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
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
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