Preparation is key, and prioritising research, thorough planning, and taking professional advice will pay off in the long run.
Professional insights
Earlier this year, I wrote in The Morning Advertiser about the importance of getting professional advice.
Since then, the PCA’s new website has been launched providing information to support tied tenants protected by the pubs code in getting that advice.
Trade associations such as UKHospitality and the British Institute of Innkeeping (BII) can be a starting point.
The big six tied pub companies which are regulated under the pubs code all provide BII membership to tied tenants (and those negotiating for a tied tenancy) for at least their first year in business.
This gives them access to panels of independent accredited advisers – trade accountants, solicitors and valuers.
The PCA provides resources for professional advisers about the pubs code and understands that quality independent professional advice is key to supporting tenants to understand and use their code rights. I recently spoke with two BII panel accountants for their advice to new operators.
Get specialist advice from the start
Jonny Constable at Inn Control told me: “As a trade accountant, I see pub tenants who might never have used an accountant before or are in a pickle because their previous accountant isn’t trade affiliated and doesn’t understand how the sector works or how the code applies.
“You must ensure you have a trusted, specialist accountant and solicitor on hand before you start. Hospitality is a complicated business, and having specialist support to scrutinise your business plan, forecast and terms of your tenancy or lease agreement is vital to ensure your (business) plans are both viable and sustainable”.
Visits to the pub
The pubs code requires the pub company to advise the prospective tenant to inspect the pub premises, including the residential accommodation, and obtain the advice of a qualified surveyor with tied pub experience.
The unique characteristics of the pub can significantly impact your business plan and visiting the site and the surrounding area multiple times (during the day and night) will give a clearer understanding of its potential. Geoff Temperton at Roslyns, advised tenants to consider the following when visiting a potential pub:
- When is it busiest, and who are the current customers? Could that change?
- Is food served, and is the kitchen in good condition?
- What products are available beyond tied options?
- What’s the overall state of repair—and who’s responsible for fixing issues?
- What’s the local competition like? Are nearby pubs or businesses thriving or closing?
- Are new homes being built? Is the high street changing? Any transport upgrades nearby?
Understanding both the pub and its surroundings helps shape a strong business plan and negotiate rent and terms effectively.
Negotiate
The pubs code exists to ensure a fairer deal for tied tenants by giving them important rights, including when they are negotiating to take on a tied agreement. The pub company must provide you with lots of information, including for example current prices for tied products, discounts and what you can buy out of tie.
Advice from your trade accountant and solicitor will be fundamental – they’ll be able to help you identify which parts of the tied agreement will have the biggest impact on you.
For example, Jonny said: “For a pub with a high volume of alcohol sales, a better price on products might be worth more to you than a better rent rate.
“Conversely if you’re considering a pub which has a higher volume of food sales (food doesn’t tend to be tied) a fixed reduction in rent might be more beneficial. The pub company must also tell you about the advice and support available during the tenancy.
“Make sure you ask about the ‘added value’ your pub company can offer you, such as access to training courses and marketing support.”
Understanding forecasts and turnover projections
Under the pubs code, pub companies must provide prospective tied tenants (apart from those on short agreements) with a Profit and Loss statement outlining their expectations of the site’s turnover.
Jonny added however, that: “These figures don’t necessarily reflect the site’s current turnover – instead it is the fair maintainable trade if the site was run by a reasonably efficient operator. There is no guarantee this figure will be achieved and being aware of this is important to the planning of your business. Always be cautious and factor this uncertainty into business planning before making decisions based on these estimates”.
The pubs code reflects this, because the tenant’s sustainable business plan must include a ‘sensitivity analysis’ to take account of the impact on the tied pub’s costs and profitability in the case of an increase or decrease in income. The pub company has to agree this plan before the tenancy can be signed.
Is this for you?
The pub company must advise inexperienced applicants to get pubs entry training, and this is highly recommended. Face-to-face courses can offer valuable insights and help ease you into the environment before committing.
Jonny added: “If you’re accustomed to the structure of a 9-to-5 job, with predictable hours and weekends off, the pub industry may not be for you.
“Understand the workload, intensity and hours involved so you know what you’re getting into. As discouraging as it might be to hear, sometimes pubs do fail, so creating an exit strategy to fall back on is vital.”
Build your own success story
Geoff suggested prospective tenants ask themselves: “How will I make this work? Only go ahead if you’re certain your plan is watertight, your goals are realistic, and you’ve got some good people in your corner. Bring a clear head, a sense of humour, and a stack of good advice to your search, and you’ll be raising a glass to your own successful pub in no time. Cheers!”
The pubs code adjudicator (PCA) factsheet explains your rights when negotiating for a tenancy.
This article is intended to aid understanding of the pubs code and its impact. Nothing in it should be understood to be a substitute for the pubs code legal framework.
