Supplementary evidence submitted by the
Fair Pint Campaign
The following supplementary evidence from the
Fair Pint campaign highlights a series of quotes from the Committee's
oral evidence session held on 9 December 2008, and provides evidence
to the contrary on a number of specific issues.
1. In answer to Question 161, on the reason
why turnover is higher in managed pubs, Rob Hayward said: "It
is also because there is a regulatory burden associated with employment
in the line which makes it uneconomic to have managed houses at
a smaller level. The point at which you operate a managed house
has risen ever higher in the last two decades."
This suggests that pubs with a lower turnover
do not have exactly the same regulatory burdens, which of course
they do. There are no regulatory burdens for managed houses that
do not apply to all pubs. However, the tied tenancy model means
that pubcos can simply pass on the regulatory burden to the tenant/lessee.
2. In answer to Question 212, Ted Tuppen
said: "There is just one point, I think, for clarification
that I would like to draw your attention to, and I am sure you
have read it, but the 2004 TISC inquiry did conclude that "the
tie usually balances the costs and benefits available to tenants"
and that "the existence of the tie provides demonstrable
benefits to both tenants and customers alike". Now, the TISC
in 2004 did not conclude that the tied tenant should be financially
no worse off than the free-of-tie tenant. That was never a conclusion.
It is a point being peddled frequently by the Fair Pint Campaign,
but it ignores entirely all of the other benefits which Giles
just referred to that we give to our tenants."
The TISC stated that "Under EU competition
law, contracts containing an exclusive purchasing obligation,
such as the beer tie, have only ever been permitted if they provide
such "countervailing benefits". The theory is that the
net cost of the beer tie to the tenants makes them no worse off
than if they were free of tie [paragraph 133]. The TISC also said
that the "`value equation' suggests the countervailing benefits
tenants receive should leave them in the same position as if they
were not tied at all" [paragraph 178]. However, they went
on to say that they did not have sufficient data to confirm that
point.
Therefore, the TISC made recommendations to
ensure that there is transparency in the rent assessment process,
through whole detail of countervailing benefits and how they are
accounted for in the profit assessment [paragraphs 144 and 145].
Unfortunately, the pubcos have failed to abide by these recommendations.
3. In answer to Question 218, Simon Townsend
said: "I would also wish to make one point, that there is
a sort of urban myth that has been propounded by various parties
that the temporary support provided by companies in some way is
repayable, and can I make it very clear that, as far as Enterprise
is concerned, no amount of the business support that we provide
in additional discounts or rental concessions is repayable; that
is simply not the case. This is permanent financial assistance
over a temporary period of time designed to prevent the business
failing."
Appendix 1 has two examples of where Enterprise
are offering their pubs some financial assistance, but changes
the detail of their arrangement. In the first pub was originally
tied for beer only and then in 2006, by Deed of Variation, cider
was included in the tie. Enterprise are now demanding a full tie,
plus strict control and confidentiality, as a condition for the
financial assistance.
4. In answer to Question 255, Simon Townsend
said: "If I can make one final point on this idea of business
failure, and Mr Hoyle was about to raise it earlier I think, it
has been suggested to this inquiry that we have no fear of a business
failure or a closed pub because of some insurance policy that
covers us for two years' loss of rent. That is a complete fabrication
and really we need to put the sword to that idea. There is no
insurance policy that can cover Enterprise Inns for the loss of
rent or the loss of income in a pub that has been closed down
through a business failure or abandoned; that is a total fabrication.
It is an absolute cost to us and we will do everything we can
to prevent that business failure."
Please see Appendix 2 (not printed here),
which is an extract from the lease of the Eagle Ale House, Battersea
(Enterprise). In Clause 6.1, the lease states: "The Landlord
covenants with the Tenant at all times during the Term to keep
the Premises (except the glass thereof) insured (unless the insurance
is prejudiced by reason of any act omission or default on the
part of the Tenant) against loss or damage by fire and such other
risks as the Landlord shall from time to time think fit and shall
insure loss of three year's open market rent of the Premises and
expert's fees."
5. On Question 261, in relation to Brulines,
Giles Thorley said: "The simple answer, as hopefully most
of us will be aware, is that beer is a different density from
water, so it actually measures the difference in the density of
the products, so, therefore, as you are well aware, when you are
cleaning a line, that is already factored into the volume that
goes through the flow meter. I am happy to provide a more technical
analysis of that."
This is simply not the case. Brulines does not
measure density; it only measures flow and is therefore unable
to differentiate between beer and water.
6. In answer to Question 270, Simon Townsend
said: "We do not have access to the pub's books in the circumstances
of either a new let or indeed an assignment. As has wrongly been
suggested to this inquiry on an earlier occasion, we do not have
access to the tenant's books."
Please see Appendix 3 (not printed here),
which is an extract from a sample Enterprise Retail Partnership
Agreement from 2006. This states that "Within three months
of the expiry of your trading or accounting year you must supply
us with a copy of your trading accounts (including reasonable
evidence of turnover) for the Business for the year in question
and notify us of any changes in the dates of your accounting year.
You must provide us with a copy of each quarterly VAT return for
the Business within one month of the date of submission required
by H M Revenue & Customs."
7. In Question 290, on the benefits of the
tie, Ted Tuppen said: "What we can do, and I would be very
happy to put this in a letter to you afterwards, are, for example,
special buy-in deals where our licensees, because they are Enterprise
licensees, at no kick-back whatsoever to us get things more cheaply
than they could otherwise get them, so there are real benefits
there. There are a whole series of things, and I would draw your
attention again to the 2004 TISC conclusion which says, "The
tie usually balances the costs and benefits available to tenants
and the existence of the tie provides demonstrable benefits to
both tenants and customers alike".
As was previously stated, the TISC also stated
that "we did not receive sufficient data for any one pubco
or pubcos in aggregate to judge with any degree of accuracy whether
the wholesale price differential on tied products plus AWP income
were exactly counterbalanced by the countervailing benefits of
a rent subsidy and other special commercial or financial advantages"
[paragraph 179].
The fact is that the costs and benefits are
actually included within the profit and loss account and so if
the profit does increase then the rent will also increase. Therefore,
not only will the tenant benefit, but so will the pubco. That
is why detail on the profit assessment is so important [paragraphs
144 and 145].
APPENDIX I
I refer to our recent discussion about your business.
I am pleased to be able to confirm our agreement to a series of
short-term support activities for your business, and a longer
term plan. The terms for the short term assistance are set out
in a side-letter annexed to this letter, on strict condition that
this long term plan is agreed forthwith. The concessions will
then be available to you during the Concessionary Period running
from ********** to the Expiry Date **********.
It is not agreed between us that our mutual overall
objective is to work together to try to grow and develop your
business in order to secure a continuing viable long-term business
relationship on the present lease or tenancy terms.
As you are aware we will arrange regular business
reviews with you during this interim period. As a result of those
reviews the Company may, entirely at its option and discretion,
defer the Expiry Date or reconsider with you the object of the
long term plan.
The terms of this agreement are confidential,
and you undertake not to disclose its terms to anyone without
our written consent; excepting only that you will be able to disclose
these terms to your accountants, stock-takers and bankers for
the purpose of putting the terms of this agreement into full affect.
I confirm that I am in agreement with all of
the above terms
This letter in ancillary to the Business Recovery
letter of the same date.
We expect you to comply in full with the terms
set out below, and to countersign this letter to record your agreement.
If you do so, Enterprise Inns plc ("the Company"), as
agent for the relevant legal owner, will enter into the following
concessions from **********. These concessions are personal to
you, they do not constitute a variation of your lease or product
suppply terms, and will all cease in the event that you do not
fully comply with your commitments set out in both this letter
and the Business Recovery letter.
From ********** until ********** (the "Expiry
Date") or upon earlier termination due to your default:
1. You will receive a discount
of £100 per 36 gallon barrel on draught beers and ciders
brought from the Company for resale at the premises on the terms
set out in the attached Enterprise Inns Price List and discount
table, which will be paid off invoice. For the duration of this
agreement it replaces the price list specified in your tenancy
or lease, if different.
2. You will be tied to buy all
your beers and ciders (however packaged), FABs, wines, spirits
and minerals for resale at the premises from the Company and the
prices you will pay are set out in the attached price list (not
printed here).
3. The Company reserves the right
to vary these price lists at any time.
4. All goods must be paid for by
variable direct debit, or such other means as the Company may
specify from time to time.
5. The Company will install beer
and cider flow metering equipment if it is not already installed
and any variances of products dispensed over delivered will lead
to this agreement being cancelled without notice and with immediate
effect.
6. The Company requires you to
notify your accountant and stock-taker forthwith that the Company
will liaise directly with them to access your monthly trading
figures, VAT returns and stocktaking results, and in the event
that you do not have a retained accountant and/or stock-taker
the Company will appoint the same at your cost.
7. We will co-operate together
in an initial and ongoing review of the business; including agreeing:
a. Retail pricing of drinks
and food to ensure the customer proposition is market competitive.
b. Number, poisitioning and
promoting of gaming and other machines.
c. Opening times and staffing.
d. The Company will conduct
a retail standards audit and agree actions with you to resolve
any issued arising from it.
e. Access to brand-owners'
support.
f. The long term sustainable
Profit & Loss model in the hands of a Reasonably Competent
Operator.
g. The need for any repair
and decorations, and the appropriate way to remedy them.
8. From ********** to **********
the rent set out in the Lease dated ********** will be reduced
by ********** excluding VAT, per annum to ********** excluding
VAT, per annum ("the Reduced Rent") to be paid monthly
in advance by direct debit.
9. In the event of you defaulting
in:
a. Making payment of the
Reduced Rent on the due dates.
b. Making payment of all
other sums due and owing on the terms of this personal agreement.
c. Complying with all the
other terms of this personal agreement and those terms of the
Lease that remain un-amended by it.
d. Undertaking reasonable
co-operation with the business review process.
e. Complying with the confidentiality
clause below.
10. Any extension of the personal
agreement must be documented by way of a new, signed Business
Recovery Letter and a new, signed Personal Concessions Agreement.
11. The terms of this agreement
are confidential, and you undertake not to disclose its terms
to anyone without our written consent; excepting only that you
will be able to disclose these terms to your accountants, stock-takers
and bankers for the purpose of putting the terms of this agreement
into full effect.
12. In the event that this personal
concession agreement is not complied with in any respect we reserve
the right to commence proceedings to recover possession of the
premises.
I confirm that I am in agreement with all of
the above terms
1 Business Recovery Lease Merge v3
Our ref: 900437/31215
Dear Mr and Mrs P******
Personal Concession Agreement
This letter in ancillary to the Business Recovery
letter of the same date.
We expect you to comply in full with the terms
set out below, and to countersign this letter to record your agreement.
If you do so, Enterprise Inns plc ("the Company"), as
agent for the relevant legal owner, will enter into the following
concessions from **********. These concessions are personal to
you, they do not constitute a variation of your lease or product
suppply terms, and will all cease in the event that you do not
fully comply with your commitments set out in both this letter
and the Business Recovery letter.
From ********** until ********** (the "Expiry
Date") or upon earlier termination due to your default:
1. You will receive a discount
of £70 per 36 gallon barrel on draught beers and ciders brought
from the Company for resale at the premises on the terms set out
in the attached Enterprise Inns Price List and discount table,
which will be paid off invoice. For the duration of this agreement
it replaces the price list specified in your tenancy or lease,
if different.
2. You will be tied to buy all
your beers and ciders (however packaged), FABs, wines, spirits
and minerals for resale at the premises from the Company and the
prices you will pay are set out in the attached price list.
3. The Company reserves the right
to vary these price lists at any time.
4. All goods must be paid for by
variable direct debit, or such other means as the Company may
specify from time to time.
5. The Company will install beer
and cider flow metering equipment if it is not already installed
and any variances of products dispensed over delivered will lead
to this agreement being cancelled without notice and with immediate
effect.
6. The Company requires you to
notify your accountant and stock-taker forthwith that the Company
will liaise directly with them to access your monthly trading
figures, VAT returns and stocktaking results, and in the event
that you do not have a retained accountant and/or stock-taker
the Company will appoint the same at your cost.
7. We will co-operate together
in an initial and ongoing review of the business; including agreeing:
a. Retail pricing of drinks
and food to ensure the customer proposition is market competitive.
b. Number, poisitioning and
promoting of gaming and other machines.
c. Opening times and staffing.
d. The Company will conduct
a retail standards audit and agree actions with you to resolve
any issued arising from it.
e. Access to brand-owners'
support.
f. The long term sustainable
Profit & Loss model in the hands of a Reasonably Competent
Operator.
g. The need for any repair
and decorations, and the appropriate way to remedy them.
8. From ********** to **********
the rent set out in the Lease dated ********** will be reduced
by ********** excluding VAT, per annum to ********** excluding
VAT, per annum ("the Reduced Rent") to be paid monthly
in advance by direct debit.
9. In the event of you defaulting
in:
a. Making payment of the
Reduced Rent on the due dates.
b. Making payment of all
other sums due and owing on the terms of this personal agreement.
c. Complying with all the
other terms of this personal agreement and those terms of the
Lease that remain un-amended by it.
d. Undertaking reasonable
co-operation with the business review process.
e. Complying with the confidentiality
clause below.
10. Any extension of the personal
agreement must be documented by way of a new, signed Business
Recovery Letter and a new, signed Personal Concessions Agreement.
11. The terms of this agreement
are confidential, and you undertake not to disclose its terms
to anyone without our written consent; excepting only that you
will be able to disclose these terms to your accountants, stock-takers
and bankers for the purpose of putting the terms of this agreement
into full effect.
12. In the event that this personal
concession agreement is not complied with in any respect we reserve
the right to commence proceedings to recover possession of the
premises.
I confirm that I am in agreement with all of
the above terms
|
