Examination of Witnesses (Questions 160
- 179)
TUESDAY 6 JULY 2004
FEDERATION OF
LICENSED VICTUALLERS
ASSOCIATIONS
Q160 Linda Perham: What is your solution
to people getting a fairer deal than they have now?
Mr Payne: The companies need to
look at the discounts which are available. Some companies do give
them and every company should look at discounts and look to give
a share of the discounts they can achieve that nobody else can.
Q161 Linda Perham: Do you think they
would be willing to do that?
Mr Payne: That is something which
we are here to talk about today, is it not? We are here today
to talk about whether there is a way round it. I do not have the
authority, but it is something which companies need to look at
and to do.
Q162 Sir Robert Smith: Would it not
involve a more transparent way in that the tenant would pay a
real rent for the premises free of any other charge, it would
be upfront, they would know what the rent was going to be and
it would be a simple business situation: is that property worth
that rent? Would there not then evolve in the market beer wholesalers
who would go out to negotiate large volume discounts, take on
the market and then pass on a percentage of that discount; the
middle men move into the market and the final licensee would then
be able to go to the wholesaler to get a share of the discounts?
Mr Payne: So what we are doing
is getting rid of one middleman and putting in another middleman,
are we not?
Q163 Sir Robert Smith: He is a transparent
middleman, because the end user, the licensee, can then see what
deal they have done on the rent, they can see what is out there
in the market, what people are quoting, what they can get for
their products and then they can make a more informed business
decision as to how to run their own business.
Mr Payne: One quarter of pubs
in England take fewer than £121,000, one quarter in Wales
take fewer than £81,000. Those types of public houses will
go out of business. This is the concern. We look after small members
and people with quite good turnover but they all accept that we
have to look after the small person as well. We are a members'
organisation and I put it to the membership and newsletters have
gone out and only one person has rung me and he congratulated
us on looking after the small person.
Q164 Mr Berry: One of the things
which strikes me, on the basis of a lot of the evidence we have
had so far, is that one of the reasons the market does not seem
to work properly here is that prospective tenants do not have
anything like full information. They are not in a position to
understand, from what some people have said, precisely what they
are signing up for. Has that been the experience of your members?
Mr Payne: What I have done is
to draw up a paper for people coming into the trade and last time
I met the DTI I gave them copies and it has been put into the
banks. It is called The First Steps in the Licensed Trade.
It tells prospective licensees what to do. I have written articles,
for which I do not get paid; I do them for free because I will
not take money from anybody. I am a bit old fashioned. Dalton's
Weekly has put things in. I have sent them to the papers so
they can put in guidelines. I do give people free half-hour consultations
and the week before last when I was on holiday I was in Tesco's
car park when a lady rang me. She was looking at a pub with her
partner and she wanted some advice. She had seen my article in
Dalton's Weekly. I told her that to be honest she should
not take the pub. I told her to go back and get certain information.
I do think that not only companies, but also the lessors who are
assigning the lease should make information available to somebody
taking over a business.
Q165 Mr Berry: That is my point really.
You accept that there is a problem and that does not happen. Our
question to people who have provided evidence and are very disenchanted
about being tenants is: why did you sign the contract in the first
place? A lot of evidence we have had suggests that people did
not realise what they were letting themselves in for. I appreciate
the support you are giving to your members and obviously for those
you speak to that clarifies it a lot. But is it generally a problem
of your members, certainly without your efforts, that they would
not have full information to be able to make a rational decision
about whether or not to sign a contract?
Mr Payne: Yes, a lot of the first-time
licensees do not have it. Another weakness, to be honest, and
I have dealt with cases and asked why they took the pub . . .
I remember it years ago. A lot of times people coming into the
trade are looking with the wrong type of lens. They are advised
to get advice, to get a solicitor, an accountant but a lot of
them will run in and sign because they want the pub. This is the
worry. It is difficult to tell them they must do this. The worry
is that people are not asking for the information when they come
in. Whether it should be available or not . . . I think it should
be available for anybody coming in, whether they are buying from
a company or a lessor.
Q166 Mr Berry: What are the main
areas where you think pubcos should be providing more information?
Mr Payne: They should provide
information when people are coming in. On rent negotiations, I
write for a full breakdown of how they have arrived at the rent.
I want the trade figures used, I want full information on expenses,
income both wet and dry and I get that from companies because
I write for it and I write to our members for information and
I can then look at it in depth and see whether they are getting
a fair deal.
Q167 Mr Berry: You say this information
would not normally be volunteered unless you asked for it.
Mr Payne: It has to be asked for.
If I were a licensee and I was looking after myself and the company
came and said they were looking for this rent, I would ask how
they arrived at it and the company would have to show how they
arrived at it. It is important that they put down on paper how
they arrive at it, whether it is income from dry, wet or accommodation.
I can assure you that I do get breakdowns and in fact what companies
tend to do when they are setting a rent, if they have managed
houses, is look at percentages and that is where you can find
out that they have over-egged the minerals or the wines and spirits.
That is where you can find things out. I have always found that
when I do ask for it, whether it be a little brewery company or
a pub company, they will send me the full information.
Q168 Chairman: Why do you think you
have to ask for it? Surely if people are entering into an agreement
this should be provided as a matter of course? We are talking
here about someone perhaps putting not their life savings, but
their financial security on the line and they are dealt with in
such a shabby manner by the pubcos.
Mr Payne: Are we talking about
people coming into the trade or people on a rent negotiation?
Q169 Chairman: Basically when you
come into the trade you are in rent negotiations from the word
go. Rent negotiations of the kind you are talking about are merely
renewal matters and by that time they should have a little understanding
of what is happening. They should not really need you to do the
work for them. It should be laid out in some kind of clear and
lucid way.
Mr Payne: Let us clarify the point.
I did say earlier that I think people coming into the trade should
be given full information, whether it be from the company or the
lessor.
Q170 Chairman: You are a members'
organisation. Why do you not fight for that and get it as of right?
At the moment it seems that you pick it up when people ask for
it. This should be there when the people cross the threshold of
the pubco office to start talking about it.
Mr Payne: When somebody comes
into the trade and I do know that at certain times they are given
the trade details for the licensee to do a business plan, they
normally ask a licensee to do a business plan which is presented
to the company. What should happen—and I do not know whether
it does happen, I am not a pub company—is that they should
look at the business plan and if the business plan is not right,
they should advise the person. I cannot say any more than that
because I am not a pub company.
Q171 Chairman: No, but on the other
hand you are paid your wages by people whom you choose to represent.
Mr Payne: Yes, that is right.
Q172 Chairman: Do you not think you
have an obligation on their behalf to get this kind of thing on
the line from the word go?
Mr Payne: Do you mean that I should
write to all the companies and suggest they do this in future
for people coming in?
Q173 Chairman: Yes.
Mr Payne: I take your point and
I shall make sure I do it.
Q174 Chairman: How long have you
been doing this job?
Mr Payne: I have been in the trade
since 1975 and been looking after self-employed licensees since
1979. I can say, without being clever, that I have the support
of the members. I am 71 next birthday. They could sack me tomorrow,
but they are quite happy to keep me here because of the service
I do for people. I am not being disrespectful to you, but the
people do appreciate that we do that. You brought up a point which
I had never thought of before, that I could write to companies
and suggest that in future somebody coming into the trade should
be given this information. We have talked about it in the past
but there is nothing in writing. I will follow that through.
Q175 Chairman: All I am saying is
that you have been in here for 30 minutes and it crossed my mind.
You are telling us that you have been in it for 30 years and I
should have thought it would have taken a little less time than
that. That is just an observation.
Mr Payne: I am not quite sure
what you mean by that.
Q176 Chairman: Quite simply that
it seems so straightforward and obvious that people are going
into agreements which they do not properly understand, which are
not of a standard character. They are not necessarily being diddled,
I am not making any suggestion of that kind, but what I am suggesting
is that people, often innocents abroad, need a little bit more
assistance and I should have thought that an organisation like
yours would have had a standard type of agreement as a matter
of course so that people who pay their dues to you are getting
some kind of realistic return for their money from the word go.
Mr Payne: May I just clarify that
people are not members until they come into the trade? People
do contact me beforehand. I look after the membership. There is
a business plan there for everybody, a helping hand for the licensed
trade. That is there. It shows people how to do a rent agreement.
I shall leave a copy for you, if you wish.
Q177 Chairman: That would be fine;
thank you.
Mr Payne: I have a responsibility
to look after members and I make sure that we do look after our
membership.
Q178 Mr Clapham: It seems to me that
some of the disenchantment people may have, having been in the
trade, may well come about because there is not sufficient training
in business development and finance. Could you tell us whether
there are any such programmes? For example, do pubcos have a training
and development programme? Is it something you press for?
Mr Payne: Yes, it is one thing
we did press for and I can assure you that training programmes
do take place. We talk about them. A small brewery company, Thwaites,
gives a five-day course for £200 for the licensees. I attend
and give an hour and a half on employment law for people coming
into the trade, non-members, to make them aware of the responsibilities.
We also have pub companies which do anything from five to ten
days. The concern is that sometimes people come into the trade
before they have been on a course. In the early 1980s I addressed
113 licensing magistrates in Tameside and I pointed out that my
concern was that if I wanted to be a bus conductor, I had to sit
an exam, if I wanted to be a postman, I had to sit an exam, if
I wanted to be a licensee all I needed to do was to write my opening
hours on my hand and I got the job. I am pleased to say now that
with the BII, there are extensive training courses and they are
available to people pre-training and for people in existing training.
There is some going on. The worry is that some people do not go
on them until they are in the premises.
Q179 Mr Clapham: Is there anything
to suggest that people who have been on these training courses
are less likely to be part of the "churn"?
Mr Payne: Yes, people do benefit
from them and it is important, especially where there is a finance
part to the course for people; they will benefit and I can assure
you that people learn and they are quite good at running the business.
There are always casualties in every business and it is a sad
situation. I deal with a lot of them.
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