Memorandum submitted anonymously
I would like to recount my story and why I believe
this demonstrates irrefutably that the tied-lease "Pubco"
model is fundamentally unfair and is abused by the Pubcos.
In six years of ownership we had never missed
a weekly direct debit payment for our rent and beer order; because
we are tied both of these payments were made by direct debit to
our Pubco every week. We never "brought-out" or broke
the terms of out lease in other respects. We spent a lot of money
on the site improving it and meeting our "fully repairing"
obligations. Our business plan was submitted to the Pubco before
we took over the lease, and if an absence of any comment on the
plan can denote approval, the business plan was approved.
Two weeks ago we missed our first direct debit
payment in our entire time at the pub. We proposed a repayment
plan that would have caught up the missed payment and placed the
account back in order over a five week period. This was rejected
because the Pubco has decided it doesn't take cheques and because
repayment plans had to be over four weeks. We were placed immediately
on something called "cash with orders".
Moving to "Cash with orders" from
a credit account is extremely onerous and places an enormous extra
burden on an already struggling business. it means that;
1. Everything outstanding on our account became
payable immediately. We were apparently treated with great leniency
as we were given an extended period to repay this amount. It still
amounts to a substantial additional sum we must pay every week
on top of the rent and beer.
2. Rent payment is now due 9 to 15 days in advance.
3. Payment for rent, beer and arrears was moved
from a Monday to a Friday, when the pub takes most of its money
over the weekend. When I pointed this out, the problem was ignored
and I was told that if we didn't pay on Friday the matter would
be referred immediately for legal action and that there would
be a £47 charge added to our delivery because it would not
take place on our "scheduled day" (which could not be
If we could not comply with the above (having
been given virtually no prior warning or being offered any flexibility
over the conditions) legal process would begin immediately!
I'd like to remind the reader of three facts
1. We'd missed one payment in six years.
2. We'd proposed a perfectly reasonable repayment
plan which was rejected.
3. The Pubco had £12,000 of our cash on
deposit with them.
I was told by the Pubco that these terms of
trading are contained in my lease they are not. They are also
not shown on any of the invoices or statements ever received from
the Pubco. The glossy "charter" the Pubco recently sent
me mentions cash with orders but absolutely no details are given
about what it involves. What can I do about this?
Somehow in the space of less than two weeks
we had gone from having a perfectly reasonable relationship with
our Pubco to being on the point where legal action being taken
against us. "Cash with orders" makes you feel like a
criminal, someone who cannot be trusted, and someone because of
the constraints of the beer tie who has no option but to go along
with whatever the Pubco demands. The attitude of our Pubco immediately
changed it is as though their aim now is to hound us out of business,
collect on the insurance and benefit from the improvements we
had made to the property.
We are a business of just four employees, working
60-70 hour weeks each and without any recourse to specialist advice.
The Pubco are a major FTSE listed business with, i imagine, huge
resources of financial and legal advice. I would like to consult
with a professional over this treatment but I cannot because I
have no money to do so (that's why we missed the direct debit
payment). The mantra of "caveat emptor" is trotted out;
"you signed the lease, you knew what you were getting into"
to justify the situation (although, like I said above, I just
can't find where it says in my lease that this is what happens
to you if you miss one payment).
I have absolutely no choice but to try to battle
through whatever payment and trading terms the Pubco throw at
me. Without doing so they have the ultimate sanction, far more
effective and faster acting than taking the lease away; they simply
stop supplying the pub with beer. We then have nothing to sell,
the pub closes down, the rent is unpaid and the whole sorry saga
starts again when the Pubco find their next victim lessee.
The Pubco's are nothing short of a consumer
con-trick. They employ enormous marketing resources in convincing
ordinary members of the public to sell up their houses, or borrow
against their equity and start a glamorous new life running a
shiny new pub with the support of a "paternal" Pubco
partner. It must all be OK mustn't it they saw our business
plan and our area manger will be around to give us advice? And
as soon as these ordinary members of the public cross that dotted
line that means they become a "business" any regulatory
protection they might have enjoyed as a member of the public disappears;
same person, but you've signed a Pubco lease now. I am not advocating
here that people should not face the consequences of their own
decisions, but in the face of the powerful marketing machine that
hauls ordinary people into the net, some will succumb and some
of these will lose EVERYTHING. In our particular case we had a
full valuation done by a RICS surveyor before we signed the lease
and as mentioned above our business plan was approved by our new
Pubco "partner". The pub has won awards and I have stacks
of positive customer surveys and questionnaires. We are much better
than the competent operator benchmark the Pubcos and RICS use
to set a fair maintainable rent against and yet we still cannot
make ends meet.
And what underpins the "con trick"
being pulled by the Pubco on ordinary members of the public is
that they insure themselves against the financial losses when
a lessee surrenders or forfeits their lease. They can destroy
lives and move on with their share price and results unaffected.
I and all other lessees out there pay for this insurance, funding
the safety net that allows the Pubco to treat us as "lambs
to the slaughter". So when the executives of the Pubcos sit
there in front of parliamentary committees, or explain to the
press that really their business model works because "we're
more closely aligned to the objectives and success of our tenants"
remember that the Pubco doesn't lose out they're insured.
They reckon you should stand up to bullies but
how can you when they not only hold the levers over the property
you trade in but also the supply of the one thing you can't do
without..,beer? The relationship is so unequal in terms of size
and resource that the lessee simply has no chance you accept the
unacceptable treatment and put up with the harassment because
otherwise you loose EVERYTHING.
The beer tie is wrong because:
The tied model allows this chronic abuse of
corporate power and greed. The relationship between Pubco
and lessee is already completely one-sided in terms of resource
and expertise. The tie is the ultimate weapon in this unequal
relationship. It allows Pubcos to ride rough shod over any normal
and acceptable business practice. It amounts to nothing short
of a mandate for corporate bullying and excessive greed at the
expense of what are ordinary people at the end of the day.
The tied model also greatly inflates the prices
paid by the end consumer because tied sector prices are inflated
by the Pubco's insertion into the supply chain, retail prices
across the whole sector are higher than they need to be for the
end consumer. Remove the tie and you allow genuine competition
to the benefit of the consumer and the industry as a whole.
The Pubcos defence of the tied model is that
their success and that of the lessee is aligned is a SHAM.
They have insured themselves against "failure" paid
for by the lessees themselves, Provided the marketing machine
can still put new lessees on the conveyor belt and the insurance
premiums don't get too high "churn" is all part of the
game ... unless your one of the ones being churned in which case
you lose the lot.
The tied Pubco business model is an outrage,
a small number of people loss everything because of it, the wider
public pays too much for a pint, and society is steadily loosing
a cornerstone of the community as smaller local pubs are squeezed
out of business.
29 September 2008