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
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.
||Price per 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
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
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.