Memorandum submitted by Paul Daly
1. INTRODUCTION
I am a free of tie operator for the last five
years. My bar "Zigfrid" is in Hoxton Square, London
N16NU. It is a successful bar and I am able to negotiate prices
based on the volume of sales.
On 11 of April 2008 I bought a Unique Taverns
lease (owned by Enterprise Inns Pic) at 243 Old Street, London
EC1V 9EY. This bar is tied on beer and packaged products.
I opened the venue now called Roadtrip at 243
Old Street after extensive refurbishment works on 29 July 2008.
Now being a licensee of both tied and tie-free leases I am in
a perfect position to draw comparisons between the two.
2. RENT CALCULATION
REGARDING "ROADTRIP",
243 OLD STREET,
LONDON EC1V 9EY
Enterprise Inns Plc (Unique Taverns) have a
head lease with Hackney Council at £1,000 (one thousand pounds
per year).
They charge me £26,000 per year making
a 2,500% profit (two thousand five hundred per cent).
I have never made 2,500% profit on anything
in my life and think Enterprise Inns Plc should be more than satisfied
with this huge extortionate profit but instead it seems they are
driven by greed simply because they can.
3. THE SUPPLY
TIE
I cannot believe this kind of extortionate middlemanship
still exists in 2008. As a person who has been self employed all
his working life I am amazed by a situation where one is not free
to purchase products from the most competitive source to sell
in your retail outlet that has cost so much money to refurbish
and get right.
The PubCos argue for the benefits a tied lease
can offer: "There's clearly a lot less initial capital investment.
And in tougher trading conditions tenants and lessees are more
likely to be supported by a landlord than they are by a bank.
Banks are calling in their lending, but clearly we have a vested
interest in a pub continuing to trade successfully." (Simon
Townsend, Enterprise Inns, chief operating officer. The Publican,
3 September 2008).
As a licensee I say it should be solely down
to the operator to estimate the trading conditions and act as
they see best. Currently there is no choice between a bank and
a PubCo whereas this choice should and must exist. If PubCos are
so confident in the benefits their middlemanship brings to the
operators, they should have no arguments against this choice being
granted. In reality, of course, the tied lease is actually the
reason why more and more pubs and bars find it difficult to trade
successfully every day. The vague idea of being supported by a
PubCo is a utopia. The dying of England's pubculture is not down
to naturally changing social habits—it is the greed of the
PubCos.
To demonstrate how much Enterprise Inns Plc
charge over and above the prices I pay for free of tie products
I have commissioned my accountant Cecile Edwards to do a like
for like comparison between Unique Taverns (Enterprise Inns Pic)
tied lease and my free of tie lease (attached Appendix 1).
If the committee shall need proof of any invoices
from Enterprise Inns Plc to prove the above figures and comparisons
I shall be happy to supply them together with invoices from Coors
regarding my free of tie site. My solicitor can verify the head
lease rent and my rent and my accountant could appear in court
if so required by yourselves.
APPENDIX 1
ROAD TRIP
Coors vs Enterprise
| | Zigfrid
| Road Trip | |
|
| | COORS
| DISCOUNTED
ENTERPRISE | VARIANCE
| VARIANCE |
Product | Size
| Net Price | Net Price
| £ | % |
Guinness | 11g | £90.28
| 110.75 | £20.47 | 23%
|
| Carling | 11g | £64.33
| 103.46 | £39.13 | 61%
|
| Grolsch | 11g | £77.32
| 119.51 | £42.19 | 55%
|
| Sol | 24 | £18.04
| 23.65 | £5.61 | 31%
|
| Budvar | 24 | £15.99
| 24.44 | £8.45 | 53%
|
| 330ml coke | 24 | £8.49
| 9.71 | £1.22 | 14%
|
| 330ml diet coke | 24 | £8.49
| 12.45 | £3.96 | 47%
|
| Baby Bitter Lemon Schweppes 125ml | 24
| £4.98 | 6.05 | £1.07
| 21% |
| Baby Ginger Ale Can Dry 125ml | 24
| £4.38 | 6.05 | £1.67
| 38% |
| Baby ginger beer Schweppes 200ml | 24
| £6.21 | 7.28 | £1.07
| 17% |
| Baby slimline tonic Schweppes 125ml | 24
| £4.38 | 7.28 | £2.90
| 66% |
| Blackcurrant Cordial Schweppes | 12 x 1 ltr
| £10.80 | 14.55 | £3.75
| 35% |
| Lime Cordial Schweppes | 12 x 1 ltr
| £10.80 | 14.55 | £3.75
| 35% |
| | £324.49
| £459.73 | £135.24
| 42% |
Based on exact product matches as above. Enterprise are billing + 42% on average.
| | | |
| |
BREWERY PRICE
LIST COMPARISONS
Further to your instruction, we have made a direct price
comparison on products purchased at "Road Trip"—a
bar you own which has a brewery tie with "Enterprise"
and those which are bought at your free house "Zigfrid".
For the comparison, we have selected the main beverage supplier
from "Zigfrid", namely "Coors" to compare
against "Enterprise", the Brewery and supplier to "Road
Trip".
In order to make the sampling of prices fair and in order
to see the effect of price variances which directly effect your
business, we have selected your latest order from "Coors",
and matched the products to the "Enterprise" price list.
The results can be seen on the attached table, product by
product, but in summary are as follows:
On average "Enterprise" charges you 42% more on
purchases, compared to those bought from "Coors". The
largest price list variances seen on this comparison was 66% and
the lowest being 14%.
Overall and based on prices being 42% higher, this will undoubtedly
have a considerable effect on your gross profit margin. If for
example you take the GP margin at "Zigfrid" at say 70%,
then you factor in the increased purchase prices and without increasing
the sales price, your GP would only ever achieve to 57%.
It must be noted, that the above percentages are based on
the average higher price and average usage of all products. You
must expect less of a margin as shown on the attachment for products
such as "Carling" where the price is 61% higher that
that of "Coors".
29 September 2008
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