Pub Companies - Business and Enterprise Committee Contents

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.


  The PubCos stated to the TISC inquiry that their rents are based on 50% of net profits—calculated 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;

    —  vehicle expenses; and

    —  house manager costs if one is in situ.

  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.


  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 he owns.

  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 PubCo—without 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 broken down.

29 September 2008

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