Memorandum submitted by Stephen Broadhurst
EXECUTIVE REPORT
This report is based upon very real personal
and professional experience. It wasn't a very pleasant one. This
report sets out to explain the events leading up to this statement,
the key points being:
— The Tenant receives absolutely no
real benefit from a beer tie.
— The role of Business Development
Manager is critical communication link to the brewery but is grossly
ineffective and biased against the Tenant.
— There are no other effective links
of communication to anybody else within the organisation at any
time, regardless of the situation or level of urgency.
— There are no complaints procedures.
— There are no dispute procedures.
— There are no appeals procedures.
— There is no disclosure or information
forthcoming from the Brewery.
— There are no Codes of Conducts.
— There is a biased and unpublished
"fine" procedure.
— Brulines is supposed to be unbiased.
It is strictly biased in favour of the Brewery.
— If the public house is struggling
to survive there are no concessions or help.
— The whole public house experience/involvement
can potentially ruin lives for both individuals and families.
— The brewery fails to fulfil its service
agreement but rigorously enforces the Tenants purchasing/rent
side of the agreement.
— The Brewery's favourable and only
solution to any dispute is to issue a Statutory Demand. End of.
1. Personal Profile
I am currently serving as a Borough Councillor
in Macclesfield until 2009. I have also been elected onto the
new Cheshire East Council until 2011. I am also a 43year old Business
Consultant currently residing in Macclesfield. As part of my professional
development I decided to try my hand at operating a public house.
As a result of this (recent) experience I would like to submit
the following evidence to the Committee.
2. Introduction
Public House referred to: Bate Hall Inn, 39
Chestergate, Macclesfield, Cheshire. SK11 6BX
Brewery: Marston's (referred to as either Marston's
or "the Brewery" for the benefit of this report).
For the purpose of this report, Stephen Broadhurst
is both the Author/Tenant that is referred to in this report.
3. Time Line
June 2006—Initial interest by Author expressed.
June 2006—The Bate Hall Inn was registered
as a limited company.
February 2007—A "Square Deal"
Agreement was signed.
February 2007—Bate Hall Inn Ltd. opened
for Business.
January 2008—An "Open House"
Agreement was invited to sign.
March 2008—Bate Hall Inn Ltd Closed for
business.
April 2008—Marston's issues a Statutory
Demand on Tenant.
May 2008—Judge sets aside Statutory Demand.
4. Recommendations
— There is urgent need for reinforcement
of existing regulations as well as further regulation of the industry.
— An independent body to be established
to arbitrate in any complaints/disputes.
— A full and factual Code of Practice
be published relating to all the procedures, implications and
events that can be encountered when signing the different agreements.
— The tied purchasing price to be reduced
to the free trade purchasing price.
— Brulines to be completely unbiased.
— Insurance against legal proceedings
be made available.
— A statute of limitations being established
against further legal action being taken.
— The Business Development Manager
title being removed as it is misleading.
— The Business Development Manager
being stripped of power and reassigned relevant role and responsibilities
appertaining to the position.
— Deposits are held in a neutral Bank
Account and arbitrated by a third party.
— A clause to be written upon failure
of a dray delivery a Tenant can purchase from a third party without
repercussions.
— Clear and realistic purchasing targets
be established.
— Fair rents be arbitrated by a third
party.
— Clear and concise calibration records
are made to cellar equipment.
5. Background
June 2006, the original intention was for the
Author to purchase the lease from the previous landlord Mr R.
The Bate Hall had been shut for approximately two months at this
stage. Due to unknown reasons Mr R was prevented from reassigning
the lease over to the Author. Again for specific details unknown,
Marston's decided to bankrupt Mr R at Macclesfield County Court
in November 2006. Two days after Mr R was made bankrupt, the Author
was approached by the Business Development Manager from Marston's,
with an offer to sign a lease and reopen the Bate Hall.
6. Lease/Tenancy
The Author signed a Square Deal Agreement in
February 2007 this basically meant that either parties could give
a 24hr notice to vacate the premises and the business. This was
interim agreement signed under the guise of an Open House Lease
(henceforth and for the purpose of this report will be known as
a Full Tenancy Agreement) being made available. It was believed
that the Full Tenancy Agreement was being drafted and would be
made available within weeks. The Tenancy agreement is a 21 year
lease where the lease cannot be sold onto another party for two
years after signing. The lease can only then be sold on, but only
with permission from the brewery. The County Court was made aware
of the intention of the Author to buy the lease from Mr R in an
effort to prevent a bankruptcy judgement on the day of the case.
Marston's rejected this and Mr R was duly made bankrupt.
If the lease cannot be sold on for any reason,
the occupier has no choice but to continue to be responsible for
the business ie Business Tax, Utilities, rent etc whether the
Business ceases to trade or not.
7. Advantage
The one and only advantage known to the Author,
to signing of the Full Tenancy Agreement is that it consists of
rent and beer discounts. This is "designed" to incentivise
the tenant to sign over from eg the "Square Deal" to
a Full Tenancy Agreement. For example, upon signing the Full Tenancy
Agreement the Bate Hall weekly rent would have reduced from circa
£650 per week to £450 per week. On average a barrel/keg
would reduce by £35 each. All agreements consist of a full
drinks tie. The Full Tenancy agreement was made available but
never signed by the Author.
The Bate Hall finally opened on 21 February
2007 after being closed for 10 months. A deposit of £7,000
was given to Marston's to which the Author has no chance of recovering.
8. Communication
Communication is primarily with, and is impossible
to have, from anybody within Marston's apart from with the Business
Development Manager.
9. Cash/Credit Account
Marston's operated two accounts, a Cash and
Credit account. A credit account allows two weeks payment grace
from order with the total amount Direct Debited out of the Public
House trading account.
10. Cash Account
The total beer order and rent to be paid in
cash into the Brewery's bank account and must be made in full,
before any dray delivery is made.
11. Complications
This causes complications if the business is
struggling with its cash flow eg you can only pay for what you
can afford or use a credit card to which, a further handling cost
is imposed by the Brewery. There are instances where the beer
delivered runs out at an inopportune moment ie the Bate Hall beer
order was placed on a Monday for delivery Tuesday. There were
instances where the cellar was running dry Thursday/Friday prior
to a weekend. This was further compounded if an event was being
held eg a birthday party the options under these circumstances
were to either:
— close the business until the next
"free" dray delivery;
— have an emergency delivery costing
circa £80;
— borrow from a third party;
— pay by personal credit card;
— pick up from the brewery shop outlet
initially located near Warrington.
With the latter option being the "legal"
and so, the preferred option. This process worked fine for the
Bate Hall upon the first three occasions until Marston's cut this
option off without prior warning eg the final option given to
the Author when the Bate Hall ran dry, was to travel from Macclesfield
to the Mansfield Brewery shop (with Warrington being the closest
and initially used but still a five hour round trip), which is
an 8hr round trip in order to purchase two kegs of lager which
is not cost effective. Emergency deliveries were costly and sometimes
could be up to three days later than required. Borrowing was frowned
upon from a third party and impossible from a managed Marston's
public house, even if it was local and "awash with drink".
Buying in was deemed illegal and is subject to an undisclosed
fine system. This was costly fine is imposed and non-negotiable,
but landlords have to put up with it because it has to be balanced
against the "nightmare" of any public house running
dry. The nightmare being, if the Business runs dry, it will fail
as it switches customers off when they cannot buy their chosen
product and ultimately will ruin the business both in goodwill
and future trading. If an event is on, the Tenant has a contractual
obligation to meet and service that requirement. There are choices
to be made but they are extremely risky from a business perspective.
12. Fines
Marston's operates a "fine" scheme
that is not publicised or can be appealed against. The fine is
usually imposed as a result of buying in from a third party. Marston's
can impose any amount of monetary fine that it chooses, usually
thousands of pounds, payable with immediate effect. If the Tenant
refuses or cannot pay, the brewery will not supply any drink to
the premises from that moment on. No prior warnings are given.
The first a tenant knows about the fine is when they try to place
a beer order for that week. This forces the tenant to either pay
up or buy in, creating a viscous circle of breaking the tie for
the business to continue trading. Breaking the tie is believed
to be an offence and was partly the reason for Mr R being made
bankrupt. A second reason for breaking the tie is for being on
cash account. The Tenant can only pay what they can afford for
that weeks delivery. If they require more drink for eg a party
booking at the weekend, they are either forced to buy in or place
an emergency delivery at a cost of (for Marston's) £80. If
a delivery fails, the Tenant has no choice—under no circumstance
are they allowed to buy-in—this seriously jeopardises and
restricts the running of the business. It is also impossible to
borrow drink from other group public houses especially the managed
houses. Inevitably the only realistic decision faced by the Tenant
is to buy-in. The Author of this report, on more than one occasion,
was faced with literally begging the Business Development Manager
to supply beer. This was compounded when the BDM was away on holiday
and the Author couldn't find anybody else to beg to.
13. Discounts
The brewery discounts are a con. The Tenant
is led to believe that the discounts are based upon a predetermined
target been achieved. This target is supposedly based upon previous
trading conditions and with mutual agreement between the Tenant
and Brewery. This isn't the case. The Brewery does not only impose
the target, it is also grossly misleading. The target is buried
deep in the agreement together with a vague description termed
"compounded barrelage". Compounded Barrelage is a number
of barrels/kegs that make up to equal 36 gallons. There are 9
gallons in a barrel and 11 gallons in a keg. For example, and
for ease of calculation, the Bate Hall target was 196 barrels,
the "real" target is in fact 196*4barrells, as 9gallons*4barrells=36=a
Compounded Barrel. So the Tenant has to buy 784 barrels in order
to reach the stated 196-barrel target before qualifying for a
discount. However, the discount is only applied to anything above
that and not across the whole amount ie 788 barrels bought = 4
barrels above target, a very small discount is only applied to
one barrel. Even with discount, a barrel/keg is not as cheap as
buying it from a third party wholesaler. The discount mechanism
is based upon quarters of the year and cannot be carried over
to the next quarter. It is confusing especially when trying to
factor in 11 gallon kegs into the equation, and Marston's are
not forthcoming with any of this information or provide clarity.
The Author was assured that he would get maximum discounts from
day one of opening, he didn't.
14. Third party wholesalers
A third party wholesaler can sell a barrel/keg
supplied from eg Marston's for circa £35 less than the Tenant
pays directly to the Brewery. So even when the discount is applied,
it still isn't cheaper than the same product supplied to and from
a wholesaler.
15. Bankrupt
Marston's tried to bankrupt the Author on the
2 May 2008 due to disputed alleged rent and buying in allegations.
They were unsuccessful. A Full Tie Tenancy agreement was made
available for the Author to sign Christmas 2007; pressure was
placed upon him to sign but was resisted by the Author due to
the previous 9months experiences and dealing with Marston's. Thought
must be given as to whether the Authors reluctance to sign the
Full Tenancy Agreement played a deciding factor in Marston's next
course of action. The proceeding action was a personal and professional
nightmare. It is believed by the Author that this refusal started
the chain of events that partly led to Marston's issuing the Statutory
Demand. Communication to resolve outside of this bankruptcy process
was made. Despite numerous written and verbal requests being made,
each were either totally ignored or passed from the CEO to Director
etc. downward until it arrived back down to the Business Development
Manager. Marston's resolves disputes by going straight to bankruptcy
proceedings ie by issuing a statutory demand. They tried to bankrupt
the Author based upon three differing amounts of monies owed according
to their internal accounting systems. Two of these accounts clearly
showed some finances dating back to Mr R, to which they tried
to attribute and make the author pay for. The Author refused.
Despite two attempts to bankrupt the Author Marston's were unsuccessful.
Marston's next available option is to try and obtain a County
Court judgement against the author for alleged monies owed. This
can be executed at any time and is not subject to a statute of
limitations. As of yet, Marston's (four months after the bankruptcy
case and six months after the Bate Hall closed at the time of
writing this report), have not taken this option, but this report
may result in action being taken against me as an individual.
It must be noted that Marston's has the benefit of being able
to apply the best lawyers to pursue cases whilst the Tenant cannot
afford that particular luxury. In essence the Brewery would rather
spend large sums of money trying to bankrupt an individual than
spend some money trying to help them.
16. Brulines
Brulines effectively "police" the
Tenant and are paid to do so by the Brewery. Brulines place monitors
in the cellar to measure beer flow. Remote checks are made to
compare brewery purchases against actual flows. If anything "suspicious"
is identified a "surprise visit" by Brulines is carried
out. This comprises of an audit of the cellar and the bar area
in full view of customers. Photographs of the bar optics, spirits,
fridge contents are taken and are compared to the purchasing history.
Bar codes are also recorded for identification purposes. Any discrepancy
is treated as "buying in" with no defence being able
to submitted, or non-that anybody is prepared to consider. A sizeable
fine is then imposed.
The author was unable to retrieve any information
from Brulines to enable him to defend himself in court. The Bate
Hall meters weren't calibrated. Another party may not realise
that this is a perquisite requirement; up-to-date calibration
records have to be made.
17. Conclusion
The Brewery is in the business to sell beer,
but they make conditions extremely difficult to purchase from
them. Marston's don't seem to care as long as you have signed
a lease and are "ultimately delighted" if a Full Tenancy
Agreement has been signed, as they will get their money regardless
of the pubs trading position and certainly pressurise the unsuspecting
into signing it, with false promises of discounts and security.
This report would go as far to state that the system is loaded
in such a way that the Brewery is geared up for, and gets some
sort of sick enjoyment out of bankrupting people, as it quickly
moves to a statutory demand option without, and before, providing
a reasonable business support package. Indeed, a Brulines representative
cheerfully told the Author that "nobody ever wins against
the brewery and to give up now!' The Author didn't. "Winning"
is achieved by the Brewery, ultimately and in the first and only
instance, by instigating bankruptcy proceedings against the Tenant,
who is fighting against rules and fines that are unpublished and
strictly biased in favour of the Brewery. This process is also
designed to try and frighten the tenant. The Brewery has a bottomless
purse when it comes to insolvency proceedings. It is the Authors
opinion, that the practices outlined within this document are
immoral, damaging, threatening, extortionate, potentially life
ruining, arrogant, aggressive and what tantamounts to an overall
disgusting malpractice by the Brewery, which have all been experienced
and concluded from, within a relatively short time-scale. I am
a professional Business Consultant and in any other industry,
these practices would be at least deterred, be open and honest
or at best made illegal.
The contents of this report are considered true
and accurate to the best of the Author's knowledge.
22 September 2008
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