Pub Companies - Business and Enterprise Committee Contents

Memorandum submitted by The Crown & the Town Hall Tavern

  I am writing to you regarding your enquiry into pubcos and would like to bring to your attention several issues we have had as an example of their conduct.

  I am the co-owner of two pubs (The Crown & Town Hall Tavern) both located in Manchester and both on a beer-only tied lease with Enterprise Inns PLC.

  We purchased the lease for The Crown in April 2006 & have gradually increased sales, despite the smoking ban and the general downturn in trade. In the summer of 2007 we were told that we would be getting a rent increase of around 50%, largely because the rent had been set too low for the previous tenant! There was no mention of this when we purchased the lease, and after lengthy discussions the rent was eventually increased by 50%. We managed to negotiate a rebate for the 1st year, but it is still a huge increase to impose in one hit.

  The pub is the bottom two floors of a block and as such, the pubco do not own the property but sub-let it. We assumed therefore, that the increase imposed on us was the result of a similar increase imposed on them but when asked, they declined to answer. We are unsure if this behaviour breaks any codes of conduct but, in our opinion, it is not a fair and responsible attitude and would perhaps suggest a need for further regulation of the industry.

  We took over the Tavern in April 2007, but didn't sign the lease until September 2007. The pub had been left in a terrible state by the previous occupant, and as a result the reputation of the pub had suffered badly.

  Because of these problems, we were offered the lease at a reduced price, though it may not have sold on the open market due to the poor condition and the fact that it wasn't trading. However, we felt it had potential, and as the pubco had a vested interest in re-building the business, they would surely help if required. During the first year of trading we incurred losses of £50k but we received little or no practical help from Enterprise during this period, and haven't done to this day. Eventually, we discovered by accident that we can apply for a rent rebate but of course, there are no guarantees though we are going through the process. In lieu of any practical help from the pubco and as owners, we have had to put over £50,000 into the Tavern, taken out personal loans and used personal credit cards in order to keep the business going.

  The issue we have with the pubco is about the purchase of beer. We don't get a discount at The Tavern, though we do for beer we buy at The Crown. We know we pay well over the odds for beer supplied on a tied lease basis, but as it is a tie we have no option. With a massive rent increase, heavy losses and no help forthcoming from the pubco, we had to reduce our costs wherever possible so we decided to buy all the beer for both pubs through the pub that got the discount. There is nothing in the terms and conditions of either lease about this—I expect it is not common for one operator to hold more than one lease at any one time. Lately, we have ordered some beer for the Tavern directly, losing whatever discount we were getting, but we felt that we should show willing and that we are prepared to compromise, though it is not reciprocated.

  We were quite open with Enterprise about what we were doing and why, but as a result, Enterprise have sent in inspectors to measure usage against purchases. Naturally, as we buy all the beer through one pub, the figures don't match so the pubco has accused us of buying from an unauthorised source & tried to impose fines ranging from £720 to £4,000. At a meeting in April this year, we were told by the pubcos Area Rep that he was happy that the shortfall at one pub was adequately offset by the over-ordering at the other, which is obviously the case. Yet, still we have inspection visits and receive invoices for fines for buying beer from an unauthorised source. As we have no beer in either pub from any other source than the pubco, we have absolutely no intention of paying these fines but are seeking legal advice and have contacted the OFT; if we are told that we are not in the wrong then we will defend our case all the way. We can only assume that this is simply a case of the pubco trying to claw back some of the discount they have had to give us by using bullying tactics or any means they can.

  I believe that it is not necessarily the tied lease which is the problem, but rather the way in which it is enforced by the pubco. It would appear that they have a relatively free reign to act as they please. If the tie is to remain, there should be an independent regulatory body to ensure the pubcos act in a fair and responsible manner and are accountable for their actions.

30 March 2009

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