Examination of Witnesses (Questions 139
- 159)
TUESDAY 6 JULY 2004
FEDERATION OF
LICENSED VICTUALLERS
ASSOCIATIONS
Q139 Chairman: Good afternoon, Mr
Payne, I welcome you to the Committee. By way of introduction
could you just tell us a little about the Federation of Licensed
Victuallers?
Mr Payne: The Federation
of Licensed Victuallers was formed in 1992 after Beer Orders came
in when the National Licensed Victuallers Association folded.
We look after the interests of self-employed licensees and that
includes everything. We advise them on employment law, health
and safety, rent negotiations with breweries and pub companies
and we are there to give assistance at all times. Mobile telephone
numbers are available 365 days a year from nine until five for
the members.
Q140 Chairman: In your submission
you tell us that in your opinion the beer tie should remain. When
you say something like "in your opinion" it begs the
question: is that the opinion of your members as well?
Mr Payne: Let me clarify the position.
We have three members on our parliamentary committee. I drew it
up and discussed it with them and then I sent a copy to every
member who receives the newsletter. We have a newsletter which
is always this colour. I have only had one telephone call since
then from a person who had two leases on freehouses and he said
that he was pleased to see that we were looking after the smaller
licensees. One of our members put in a submission, Sean Renisson,
and took it to the HLVA, which is our biggest member, discussed
it and everybody accepted it.
Q141 Chairman: What has been the
impact of the beer tie on your members and indeed consumers since
the introduction of the Beer Orders?
Mr Payne: On the licensees, first
of all when the Beer Orders came in, a lot of members lost their
position because they were faced with either a full repairing
lease or having to get out. We lost a lot of members and we had
to restart. The situation is that some members still have tenancies,
some companies still have tenancies and some have leases. The
situation for the members was "Take it or leave it"
and that was the situation. We found that the biggest thing for
the customer has been the choice of drinks. There is a far greater
choice than ever, because when you were a Bass licensee you had
Bass drinks. Now we find that licensees have greater choice to
market and the customers have that choice. We found that a benefit.
The licensees who had the tie knew how to live with it and what
has happened is we have had to try to negotiate to make sure members
got the best deal possible.
Q142 Chairman: The tenants' agreements
seem to lie at the heart of this. They seem to have changed since
the introduction of the Beer Orders. Could you explain to us the
nature of the changes, if there are any?
Mr Payne: We had the introduction
of the full repairing leases, something we had not really had
in the trade in the past and that is why a lot of people left.
We had the upward only rent agreements when in the past people
were on a three-year agreement and at the end of the three-year
agreement they started afresh on a new rent system. Extra responsibilities
were put on the licensees: property insurance, tied services.
Certain companies now also tie licensees for wines, spirits and
minerals. The benefits for the licensee have been the Landlord
and Tenant Act which we found very beneficial. I can say that
in 1990 I came down to London to do a presentation to MPs and
members of the House of Lords about why we needed a Landlord and
Tenant Act. Previously we had a Code of Practice which said "should"
and not "must". That is why we wanted the Landlord and
Tenant Act. So we are very happy with the Landlord and Tenant
Act. The thing is that on a lease the licensees have some benefits
which we did not have before; we can assign it and also we can
pass it on to the children. So there are certain benefits and
we have the full repairing leases, etcetera. That is the thing
which really hit a lot of people. In the first instance people
did not get the structural survey.
Q143 Chairman: Have the changes differed
for pubcos as against regional brewers' tenants?
Mr Payne: Some regional breweries
do have the lease. I think you will find that the wholesale price
of beers is similar with pubcos and regional brewers.
Q144 Mr Clapham: Some witnesses have
suggested that they feel a code of conduct would be a good think
for pubcos. What they suggest might be contained in that code
of conduct are things like pre-contract structural surveys on
properties and an independent body to review rents. Would you
go along with that suggestion? Would that be of benefit to your
members?
Mr Payne: Yes, certain companies
do have a code of conduct, a code of practice on leasing, code
of practice on rents, etcetera, which I have used time and time
again in rent negotiations with companies. I think that they are
beneficial. What I should like to see is that they are written
into the agreement. If a pub is sold on to another company, it
is a side letter which is worthless, but I do think codes of conduct
are beneficial. I use them quite regularly. I work on the shopfloor
looking after licensees' rent negotiations, etcetera, so I do
know the problems.
Q145 Mr Clapham: From your experience
of dealing with some of these questions for your members do you
think there is anything else which might be added into them other
than the things to which I just referred?
Mr Payne: The situation really
is that what we need is more than one and to make sure the information
goes to people coming into the trade; there is one there for people
coming into the trade which is useful. There is also one on rent
negotiation which is essential. With some companies you can go
to independent experts instead of arbitration. I would not recommend
any licensee to go to arbitration because of the cost, but, if
it is written in the agreement, you can do it with an independent
expert for a set fee and the most important thing is to have the
choice. The company might nominate two, but we have the right
to make our own nomination and I know the companies who do a lot
of work for that particular company and who to use and who not
to use. That is why it is important.
Q146 Mr Clapham: From your experience,
have you given any thought to how a code of conduct could be enforced
at all? Could you advise us?
Mr Payne: I should like to see
a code of conduct written into everyone's agreement. As we know,
a code is there to be used or ignored. I should like to see it
attached to the agreement. We can always attach it to an agreement.
I am dealing with cases now where Enterprise, because they had
too many pubs in one area had to sell off some pubs and they have
now gone to a company which is putting in bailiffs, etcetera.
That is what worries me. That is why I am frightened that if the
tie went, we would get pubs sold off to property speculators,
which might cause a lot of damage to the trade. I think things
need writing in or attaching to the lease so they have to be passed
on to the new purchaser. We are having a lot of problems now and
I can give you copies of letters from members where bailiffs have
been put in. In fact I had to tell a bailiff to remove himself,
get out, because a pub had been sold again in a short time, otherwise
I would tell the new company taking it over that they were buying
pubs without fixtures and fittings. So the company told the bailiff
to walk out. He wanted £650 immediately from the licensee
for himself, plus he wanted the licensee to sign over the disputed
debts. That is a worry which has been with me all the time. That
is why people wonder why I support the tie. I support the tie
as long as we get a fair deal.
Q147 Sir Robert Smith: One of the
issues which has come up in many of the submissions is the quality
of the business development managers (BDMs) and the advice they
can give and whether they help the licensees or not. What has
been your experience of dealing with business development managers?
Mr Payne: You get good ones and
in every business you will get people who are not doing their
job. I have reported not only business development managers, I
have even reported a director once. I went to the top of the tree
and reported a director because of his attitude and we got it
resolved. I can ring up certain BDMs and say that we have a problem,
that the licensee has a financial problem. I have sat round the
table with business development managers doing business plans.
We have looked at marketing the premises and at the end of the
day we have been able to get rent reductions where we have been
able to prove it was not the licensee's fault. So some are very
good and they work with you and where we have had problems in
the past with others I have had to report them. We could really
do with a disputes procedure so that a licensee knows that if
he has a problem, he can go to the next stage and make sure that
it is resolved. It can be. I have had occasions when I have had
a business development manager and two licensees in our office
to resolve a problem because the two licensees were arguing. It
was difficult. The situation calls for some type of disputes procedure
so that we can get the person sorted out. In every walk of life
you have to accept that you will get somebody who wants to take
shortcuts, does not want to do the job and they are the people
who must be reported and taken out of the business.
Q148 Sir Robert Smith: Is there currently
any formal procedure if someone is unhappy with their BDM or is
it just that you, through your knowledge, know the ways to—
Mr Payne: There is no laid down
procedure, but if I am dealing with a property I will ring up
and explain what has happened, etcetera. I can say that if you
go to the top, you do get support on that type of situation.
Q149 Sir Robert Smith: Do you have
any view of the scale of the problem? Is it half the BDMs or is
it 10%?
Mr Payne: It is difficult to say.
You are bound to get some who are prepared to work and some who
are not. If ever I have a problem it is important that licensees
should know whom they can contact and to 10%?
to me the other day to write to the chief executive
of the company and I do know the BDM is no longer with the company.
Q150 Sir Robert Smith: Is there any
equivalent with the regional breweries? Do they have BDMs as well?
Mr Payne: They have BDMs or district
managers, or whatever. They are all the same, just with different
names. I find that you can work with the majority of people, if
you are prepared to be honest, straightforward, which, as far
as I am concerned, I always will be. If there is a problem with
the regional breweries you need to go to the top at times, because
in every company, every walk of life, you will get somebody who
wants to take a shortcut. In the old days they used to write it
down on a cigarette packet, walk out of the pub and throw it away.
Q151 Mr Berry: In your written evidence
you argue that licensees are not getting a fair deal and specifically
that tenants should be given a share of the large discounts which
pubcos get from the breweries. Obviously we have been told that
the pricing structures employed by pubcos are less than totally
transparent, perhaps for obvious reasons. How would you suggest
that tenants make sure they get a fair deal without destroying
the confidential nature of pubcos' supply agreements with brewers?
How can we crack that one?
Mr Payne: First of all we have
to look at the total package, whatever it is, whichever company,
of rent and other benefits, what they get from machines and at
the end of the day you have to look at discounts. Some companies
do give discounts. Discounts vary. With one company it might be
put on the rent as a discounted rent and with others there is
a discount somewhere else. First of all, we have to ensure that
where a licensee has a problem, the company should be prepared
to sit down and work with them to try to resolve that problem
and if it is a person who cannot perform, they should be prepared
to let him surrender the lease, otherwise there should be a discount
to the licensees. It is difficult to know how much the companies
get, because they will not open their books, but there should
be a discount to the licensees to assist them in running the business.
Q152 Mr Berry: One of the problems
is that we have had lots of evidence from what can only be described
as struggling tenants and the big question is what pubcos can
do to help them out. You have touched on this already, but are
there any other things you think pubcos could do to help out this
vast number of struggling tenants who are bombarding this Committee
with letters of complaint?
Mr Payne: It is the bottom end
of the market which really needs the help. I always said I would
sooner pay £40,000 rent and have a good return than pay £10,000
and be struggling. It is a matter of the return; that is the end
where the rent structure needs looking at, so that the companies
are looking for a better, lower percentage for the bottom end
of the market. I cannot tell you what percentage discount they
should give, but we found that where licensees do get a discount
from the company, the licensees are more satisfied and you get
a better relationship.
Q153 Mr Berry: This is the problem.
It is self-evident that licensees are going to be happier the
more money they get. The question is how to do that. Do you just
rely on goodwill, charity from the pubcos or how else do you crack
it?
Mr Payne: I should love to see
them looking at the total business and looking at their returns
and trying to help the bottom end of the market in particular
more than at present. If you have a couple who have invested money
and they are working and only getting a small return, they are
the ones who would need more help than the people with the big
pubs who are getting big returns.
Q154 Linda Perham: It has been suggested
to us that the pubcos should look at allowing publicans the option
of buying beer at the market rate in return for an increased rent.
Do you know whether any of your tenant members have been offered
that option? Would you welcome it or not?
Mr Payne: I did not suggest that.
Q155 Linda Perham: We have had it
suggested by other witnesses.
Mr Payne: That the licensees be
allowed to . . .?
Q156 Linda Perham: To buy beer at
the market rate in return for an increased rent.
Mr Payne: The trouble is that
in the agreements it does say that the tie is taken into the rent
and if you are released, the company will re-rent you. My concern
is that the company will be looking for a return. I am concerned
that if we suddenly have 30,000 more licensees trying to negotiate
with brewery companies for discounts, the brewery companies will
benefit because they will reduce the discounts. We find that in
Northern Ireland discounts are less than England because there
is no competition with pub companies. I think that it is a difficult
situation but that is why I say keep the tie, because if we release
the tie, licensees at the bottom end would be worse off and they
are the ones I am worried about. If you just have three barrels
and you are trying to buy from a company, (a) if you are free
of tie, you would not get the choice of products—now we
have the choice of products—and (b) you would not get the
discounts which are available now.
Q157 Linda Perham: I can see what
you mean about the discounts, but when you talk about choice of
products, are tenants increasingly finding that their choice is
restricted, that the pubcos are saying the tenants have to buy
the beer they supply and also have to buy soft drinks and all
the other drinks they might sell?
Mr Payne: Yes. Put the soft drinks
on one side for a moment. With beers, the choice is greater than
it ever has been, because now pubcos buy from different brewery
companies and they make the beers available to the licensees and
some of the smaller brewery companies or the very small companies
can get into the market where they could not before. If we were
free of tie we would lose that. What does concern me is where
licensees are tied where we were not previously for wines, spirits
and minerals. I brought this up with the DTI two years ago when
the Beer Orders were being rescinded and I pointed out that the
choice had gone on that.
Q158 Linda Perham: So you would say
then that your members would not be interested in the suggestion
I made at the start about buying beer at the market rate in return
for increased rent, the discount option and that the rest of what
you said are the factors which would mean that in general your
members would not be interested in that sort of agreement?
Mr Payne: The members would not
benefit by it and I have spoken to the members. I have already
said that if you were to ask licensees whether they would like
to be free of the tie, everybody would put their hand up, but
I try to take a balanced view of how it would affect the licensees.
I put this to the membership and they have accepted that the situation
is that discounts would not be there for individual licensees.
We would be re-rented and the small pub, which would not be able
to get the discounts, would just go out of business.
Q159 Linda Perham: You have said
several times that you support the tie as long as people get a
fair deal.
Mr Payne: Yes.
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