Pub Companies - Business and Enterprise Committee Contents

Memorandum submitted by The Swan Inn

  The Swan benefits from a summer period that boosts the taking for the pub for six months of the year. The remaining six months it treads water waiting for the bumper months to arrive. Last summer and for most of this year our weather has been poor and this affects the number of visitors we attract to our village. Within the village there are three other venues all adding up to a total of 250 restaurant covers per night. Good summer weather brings this in easily but with the poor weather of late this becomes an unattainable number. Weather is only one of the factors here, I believe that cheap beer from supermarkets combined with the smoking ban and credit crunch have all resulted in poor trading figures for the Swan.

  In January 2007 accountants at Punch discovered that an invoice from August '06 had not been billed to the pub. We did not notice it at our end and I gather that we were one of a number of pubs who found this bill being added onto its winter trade bills which are considerably lower that the August totals. At this time my rent was £750 a week plus whatever beer I was buying, so roughly in a winter's fortnight Punch would extract from my account the relevant rent and beer bills. Usually in the region of £3-4K. On the discovery of the missed invoice Punch allocated this resulting in the usual payment being increased by £2,650. We failed to meet this and were placed onto a cash account which simply means if we have no cash then we have no delivery. The missing invoice was split between a 26-week period and added to the rent we owed which resulted in us paying in cash £1085.30 + Beer every week on a Tuesday before the beer would be delivered on a Wednesday. We would occasionally find that we did not have sufficient money for the beer and rent and on these occasions they have been kind enough to deliver if we paid for the drink in advance.

  With a reduced winter cash flow we have at times been forced to buy beer out. Punch offers an emergency next day delivery on the condition that you pay for it on the same day with a delivery window of 6.00 am to 6.00 pm. If you have more than two such deliveries in a quarter you are charged £40 a delivery. Normal deliveries and the first two extra are free. Punch has NO delivery system for a weekend delivery. Although the BDM has said if I call he will see what he can do to get some to us.

  With restricted cash flow we have on occasions had to buy beer out in order to meet the demand. The price differential between beer purchased through our business partner, Punch and prices from wholesalers is roughly about £40 a barrel in Punch's favor. This places the need for Punch-owned pubs to maintain artificial prices on tied products in order to meet the GP's as laid down by Punch in rent reviews and the discussions. This places us at a disadvantage when comparing us to our neighboring venues who buy the same products for about £40 less a barrel.
ProductPunch Price Bookers PriceDifference Price per Pint
Stella£124.59 £86.99£37.60 .47p/Pint
Carlsberg£115.40 £73.99£41.41.47p/Pint

  I was recently visited by Brulines the Police agency for beer who placed an "on the spot fine" of £618 for beer that I had in the past bought from cheaper suppliers because I had run out on a Friday with the full weekend ahead. I questioned this with my Punch BDM and was informed that it was my own fault as I had the opportunity to buy the beer. My cash flow and the way I choose to run my business is irrelevant.

  Our crippled cash flow has resulted in debts piling up and we are now looking to re-finance the pub just to get to a level ground again before the winter commences.

  We are currently going through a rent review. In January 2007 I provided figures and information as requested by my BDM. I now realise that this was a mistake but it was the first time I have been through a review and was naive to the process. I was presented by Punch with two sheets a current state and a Negotiation. These showed my take and projected take (FMT) on various items which once the allowable expenses had been removed resulted in a gross profit which is then divided in two to provide a figure for rent. My current rent stands at £32,286 and the new figures they had suggested was to be £37,612. With the current economic climate I knew that the business could not sustain the current rent let alone an increase. I requested detailed explanations of how these figures where reached. A document was sent to me with breakdowns of the overall GP's for each department. I went through this and discovered glaring mathematical mistakes which lowered GP's totals from 61% to 56% on the same figures making a difference of £12,000.

  The documents provided me with information regarding "allowable expenses" that we where allowed to subtract. For example I was allowed to spend £1,000 a year in running my car, with the current fuel costs this allowed for 18 tanks of fuel or 5,000 miles a year. The Swan is a rural pub compared to a town pub. Much of my costs were higher than Punch expected them to be which came down to the crunch when you understand that Punch imagines that two people will be running the operation. I operate this on my own so the second person's time has to be covered by a hired hand. This can amount up to an additional £15,000 per annum in funds that are now allowable expenses. I have argued the rent review figures and we have now got to a figure of £34,000. This I still feel is too high. Punch have reworked their figures that still say I am going to do at least £70,000 more than this year and my GP's will be high enough to produce a rent of £34,000.

  I have repeatedly asked for the figures not to be based on my input and to be based on average trade requesting examples of similar locations to which I am being told there have none available for me to see. Furthermore don't feel that they need to prove their figures. I have also asked for the matter to be looked at by the charter that Punch claim to have introduced in the 2004 Select Committee on Trade and Industry Section 8 The Benefit of the Tie to Tenants, citing an "independent mediation service at no cost to the tenant" to which they scratch their heads and say that the guy they use is employed by Punch, so does not exist.

  We are racing towards arbitration which we can ill afford and I feel this has now been used to highlight the fact we can ill afford it. It is obviously cheaper for us to accept the £1,400 rise and save thousands but it feels wrong when we are placed under such tough operating conditions.

  Pubco's are killing rural pubs as they get strangled every winter or bad summer to meet inflated prices and over the top rents for buildings that leak and have poor services for the customers when they do arrive. Something must be done before the rural English pub is replaced by larger subsidised properties selling less than standard products in a plastic environment.

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