed target/turnover of £248,316. I’ll say nothing except well done to Star.

The only issue is the ingoing is still just under £40,000. Sadly I have to ask is anyone going to invest that amount where if they achieve Star's target they can expect an income of £335 a week (£17,409 div 52)?

You can wash pots in my local ‘smoke house’ for 25 hours part time and earn more than that (25 x £14 = £350) yep, I know there is the free accommodation aspect.  Can it though be justified to be spending hundreds of thousands on a site after which Star doesn't feel the pub can trade at over £4,800 net per week?

Star has a Publican Award’s winning fixtures and fittings (F&F) policy I know, because I judged them where they own the ‘Big Ticket’ items but I am therefore struggling to comprehend some of the costs required if you take a Star site. Here is the basis of the policy:

‘It means things like floor mounted kitchen ranges, fryers, fridges, freezers and fixed furniture are owned by us, maintained by you and replaced by us at the end of their useful life’​.

However two Scottish Pubs, both with letting rooms, but I am assured closed for years, are now available, the Cedar Inn, Aberdour Fifeshire and the County Hotel in picturesque North Berwick. The F&F are valued at £150,000 and £165,000 respectfully.

The Green Man in Cambridge came with a F&F of £120,000 and many of the Star's proposed refurbishments have figures higher than I have ever witnessed. I asked whatever happened your ‘Big Ticket’ award-winning policy as it is proudly proclaimed on your website. Almost immediately the policy completely disappeared. Has David Blaine become a Heineken executive or maybe that was just an illusion. 

When it comes to pubco rents I can be grumpy, Ok, maybe more than miserable but at least I am consistent! I have always stated in my opinion pubco rent levels are on average about 30% more than they ought to be. That translates to the fact that publicans should be paying around 77% of their actual rents.

Have I any supportive evidence other than a gut feeling? Well I didn’t, but I do now! 

Annual report

Each of the big six companies have to submit an annual Code Compliance Report. In it they have to state what they proposed for a post MRO free of tie rent and what was the actual sum awarded. The statistics are typically on page 6/7 of the reports.

Stonegate (eight cases). The actual average rent determined was 73% of what they suggested.

Greene King (only one case) was 76% of their proposal.

Punch came in bottom of the league at 66% (but only 3 cases).

Marston's, one case 79%.

Admiral Taverns, one case 71%.

Star had the most cases by far (14) seeking £1,141,699 in rents only to receive £824,700  i.e. 72%. 

Apart from the obvious that Star had the same number as all the other pubcos put together, the statistics appear damning, but it has to be said the quota numbers are low. Also, apart from the Stonegate report we don’t know what the tenant was suggesting as a fair rent but I suspect it was by a margin under the amount similar to the pubcos over estimate.

As it’s the season of goodwill (pubco surveyors may need to google that term) let me end on a positive. I had a very enjoyable lunch in my local high street with Admiral Taverns Midland’s Director Wayne Billyeald.

Wayne, whose parents were publicans, is reassuringly passionate about pubs although he does believe an in-depth discussion on stocktaking can be both exotic and erotic.

We were in the local award-winning Cock 'N' Bull. It’s a ‘Tardis’ and a monument to innovation and inspiration run by the partnership of David Salmon and Jason Green. I was frankly astounded by the turnover and more than pleasantly surprised by the rent level.

"The rent is fair," confirmed Wayne "because we know and respect the fact that we have a pub run by exceptional operators."

Well, forty years on there is at least one pub in Stourbridge that is certainly viable.

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