Pub Companies - Business and Enterprise Committee Contents

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:

  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.


    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:

  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

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2009
Prepared 13 May 2009