Memorandum submitted by Winter Hill Consultancy
We are pleased that a review of the Trade &
Industry Committee inquiry into PubCos is underway and we are
hopeful that your review may be able to focus on what we believe
are two of the key issues examined by the inquiry.
1. RENT REVIEWS
The PubCos stated to the TISC inquiry that their
rents are based on 50% of net profitscalculated from an
assessment of what is "Fair Maintainable Trade".
In order to verify what is reality, may we respectfully
suggest that you might obtain a summary of actual data in respect
of those Punch Taverns lessees whose accounts are prepared by
Milestone Accountants, to whom (we believe) new lessees have been
referred by Punch Taverns themselves for about the last two years.
To keep it simple and economical, you might
just ask Milestone for an (anonymous) listing, comprising the
net profit before rent, the rent itself, and the net profit after
rent. The net profit figures should be adjusted to exclude:
AWP income (if that is already shared);
interest and loan charges;
house manager costs if one is in
This is not a complete surveyor's formula of
course, but it should at least give a rough idea of what is happening
in the real world.
2. THE BALANCE
The TISC inquiry commented on the balance of
power between PubCos and their Lessees.
The nature of PubCo leases is that the Tenant
is legally hamstrung and cannot easily escape his lease in the
event of a rent dispute or if his business is failing. He must
either "sell on" his lease obligations or (if the business
is failing) he must crash heavily and may then lose everything
Therefore, we would propose that a Tenant should
be allowed to simply give six months notice at any time in order
to surrender his lease back to the PubCowithout any financial
penalty arising (or additional premium on the amount of rent charged).
We believe that this simple measure would help to redress slightly
the balance of power in favour of the Tenant in situations of
last resort, when his relationship with his PubCo may well have
29 September 2008