Annex A
PUB OPERATING
STRUCTURES
The main operating structures are as follows:
Managed
The property is owned and operated by a company
who employs all of the staff on the premises. The main operator
or manager will generally receive a salary plus bonus, based upon
the performance of the outlet. Until the Beer Orders, managed
pubs were nearly all owned by National Brewer groups and it is
worth noting that the two largest managed pub groups today originate
from the sale by the brewery companies of their managed pub chains
in the last five years. Many of the managed pubs are branded and
each site will tend to cater for a very specific sector of the
market. The main focus of managed chains has in recent years polarised
to the high street and roadside food establishments.
Managed pubs tend to be significantly larger
than average pubs, and will generally have a much higher turnover
and unit profitability, in order to offset significantly higher
overhead costs.
Since the Beer Orders a number of managed pub
operators have formed, many starting with pubs leased from the
leased and tenanted pub operators and then expanding into other
freehold and leasehold premises.
Major managed pub chains include Mitchells &
Butler ("M&B"), Spirit Group and J.D. Wetherspoon.
Leased/Tenanted
The freehold of the property is owned by a pub
company, brewer or property investment company and then let on
a commercial lease to an individual or business who operates the
premises (the "retailer"). The property owner receives
a return on their property asset in the form of rent and a share
of the margin on the sale of certain goods and services sold by
the operator.
In the main the retailer can operate his property
as he wishes, indeed the lease agreement refers to the "right
to quiet enjoyment". If the pub is owned by a brewer or pub
company, the pub is likely to be leased on a tie for beer and
some other alcoholic beverages. In the case of a brewer, the pub
will still tend to be branded in the name of the brewer and restricted
to selling that brewer's beer. Pub Companies enter into supply
contracts with a large number of brewers and offer an unrestricted
choice of these products to the retailer.
Leased/Tenanted pubs tend to be traditional
pub buildings, many of which were owned and built by a brewer
at some point in the past. Most are not branded and retain traditional
pub names. Turnover is typically less than a managed pub but operating
costs are considerably lower, partly because of the range of products
and support services provided by the pubco landlord.
Major Leased/Tenanted pub owners include Enterprise
Inns, Punch Taverns, Greene King, Wolverhampton & Dudley Brewery
and Innspired.
The distinction between tenanted and leased
agreements is explained in the following section.
Franchised
A small number of companies have offered a halfway
house between the structured and salaried model for a manager
in a managed pub and the autonomy and operational freedom of a
retailer in a leased/tenanted pub. An individual operator will
lease the property subject to a format or brand. The brand will
be owned by the landlord and will include strict controls on the
maintenance of the brand values. In addition to rent, the franchisee
will pay a fee for the use of the brand, possibly linked to the
turnover of the property. Most other goods and services will have
to be purchased from the landlord.
Currently M&B is the only major franchise
pub operator in the UK.
Free-of-Tie Lease
A commercial lease where the rent is set according
to the prevailing property market. The retailer is free to source
his goods and services from whoever he wishes. The landlord will
usually be a commercial property company and will provide little
in the way of support services. The majority of free of tie leases
have developed in High St locations as managed pub chains have
expanded and councils have been willing to allow planning changes
of use on former retail premises such as banks, large stores and
cinemas.
Currently Wellington Pub Company is the only
pub company offering solely free-of-tie agreements.
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