APPENDIX 15
Memorandum by Linda Hudson, The Square
and Compass (North Rigton)
1. I entered the licensed trade as a newcomer
in November 2002 when I applied to Punch Taverns for this pub.
I was encouraged to enter on a Tenancy at Will initially, whilst
a 10 year lease was negotiated. I had agreed an annual rent of
£60,000 and the profit and loss forecasts prepared by my
accountant indicated a year one profit of £19,000.
2. During the due diligence process prior
to taking over under the Tenancy at Will my accountants asked
Punch's representative to confirm aspects of the financial information
provided. Most specifically, the wageroll. This was confirmed.
Two weeks after taking occupation I discovered that this had been
misrepresented by £40,000 approximately. Therefore my £19,000
profit forecast turned to a £21,000 loss forecast.
3. Punch had also been asked to provide
previous trading figures and had specifically said that they had
no detailed trading information other than the barrelage figures
provided.
4. It transpired, after I took over, that
they had a full Profit and Loss account showing that the pub had
lost £141,000 in the most recent full year.
5. When I raised these issues with them,
attempting to renegotiate the rent so a figure which would allow
the business a chance of viability their initial response was
that I could leave at any time as I was on a Tenancy at Will,
but they were not going to reduce the rent. They remained intransigent
for quite some time. I continued to argue for a reduction and
eventually they agreed a short term reduction. Although I felt
this was far from adequate, they assured me that this would be
reviewed and if the business was not viable at that level further
negotiation could take place. They were not prepared to allow
any further discount at that stage and I was given an ultimatum
to sign the lease or move out. I felt I had my back against a
wall as I am a single parent with two children and had invested
the small amount of capital I had in the business by that time.
I had given up my rented house, and my job with a £45,000
salary. On that basis, under pressure, I signed a 10 year lease
in August 2003. The business was in decline, with many problems
and I have worked tirelessly to grow the business and reorganise
it to a more commercial operation. I cut operating costs ruthlessly
and organised many new events to generate trade. I worked on redeveloping
the food offer to a much better quality. By the end of year one
I had lost in the region of £19,000 and the rent, which had
risen to Pro rate £52,000 per annum, was still clearly disproportionate
to the performance of the business.
6. It proved to be impossible to achieve
any further discount and in fact just to achieve the little progress
I made I had had to resort to appealing to Giles Thorley, their
Chief Executive. At that point, I have to say that there was a
distinct change in attitude from their representatives. However,
my rent is still, at £52,000 per annum, far too high given
the financial situation the business is in and the time it will
take to restore profitability. I am still losing money and only
now approaching break even. It looks as though it will be the
end of the third financial year before the initial losses will
be recouped and in the meantime there is no further movement from
Punch on rent.
7. They have, however, since Giles Thorley
became aware of the situation, offered £5,000 as a marketing
budget, which is very much appreciated.
8. During this time, I have had other difficulties
in having premises repairs completed and there is still work outstanding
on the electrical system. It took 16 months to complete a repair
to a ceiling.
9. My local competition is made up of three
Vintage Inns, two Chef and Brewer and a free house. I am unable
to compete with any of these on beer prices due to the price I
pay to Punch. This makes growing the business doubly difficult.
The beer tie is not an issue for me as I understand that Punch
have a business to run—the prices are because they mean
I cannot charge competitively in my outlet.
10. I hope you will understand from this
letter that my experience of a pub company is that they do not
review rents taking into account fairness, profitability or the
need for their lessees to have a basic and decent income. I have
never worked less than 50 hours in a week and regularly average
over 70 hours per week. I have only had one short holiday (one
week) in 18 months, and have not had a single day off other than
my holiday. Until my business's turnover justifies it I am unable
to increase the wage costs therefore I can see no way of working
shorter hours myself in the near future.
11. Regarding the financial misrepresentations,
I was met with an almost cavalier attitude—I had no legal
recourse as I had discovered them whilst on a Tenancy at Will
and not after signing a full lease.
12. I welcome the inquiry into pubcos and
very much hope that a level playing field, in terms of trading
conditions, will be the outcome.
Linda Hudson
1 June 2004
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