Memorandum submitted by The Federation
of Licensed Victuallers Associations
PRESENT TRADING
CONDITIONS
To say that the on-sales section of the licensed
trade is struggling is an understatement. Public houses are being
boarded up on a regular basis, many of which will never re-open.
Not only are many of our members losing their
life savings but also their homes. The British public are now
losing the only venue where they can go and relax in a safe environment.
Nobody in Parliament accepted the damage the
smoking ban would cause to the trade when we requested segregated
smoking areas with updated ventilation. The non smokers who we
were told would now flock to the public house or club never materialised.
Increased energy costs are now a major part
of a public house/club expenses which also affect our customer's
spending power.
Supermarkets are being allowed not only to sell
alcohol products cheaper than in 1986 but in certain instances
below cost.
Beer duty above inflation introduced by the
Treasury can only add to the disaster. Many licensees are under
the impression the government is no longer concerned about the
future of the community and rural public houses and the essential
services it gives to the public ie places to meet in a warm and
friendly atmosphere, reasonably priced meals, millions of pounds
raised for charities and sponsoring of local amateur sports teams.
Has the Licensing Act 2003 had an effect on competition
within the market?
Whilst the flexibility of opening hours has
allowed public houses to compete with night clubs to stay open
longer the majority of community and rural public houses only
want to open until midnight, something they would have accepted
rather than the full cost of the implementation of the 2003 Act.
It is the supermarkets who have benefited by
applying for and being granted licences to stay open during their
full trading hours.
Previously supermarkets had all their alcohol
in an area they had to segregate whilst open for other business
out of licensing hours. Now every part of the supermarkets has
alcohol on sale with special offers, some selling at a loss.
To what extent have revisions to the framework
Codes of Practice met the Committee's concerns?
Following the 2004 inquiry the Federation of
Licensed Victuallers Associations sought and gained meetings with
the British Beer & Pub Association to review and update their
Code of Practice. It was on the understanding that the new code
would be accepted by all their members.
The new "Codes of Practice Framework
on the Granting and Operation of Tied Tenancies and Leases"
was introduced in November 2005 and has successfully been used
on behalf of our members with companies affiliated to the BBPA.
The area of the code which concerned our members
is the amusement machines which is not fully explained as to how
many bites the company receives ie site rents and tenants share
which they rentalised and how little licensees actually receive.
The Federation of Licensed Victuallers Associations
is represented on a British Institute of Innkeeping Committee
which is reviewing and achieving improvements in not only National
pub company codes but also regional brewery companies before they
receive accreditation of their codes.
To what extent are the codes applied by the Pub
Companies?
There have been a number of occasions when the
codes have not been fully implemented but when brought to the
attention of a present or more senior member of the company the
decision has been reversed.
Codes of Practice Framework on the Granting
and Operation of Tied Tenancies and Leases (Second Revision November2005)—Item
4 Material Changes/Exceptional Circumstances. We are pleased to
say that this code agreed with the British Beer & Pub Association
and others agreed with the British Institute of Innkeeping are
reducing rents and giving assistance to licensees experiencing
difficulties through no failing of his/her own.
Is there a need for further regulation of the
industry?
There is no doubt many licensees would like
to see the tie removed and whilst we can understand their views
we are concerned by the implications of the removal of the tie.
If one reads the second paragraph of the summary
of the Second Report of Session 2004-05 by the House of Commons
Trade and Industry Committee they will understand our concerns
if the tie is removed—"We are not convinced that the
division of the wholesaling and property functions of pubcos,
ie the removal of the beer tie, is advocated by many witnesses,
would necessarily benefit tenants. We felt it likely that in the
absence of the tie pubcos would exercise their contractual right
to raise property rents to compensate for the loss of income from
beer sales. Indeed, if brewers were free to supply all public
houses on a wholesale basis it is possible that major brewing
companies could achieve a dominant market position to the detriment
of individual public house operators."
The Federation of Licensed Victuallers Associations
has always promoted the view that all tied licensees should receive
a share of the discounts the pub companies gain and that this
should not be rentalised.
When Grand Met introduced the Inntrepreneur
lease in the 1980s it led to many financial problems for their
licensees until a Courage takeover of the Inntrepreneur Leasing
Company who then brought in discounts that were written into the
lease.
We believe freedom of tie (which has the support
of many licensees) would lead to the Pub Companies and Regional
Breweries implementing the clause which allows them to seek a
market review of the rent within one month of the release of the
tie.
The new rent would be based on discounts at
present achieved by the Pub Companies. Discounts would be dramatically
reduced by the brewery when negotiating with thousands of licensees
rather than a limited number of companies.
Where a licensee signed an agreement with a
single brewery to get the best deal available they could then
be tied for their drinks which would lead to a reduction in the
selection of drinks for their customers.
Supply agreements in the free trade would have
strict conditions in them which must be adhered to or penalties
may be imposed.
If the pub companies lost their tie licensees
would be dealing with a property company who would have a different
agenda and they would lose some of the benefits that are available
at the present time.
It is our opinion that the introduction of any
further regulations to the industry would only lead to extra costs
on the licensed trade which as previously stated is already struggling.
What the Federation of Licensed Victuallers
Associations requires for our members is a share of the discounts
achieved by the pub companies and managed house section of the
regional breweries being given to all tied licensees plus a fair
share of the machine income which is not rentalised.
September 2008
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