Memorandum submitted by the National Parliamentary
Committee of the Guild of Master Victuallers
Costs to Pubcos
Pubcos are able to negotiate substantial discounts
from their suppliers because of the influence in the market due
to their size. For instance Enterprise Inns and Punch Taverns
own in excess of 15,000 licensed premises which represents more
than 25% of the UK pub market. These pubs are in the main operated
by individual tenants and lessees.
This situation is compounded by the managed
house estates also owned by the Pubcos and their buying power
with a distinct advantage over the individual tenants and lessees
all operating in the same high street.
Costs to tenants and lessees
Due to Pubcos strict enforcement of their supply
agreements with both tenants and lessees which prohibits them
from obtaining their products on the open market or from suppliers
of their choice they are bound by the price list imposed by the
pub owning companies. This price list does not reflect the large
discounts obtained by the pubcos from the Brewers. Where large
volume sales result in a more beneficial discount to the tenant
or lessee it is offset by a higher level of rent which negates
any advantage gained.
The Guest Ale provision in the Beer Orders,
enabling tenant and lessees by right to stock these products,
have in most cases been eroded by the Pubcos by arrangements forced
on licensees in exchange for discounts. These arrangements are
reflected in any subsequent rent review.
On review rents should be subject to any environmental
changes in and around the licensed premises which adversely affect
the profitability of the business. The unfairness of the upward
only rent reviews do not take in consideration these changing
circumstances which in most cases are outside of the control of
the licensee. In commercial trading practises there is no place
for upward only rent reviews and therefore they should be abolished.
Pubcos should be open with their tenants about the way in which
rents are calculated.
In the case of AWPs (Amusement with Prizes Machines),
Juke boxes, Video machines and Quiz machines, the licensee is
again restricted from a choice of supplier by having to adhere
to the Pubcos list of preferred suppliers of these machines. The
preferred suppliers rental arrangements with licensees are in
excess of those that can be obtained in the open market.
The reason for this is because the Pubcos receive
commission on the inflated rental charges levied by the suppliers.
This general practice is further compounded by their taking of
a high proportion of the total machine income. In the case of
pool tables and snooker tables that are not rented from the preferred
supplier, the Pubcos levy a ground rent to offset their loss of
commission. Where the tie exists it should be removed.
4. BUILDING INSURANCE
Licensees have no choice in the selection of
building insurance providers but are restricted to the company's
nominated insurer. The restriction results in higher premiums
than can be otherwise obtained due to the company's commission
arrangements with the nominated insurers.
5. THE TIEA
There has been no substantial review of the
Tie since the 1990's when the spotlight was on Inntrepreneur Pub
Company. At that time the focus of attention was on whether the
Tied Lease complied with the "Block Exemption" requirements
under European Competition Law. In particular, attention focused
on whether the Tied Lease provided the tenant with any "special
commercial or financial advantage" (SCOFA).
The basis of the Tie in early 1900s meant that
all beer products supplied by the tenant had to be purchased from
the landlord or from the landlords nominated supplier and at the
landlords standard price. This was subject to one proviso ie.
that the tenant could, at any given time, stock one "guest"
ale of the tenants choice and purchased from a supplier of the
The nature and scope of the tie has changed
dramatically since the late 1990's, either through changes introduced
in the terms of new leases granted by Pubco landlords or through
financial incentives. The guest ale concessions have been removed
from leases granted in the late 1990s and onwards. In addition
many existing tenants were offered financial incentives to give
up the guest ale. The tie provisions in leases have been extended
from beer only to "beer, ciders and alcopops". Some
Pubco landloads have introduced a "full tie" in new
AWPS and other gaming amusement machines have
been brought into the scope of the tie provisions. Tenants must
now use the landlords nominated supplier for such machines. In
addition, the net takings, (which formerly belonged to the tenant
absolutely) must now be shared between the landlord and the tenant.
Increasing public concern over alcopops and
increased consumption of soft drinks in public houses has resulted
in the tie provisions being changed yet again. Alcopops are now
going out of the tie provisions and are being replaced by soft
The National Parliamentary Committee of the
Guild of Master Victuallers has restricted its submission to the
issues that the Business & Enterprise Committee intend looking
into but it is aware that there are other issues that are of concern
to licensees. It would like the Committee to consider other important
issues such as:
An agreed accredited National Code of Practice
to apply to all Pubcos.
Transparancy in all dealings between Pubcos and
Independent fully binding complaints procedure
29 September 2008