Figures from the Campaign for Real Ale claim tied pubs are closing at a faster rate than free of tie outlets and Christie & Co’s Business Outlook 2012 predicts pubcos will offload more than 2000 properties this year.
The relationship between pub firms and their tenants has also remained under the spotlight, with the long-running government enquiry giving pubcos one last attempt at self-regulation; an independent panel will review progress made by the industry’s code of practice later this year, with the code expected to become statutory if the panel finds it has not addressed the lessee/pubco relationship.
But it seems the added scrutiny has brought benefits for lessees.
Pubcos say the code of practice has had a positive impact, bringing greater transparency to the sector.
“We believe it has had a positive impact – much of it is good business practice and makes the industry more transparent,” said Ken McGown, operations and sales director for Scotland at S&NPC, which has 145 pubs north of the border.
“This clarity helps recruitment and ultimately retention of lessees as both parties enter their agreements fully aware of their obligations.”
David Wigham, operations director at Punch Taverns, whose Scottish estate totals 300 pubs, described the introduction of the code of practice as an “important step”.
“It has helped us increase transparency, giving clarity and confidence to our current and prospective operating partners,” he said. “It has enabled us to make important strides towards our objective of offering the best value and being the most trusted pub operating company in the UK.”
Ongoing challenges surrounding funding are also reckoned to have buoyed the tenanted and leasehold sector, with pubs requiring less ingoing capital then freeholds.
That pubcos have ramped up the support they offer lessees is also credited with attracting new lessees to the sector – and helping existing operators grow their business.
Wigham said Punch is offering a greater degree of flexibility to its lessees. “We now offer a range of industry-leading agreements which include the following benefits: a choice of rent levels and beer discount bands; bonus payments for exceeding target beer and cider volumes; free of tie on wines, spirits and minerals; free of tie options on cask ale; and no mid-term rent reviews unless our partners request one,” he said. “We are fortunate in having many great pubs and capital available to invest with the right partner to enable each of our pubs to realise their trading potential.”
S&NPC has upped its support for lessees in the past six months with a range of measures, including launching an enhanced version of its stock taking package Innside Track; using its buying power to negotiate reductions on energy bills for lessees; and launching a distance e-learning package for bar staff.
“We believe the key to attracting and retaining lessees is for them to have both a successful pub business and a strong partnership with us where we can be seen to be adding value,” McGown added.
“To that end we provide support to help our lessees grow their businesses and reduce their costs and are always looking at new ways in which we can refine and improve this help.
“When you look at the pub market there are plenty of reasons to be positive: the increasing popularity of cider, increasing sales of cask ale and world beers, and the pub food market continues to grow as customers looking for excellent value choose pubs over restaurants.
“Speaking from our own experience, we have good operators doing well across the UK.”