Tuesday, 28 May 2013

UTTERLY FLABBERGASTED AT A 66% MARK-UP!

SORRY BOSS - NO DRAUGHT HERE!
I have to say I was quite staggered by the recent report in the Morning Advertiser, highlighting a north west London landlord resorting to drastic measures, in response to 'spiraling prices' for his beer.

Tied-licensee, Brian Mannion of the Black Lion in Kilburn, had calculated that if he was buying his beer free-of -the-tie, he could be saving himself 66% of his beer purchasing outlay - and had decided to stop selling draught  beers in protest!   

To be honest, it really surprised me, this two-thirds differential. Crikey, I knew Enterprise Inns charged quite 'a wedge' for their ales - but a 66% hike?

I know a few licensees read my blog. Well, I would like to ask them - is this common in the trade?   

The licensee in question is even having a 'draught wake' next week - to signal the end of his boozer flogging cask ales. You have to admire his stance - in protest to the 'inflated' price of his beer.

Mr Mannion will be 'ramming home' his feelings on the subject, by carrying a keg out of the pub - placed in a coffin! I am sure a picture will be available in the local press, come the first of June.

Do you think this is all a bit desperate? Has it really got so bad for tied-licensees, that they are stooping to these measures? Measures that in this case will surely result in a drop in custom - although you have to admire him for having the 'bollocks' to stand up to the 'Pubco Machine'.

Question, questions, questions! Questions, I am sure lots of you out there, who read this blog, can answer - well, I hope so.   

  

7 comments:

  1. Of the questions I have, is What is the dry rent? is that lower? If not why enter such an agreement?

    If I rent a pub and accept a tie, then surely part of accepting an tie is that the building rent is lower? Otherwise I might as well rent somewhere free of tie.

    If the dry rent is lower, doesn't that alter the cost base?

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  2. The dry rent is meant to be lower but it is not, in fact in many cases it is higher than that of a free of tie pub, adding to the cost base. Pubcos have for years manipulated the rent setting mechanism with the help, intended or not, of the RICS, many of whose members derive substantial fees negotiating pubco rents.

    As to your valid point of renting somewhere free of tie, opportunities are limited as pubcos in their testosterone fuelled expansion of the last 20 years bought almost all the free of tie pubs brought to market to give themselves control.

    What is clear is that nobody should EVER enter into an agreement for a tied pub. These are rotten contracts open to price manipulation and abuse by the pubcos, and they take every opportunity to do just that. A tied lease is a roed to ruin, just a matter of time.

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  3. It's simple economics - Enterprise are technically bankrupt with an overstated asset base and borrowings in the billions. Whether they give a peppercorn rental with lower discounts or higher rental with bigger discounts, these robbers look at one thing only - Return on Investment. Not being able to entice any wary buyers, they arrogantly and fraudulently advertise "low entry level" pubs without disclosing the near derelict condition of their properties plus the massive financial burden of Rates, cellar maintenance charges, Insurance, etc, etc that the new tenant will have to assume upon handing over the keys. I got massively burned by these thieves as they gave me 27 days notice having spent tons of money improving their property and paying all their maintenance costs - around £36 000 down the drain! I now have a FOT, Private Landlord and enjoy an average of £76 per keg LESS than I was paying these rogues. In any other trade, they would be arrested for fraud, theft and a host of other charges. Read my full story at: https://www.facebook.com/pages/The-Truth-about-Enterprise-Inns-and-the-way-they-do-business/191948240885997?ref=hl

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    Replies
    1. An enlightening and excellent response.

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  4. As a licensee with an enterprise inns lease I find these figures somewhat conservative. A cask of ale that would cast £65 fee of tie is £119 from Enterprise. That's a mark up of 83%.

    A keg of lager available from a local wholesaler for £85 is £157 from Enterprise a mark up of 84%.
    Remember that these are VAT free prices.

    Add to this above market rate rents (and which according to industry figures, ALMR, are on average 3% more than FOT rents) means that the true rent paid is often significantly higher than double the advertised wet rent.Not the low cost entry advertised.
    This is the reason so many are shutting.
    Enterprise Inns properties available pages are overflowing with "opportunities" many of these have been available for more than two years AND some have had several licensees in the same time period. What is more concerning is their web site doesn't show all of their estate available at any given time. There are many others on sites specialising in pub sales such as Guy Simmonds, Fleurets and Sidney Phillips. Enterprise are not alone in this however they are the biggest and, in my opinion, the worst of the bunch.

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  5. Succinct, to the point. Nice. You got off lightly.

    Enterprise are also characterised by denying any of the above and asserting that 'the vast majority' of their tenants are 'happy with their business relationship with us'

    This company and its employees behave sociopathically. It's endemic in their behaviour.

    See www.fairdealforyourlocal.com and @FairDeal4Locals on twitter

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  6. A FOT leased Pub with the Wellington Pubco has an average EBITDA of £19097 per pub.
    ETI in the same period had a net income of £65900 per pub. Earnings AFTER Income Tax Depreciation and Amortisation.
    Now both those companies, no doubt, would like to see higher figures but ETI are achieving more than 3 times Wellingtons.
    Which leaseholders are being fleeced here?
    A cheap low cost entry my arse, ETI's earnings per pub actually went up! (and they would have been higher if not for disposals?)
    The difference is inflated rent and other "charges" but almost exclusively the bloody TIE. In other words the current climate is affecting sales in both FOT and Tied pubs however Enterprise expect the Leaseholders to meet ever more difficult to achieve targets that leave the Leaseholder, at best, with nothing to reinvest. Wellington takes a rent only and they have a reduced rental income however there is nothing to say that the average turnover in a Wellington pub is massively different to a tied Pubco property. It’s just with the FOT model the leaseholder is actually able to invest and save.
    ETI leave leaseholders with nothing. Or less.
    As they are paying interest on their loans of approximately £33k per pub per year they are on a road to nowhere. It is unsustainable.
    Their directors appear to have recognised this and have awarded themselves large pay increases and massive bonuses which seems to be typical of any failing business these days. Get as much out as you can before the whole house of cards falls down. If it was a bank there would be mass criticism, but a Pubco isn’t a Bank and doesn’t engender as much bile. Except maybe from it’s leaseholders.

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