Memorandum submitted by David Law, The
Eagle Ale House
I am a Partner in two pubs leased from Enterprise
Inns. My business partner at the Eagle, 104 Chatham Road has entered
evidence to the BEC with regard to Rent Reviews, Code of Conduct,
The Tie, and many issues that I am sure will be well supported
by many other submissions. The issue that I would like to address
is in my view a sharp and shoddy practice employed by Enterprise
Inns and many other PubCo's which I consider to be fraud and within
the remit of the Serious Fraud Squad.
The issue is the use of a beer monitoring system
that put simply counts the volume of beer dispensed in a tied
pub. The PubCos use of this system is to supposedly check whether
the Lessee is buying beer on the free market "outside of
the Tie aggreement ie, if the system counts more beer dispensed
than has been bought by the Lessee from the PubCo, he is assumed
to have bought beer elsewhere.
This system is known as Brulines and was founded
by Derrick Collins who in 1986 was convicted of conspiracy and
blackmail:
http://www.telegraph.co.uk/finance/2720480/How-to-ride-a-company%27s-growth-cycle-without-falling-off.html
The system is based around a very simple flow
meter commonly used in plumbing and can be bought over the counter
in any plumbers merchant for approx 24p. It measures each half
pint dispensed and the info it records is then transmitted by
a digital signal to the Brulines centre and is then checked against
deliveries manually entered from data sent by the PubCo.
The problem lies in the fact that the analysts
of the data at the Brulines HQ have to guestimate the quantities
of water that the Lessee pulls through the dispense system to
clean the beer pipes because the meter cannot tell the difference
between beer or water. If they don't get this right(they often
don't, and in our case I know that they haven't a clue) it is
counted as beer volume and so the Lessee is therefore already
falling foul of the system by performing best practise. By law
beer pipes have to be cleaned once a week, however, with regard
to real ale we clean our lines at the end of every barrel. This
had accounted for a massive discrepancy in the figures for our
site.
My first experience of this was when my BDM
reported a 54 x 11 gallon, barrels discrepancy to my previous
employers at the Eagle, and asked them to explain it. Both Directors
the stocktaker and I could not prove the figures to be incorrect
other than a couple of barrels difference. When one of the Directors
asked the BDM what would happen if the discrepancy could not be
accounted for he replied that an £8,000 fine would be levied
to them.
The Directors were obviously unhappy about this
and were considering that I was buying in and selling my own beer
through their outlet, and one might reasonably reach this conclusion
if one were to believe the figures quoted. I however had a good
idea of how the system worked and stood my ground as my livelihood
and home were potentially at risk, not to mention the £125,000
deal that I was brokering with the Directors to buy the lease
from them.
Subsequently I was vindicated by an Email sent
by Brulines admitting their mistake was due to missing delivery
figures and incorrect guestimation of beer line cleaning. See
below Bruline e-mail.
E-MAIL TO
THE EAGLE
FROM THE
ACCOUNTS MANAGER,
BRULINES, DATED
28 JULY 2005
Further to our conversation today, as discussed
we have investigated the variances on cask ales at the Eagle in
full.
There appear to be two reasons for the variance,
firstly we missed 153 gallons of deliveries on specialist cask
ales, due to the manual nature of how these are input into our
system. We have rectified the error and will ensure it does not
happen again.
Secondly, it is testament to the quality the
cask ale offering at your site, that your manager has such high
standards with regards to the care of cask ales. The level of
line cleaning and "flushig through" that your manager
undertakes is very high compared to most outlets. With the level
of care being taken over cask ales, we have now taken into account
fully this flushing through using a bucket. Having now identified
this, we have removed dispense information from the cask ale lines
for flush-through and will take this ino account in future.
This admission however, did not stop the BDM
from trying the same thing on two other occasions after this.
Brulines latterly acknowledged they did not consider the Eagle
to be guilty of any impropriety. Our figures as per Brulines are
now contrary to that period in that in the year commencing 30
June 2007 to 29 June 2008 the stats show:
Delivered 12,929.8 gallons
Dispensed 11,443.1 gallons
A variance of 1486.7 gallons or 135 x 11 gallon
barrels.
Unfortunately I personally know four Lessees
that have been charged with the same accusation and sadly paid
fines of £1,500, £3,000, £4,000, £8,000 and
another with an attempt at £18,000. Why do they pay if they
are not guilty? Put simply many are too intimidated by the power
and might of the PubCo, and their common threat to forfeit the
lease in court.
The lessee will on average have a £10k
deposit with the PubCo, £5,000 stock holding, £20,000
refurbishment and maintenance investment, £6,000 Fixtures
and Fittings, £30,000 premium investment, equalling £71,000.
Being presented with fancy spreadsheets they don't understand,
the threat of court action from a £5 billion net worth PubCo
and potentially losing one's home and livelihood, I can understand
and appreciate why a £3,000 fine would seem like small beer
even where you know your innocence.
Consider this scenario; the two largest PubCos
have between them approaching 16,000 pubs 28% of the UK's Pub
Sector. If they achieve a levied fine of only £1,500 to half
of those the pubs in their estates the revenue stream would equate
to £12,000,000. Hardly small beer!
Enterprise Code of Conduct; "Central to
our business strategy is our commitment to developing a mutually
profitable relationship with our business partners. Such a relationship
requires trust, understanding, clarity and focus".
Nick Light Operations Director, Enterprise Inns
told us that Brulines had gone to court 160 times and had a 100%
track record. This is a part truth, as far as I am aware at this
moment in time they have not won a forfeit to lease on a first
attempt as the Judge reasonably asks if the equipment has been
recalibrated. Our experience shows that it is not. Any meter that
is suspected of being faulty is just thrown away and replaced,
without the Lessee being given a chance to inspect the faulty
apparatus. What Mr Light refers to are injunctions to stop a Lessee
buying out of the Tie. Well if one knows he is not "Buying
Out" why would one be bothered by an injunction stopping
one from doing so? Thus they go uncontested:
http://www.thepublican.com/story.asp?storyCode=53272
Recently we had new meters installed and the
variance started to drop dramatically. When we questioned this
the figures were immediately reversed. This is very disconcerting
as no effort was made to check our claim it was just honoured
without any site visit, re calibration or stock count. Hardly
Scientific!
Enterprise Quote on Brulines: "This equipment
provides a wide range of information to aid quality and management
control, which can help you run your business move efficiently.
Stock control and checks on whether beer taps are working efficiently
are just two of the benefits".
How? The meters aren't government stamped, are
not recognised by Weights and Measures or Trading Standards. Flow
meters are used by the oil trade and are notorious for inaccuracy,
which is why they are recalibrated weekly. Oil Companies use very
sophisticated expensive kit. Our Brulines meters have had their
calibration checked just three times in three years.
I am willing to be called as a witness for the
BEC and have copious amounts of further information to support
my claim.
September 2008
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