Pub Companies - Business and Enterprise Committee Contents

Memorandum submitted by Shepherd Neame

  Shepherd Neame is a relatively small family controlled vertically integrated Brewery operating a tied estate of 370 public houses located in the South east, of which 50 are managed and 320 are tenanted. Shepherd Neame supplies both the On and Off trade on a national basis.

  Shepherd Neame belongs to the BBPA, have contributed to and would fully endorse the BBPA submission to the Committee.

  Shepherd Neame would contend that the potential for imbalance of risk/reward within the Landlord/Tenant relationship which is at the heart of the inquiry is significantly reduced in the case of the traditional tenancy model of this relationship as opposed to the FRI lease model.

    1. The Landlord carries all the risk for the cost of structural deterioration of premises.

    2. The Landlord additionally bears the cost of building insurance, external redecoration and signage and maintenance of fixtures.

    3. The Landlord provides significant operational support with training, promotional activity and rating advice.

    4. The Landlord holds and deals with all issues relating to the Premises License.

    5. The Traditional Tenancy is a low cost entry point to the licensed trade with no goodwill payment required.

    6. The Tenant is able to issue notice to quit at any time with the landlord obliged to purchase the inventory if necessary.

  Shepherd Neame believes that income sharing is appropriate for AWPs. If this income were not shared it would be rentalised and we believe this would be disadvantageous for the tenants at a time when AWP income is falling. As multi-site operators, pub companies can negotiate terms and obtain specialist advice not available to individual operators.

  Shepherd Neame believes that rents need to be sustainable and that no single method of rental valuation should be prescribed. There are a number of factors involved in arriving at a fair rent and it is important that valuation be flexible. There has not been a request for arbitration within the Shepherd Neame estate for 20 years.

  Shepherd Neame maintains close relations with their licensees with senior management accessible and Business Development Managers in close contact with all their tenants.

  Shepherd Neame would suggest that current economic/trading conditions will reward those companies which provide marketing/promotional assistance for tenants and which acknowledge the need for a flexible policy in respect of rents. There is no benefit to be derived from vacant premises and in the current difficult trading conditions the level of landlord support is increasing.

29 September 2008

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