Examination of Witnesses (Questions 180
- 198)
TUESDAY 6 JULY 2004
FEDERATION OF
LICENSED VICTUALLERS
ASSOCIATIONS
Q180 Mr Clapham: Many of the public
houses today of course are involved in food and that means there
is a necessity to have knowledge about hygiene and training. Is
that part of the training courses which the pubcos put on or is
that left to the individual?
Mr Payne: Pub companies do put
it on and in addition to that we run a free day course for licensees
and the staff. We try to encourage not just the licensee, but
the staff on food hygiene because beer is food.
Q181 Mr Clapham: Is there anything
else you think really ought to be contained in the training programme?
Mr Payne: More should be done
on financial advice. This is one area where people are not always
right. The worry is many times that if I call a meeting and ask
people to put up their hands if they know the breakeven point,
a lot of people would not know it. That is my worry, that people
do not. I have to say that a lot of people at the bottom end do
not have the best education, like me. We are just normal people
and they have not had a full education, but at least they are
honest people running businesses and they do need that guidance.
I am afraid that one of the areas where they do not get the guidance
a lot of the time is from their accountants. I find many accountants
do not give the licensees sufficient information; a licensee might
not get any accounts for 15 months. I wrote a programme up for
accountants saying that licensees should get at least monthly
visits in the first 12 months to see how they are getting on.
Q182 Mr Clapham: Has there been any
response to that? Given that you have tried to pressure your members
to raise that matter with their accountants, is there anything
to suggest that the accountants are responding in a more constructive
way?
Mr Payne: Some do. I have laid
down minimum guidelines for any accountant. I will not recommend
accountants but there is a list of accountants who have agreed
to adhere to those, which I will give to a licensee to consider,
but I cannot recommend an accountant.
Q183 Sir Robert Smith: You suggested
in your submission that in certain circumstances licensees should
be allowed to surrender their leases in the case of ill health
or if it is found that the licensee is not the right person for
the outlet. It has been suggested to us though that there have
been quite high penalties on trying to surrender the lease. What
is the common practice if someone does need to surrender their
lease?
Mr Payne: I have never had a licensee
being penalised for the surrender of a lease on ill health grounds.
We have always made sure we have got the full compensation for
the fittings. What they do not do is get any money for the goodwill,
because normally they do not pay for goodwill when they go in,
unless they are buying the lease. They do not get any money for
the goodwill, but they get full compensation for the fixtures
and fittings. I am dealing now with a case of one licensee who
has three pubs; one is going quite well and the other two are
really down in the dumps. I have got the company to agree that
he can surrender them, but he has been trading for a while and
losing money. It worries me. I have talked to pub companies, I
have gone to meet them, going back to the old Inntrepreneur days,
and asked them whether they wanted to have boarded-up pubs or
to sit down and reduce rents. I can say in certain circumstances—I
could take you to a pub in Hull—I have got over £10,000
off the rent because the trade had gone. Companies need to look
at that. It is no good to them to have a boarded-up pub. Let us
look at it and market it and get somebody in, if somebody has
some failings or ill health, etcetera.
Q184 Sir Robert Smith: If it is more
because they are not the right person and they are not coping
with the business, what do you do in that situation?
Mr Payne: Then the first thing
the person should do is to make sure that a business development
manager sits round a table with the licensee to try to advise,
see whether he needs any training so he can benefit. At the end
of the day we are bound to get people who do not fit into the
trade. It could be marriage problems, whatever. That is where
the person should be allowed to surrender the lease.
Q185 Sir Robert Smith: Current practice
is—
Mr Payne: There is no legal requirement
at all. It is the matter of goodwill on the part of a company
whether they are prepared to let somebody go.
Q186 Sir Robert Smith: What is your
measure at the moment of the goodwill?
Mr Payne: You do not get a lot
of that. It is difficult to get a company to allow a company to
surrender the lease because they are not the right type of person.
They might want to put a little bit of money into trying to market
it, but that will not always do. We have to be realistic. It might
make you laugh, but my favourite saying to a licensee is "If
you've got a hole in your pocket, do you still put your brass
in it? No? Then get out". I have done that because I have
had a number of cases where I have been able to get them out and
the licensee did not want to go at first, but he was on a downward
scale. He just did not fit. I got a licensee to assign his lease
in Chorley because the town centre had moved. He signed the lease
and lo and behold, who did I get as my next member? A person took
it on who had good letting accommodation in Blackpool and he took
it because he remembered the pub from many years ago. That is
the type of thing. People sometimes do not come into the trade
fully aware of the problems. They remember the old days and go
in, instead of being realistic and sitting down and getting proper
advice. The most important thing is that pub companies should
give the information. At the same time the licensee should get
a structural survey where they need to, they should go to see
their accountant, they should see a solicitor, but a lot of them
cannot be bothered. No disrespect. They want to get in very fast
and they remember the pub and that is sometimes a weakness on
our side. I accept some of the responsibility there, because we
do not meet the people fast enough to make them aware.
Q187 Mr Hoyle: Chorley is always
the intrigue for me, as we seem to have many pubs which are boarded
up for a period, they get another mug to come in and take them
on, lose another fortune and on it goes. It is the perpetual wheel;
we suffer from the hamster-running-round syndrome. What worries
me is the glossy advert which says to people "Be your own
boss. Make your fortune. The world is yours". It is those
adverts which tempt people in. They believe the adverts, they
want to get on board, they have maybe had a redundancy payment
from a local business, they may be using their savings, they may
sell their house because they have equity there and they think
they will go and double their money. It is that tragedy which
we suffer. Chorley is a good example.
Mr Payne: Yes, it is.
Q188 Mr Hoyle: The problem we see
though is like the town centre shops. If you have a town centre
shop and it is owned by some management company, or an insurance
company, those shops in those shopping centres will be boarded
up before the rents are reduced and it is that syndrome that we
are suffering with the pubs. Instead of reducing when somebody
is in trouble, helping them to make a go of it, the companies,
like the people who own the shops, do the same. They will not
drop the rents because that is the pitch they have set and they
expect it to increase next year. They would sooner see something
empty and boarded up and wait for the next bloke. Would you not
agree that is a fair analysis?
Mr Payne: Yes, it does happen.
The other thing which I have brought to the DTI and have had it
on Watchdog is that a number of companies are advertising
in daily papers and they say "Would you like to manage a
pub? Would you like to earn £30,000 a year?" etcetera.
People pay these companies £3,000 to £6,000 to go in.
The companies might not own any public houses at all. We have
had many, many cases and those companies are still advertising.
I have given it to the DTI, I have had it on Watchdog.
I am afraid that those companies are conning people into giving
money when they have no public houses at all.
Q189 Chairman: Can we try to draw
some threads together here? You are saying that a sizeable number
of people go into the pub business without really having any idea
of what running a pub is like. They have seen it from the other
side of the bar perhaps; maybe too frequently in some instances.
They have seen it nonetheless. Do you not think that pub companies
should be more responsible? If they are offering a franchise,
they are putting the name of the pub, they are putting the name
of the brewery, they are putting the name of the organisation
at stake, yet they do not seem to give a damn. So long as they
can get some hapless barman-cum-tenant in the pub, they are quite
happy. Do you not think there is a responsibility on the pubcos
to take the business of letting more seriously than they do?
Mr Payne: I do. There are several
instances where a person coming into the trade should be given
help, to make sure. I will tell somebody who wants to come into
the trade not to bother if they have not worked in a pub. They
should go out and get some training, work in a pub and get some
experience before they consider it. They ask a company and what
the company should do is to make sure everybody has had some training
before they go into a public house, before they sign the agreement.
They have had the training and they know the finances, so they
know what they are letting themselves in for based on full information.
I support you fully on that.
Q190 Chairman: In your experience,
do pubcos refuse many people the opportunity to take over a public
house?
Mr Payne: I do not know that at
all. All I can say is go back to the time pre Beer Orders when
you had a waiting list of people wanting to get in and now we
have more vacancies than people. Some companies might have waiting
lists, but I do not think we do have the waiting lists. This is
the sad thing. This is why we are seeing boarded-up pubs.
Q191 Chairman: Are you in a position
to distinguish between what you would regard as good pub companies
and bad ones?
Mr Payne: I am not prepared to
attack a pub company here today. I will do it privately and I
do it; I write in to companies when I think they have problems
and I make them aware of them.
Q192 Chairman: Do you find that some
pub companies are more likely to receive letters from you than
others?
Mr Payne: There is bound to be
the odd one which I have had to contact more than once, whether
on rent negotiations, concern that someone is not getting a fair
deal or something else. There is bound to be one more than the
others.
Q193 Chairman: Would you be prepared
to share with us the names of the companies?
Mr Payne: No, I am not prepared
to disclose that. I would take that up with the company. It is
unfair. I will take it up with a company and I do take it up with
companies where there is a problem; I do make sure that if there
is a problem, whether it is a BDM or a director, I take it up
with a company.
Q194 Chairman: You have been reasonably
frank with us. Do big companies act differently from small pub
companies? It has been suggested to us that they do not, that
they are fairly consistent, either good or bad as the case may
be.
Mr Payne: I think the problem
with the smaller pub companies is that they are more at the bottom
end of the market than the large companies. That is one of the
problems. The smaller pub companies tend to buy more of the dregs,
the bottom end of the market, because the big company will be
offloading and they tend to buy those. So the smaller companies
can at times have more problems with the licensees, more problems
that way. There is a large turnover of both small breweries or
brewery company licensees and pub companies, higher than I should
like to see. I think we need to do more to keep people in the
trade.
Q195 Chairman: Do you think that
Britain is "over-pubbed"?
Mr Payne: The problem now is that
over 39% of sales are off-sales. For the European Cup, supermarkets
were offering Strongbow cider at 51 pence a pint and 5% strong
export lager at 64 pence a pint, which is taking people away and
we have a lot of uncontrolled drinking which is my worry and it
is a worry to the Government. We talk about happy hours and cheap
drinks, but we have a problem with the supermarkets as well as
public houses. It is something which really needs to be looked
at. We are to a certain extent "over-pubbed".
Q196 Chairman: Perhaps over-priced
as well. There is the suggestion that wholesale prices have fallen
by an amount which is far in excess of what we as customers have
to pay when we buy our beer, that this has not been transferred
on to the public.
Mr Payne: I worked out that in
the last ten years in fact wholesale prices to licensees have
gone up higher than inflation.
Q197 Chairman: We will finish on
that note. Mr Payne, you have been very helpful to us. If we need
to get back to you for any additional information, we will.
Mr Payne: Thank you very much.
Would you like me to leave some of these documents?
Q198 Chairman: Yes, we should be
very grateful.
Mr Payne: May I tell you that
I am here to look after small self-employed licensees, but I want
fair play? I do not want to see them thrown out of the pubs. Thank
you.
Chairman: Thank you.
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