Pub companies: follow-up - Business, Innovation and Skills Committee Contents

Memorandum submitted by Stephen Shuttleworth

  I am writing to share my experiences of Enterprise Inns plc and the general business practices of these organisations. I would like to offer my experiences of the said Pubcos. I will attempt to keep my emotions and personal feelings to a minimum, I feel it may be a little difficult so I apologise in advance.

  I purchased a pub lease owned by Enterprise Inns in December 2007, and I am certainly not going to berate the fact that I did so, I was fully aware of the conditions of the lease. That said, I now know with undoubted certainty that the business model operated by this pubco is incredibly unfair, at the least extremely inconsistent and the manner in which they endeavor to enforce these practices amounts to nothing more than intimidation, bullying and harassment. Even while we were in the early stages of turning an ailing pub into a viable business Enterprise offered no assistance or advice. The regional manager was quick to praise us for raising beer quotas but never offered to help with the cost of entertainment which was a main cause of the uptrend in trade, this obviously then left us with huge stock bills from Enterprise, again in the early days of our business there was a learning curve, we certainly were not prepared for the manner in which Enterprise's credit control department collected money, insisting we put huge amounts of money on our personal credit cards or we would not be supplied with stock. Being honest we abided to the rules of the "Tie". Tell me; is this a fair and equitable arrangement, a partnership seeking success for all?

  When I initially purchased the lease, Enterprise Inns, whilst divulging the basic facts about their terms failed to go into the details of their business. Being tied for beer, cider and alcopops I asked at the time "are your prices competitive?" the answer was yes. Perhaps you would consider it a little naive but I took this on face value believing it to be true. Please tell me how 22 gallons of Carling at £232 from Enterprise against £155 for the same from a local supplier is fair. This is one example; the rest of the price list is pro rata. I estimate in the first year I paid between £20K and £30K above what I could have purchased my stock for. When I queried the exorbitant and uncompetitive price, I was told this was one of Enterprise Inns "Profit Strings" and it along with the rent and 60% of any gaming machines in the pub, allowed people like me the chance to own public houses for a relatively cheap outlay. To conclude the issue of price setting, I presume that a business the size of Enterprise Inns with the amount of beer/stock it buys, commands handsome discounts, which they will never disclose, from the breweries, not only do they not pass on any of this discount to landlords they then see fit to raise the price they sell the beer/stock by what must be approaching 100%, because they can. I/we have to pay that price. How is this fair, 1) to the landlord who pays these vastly inflated prices and 2) to the consumer who then has to pay an inflated price for his drink.

  He could in theory go elsewhere to somewhere selling cheaper, this then brings into play the argument of fairness to the landlord, who must then reduce his margins in order to keep his trade at some sort of level. Is competition good? Of course it is but only when the playing field is level. I would suggest that this is one of the contributing factors to publicans going out of business, reducing margins, having to pay the pubcos or beer deliveries are withheld and thus leaves no money in order to satisfy all the other creditors. If I thought for one minute that this was just a badly run business on my part then I would hold my hands up, however, with hundreds possibly thousands of licensees in the same situation surely commonsense must prevail.

  My next subject which whilst not directly attributable to the tie, is part of the pubco model which again is totally unfair, is the setting of rent. In the space of 20 months I have seen my rent rise from £38,000 to £44,320 added to which I have to pay Enterprise's buildings insurance of £41.50 a week, £2,150 a year for buildings insurance. The rent increase in the worst recession for 60 years amounts to approximately 24.5% when trade has dropped by approximately the same, again how can this be fair? There is no recourse.

  The terms and conditions of the lease are another bone of contention, again I understood them when my solicitor went through the lease with me and I must say that there were some alarm bells sounding, but a combination of wanting to give my family a chance at better things and the belief that if we showed a little fortitude and a lot of effort we could make it work. I honestly thought that Enterprise would support us while we established ourselves, how sadly mistaken I was. When the lease said "Fully self repairing" boy did they mean it. Even when we had a major problem with unclean water, which we had unwittingly been serving to our customers, the amount of effort it took to get Enterprise to solve the problem was amazing. A fairly serious health and safety situation that resorted to us buying and using bottled water for a period of eight weeks while Enterprise Inns considered whether my lease meant that I should pay for the situation to be rectified, they eventually conceded. Again, I think it is the rigidity which Enterprise enforce the terms and conditions, another example, I asked for assistance in redecorating the pub, us being short of money, obviously this would have had a beneficial effect on trade, Enterprise would not entertain it, again quoting the terms of the lease. I was totally aware of the terms; it is this question of help, of working together.

  Another aspect of our pub closing is the loss to all the people who work and are associated in one way or another with us, our employees, the entertainers and of course my family all of whom have said they will stand and fight with us but if it closes will leave with us. It saddens me to think of the personal cost to them.

  Enterprise Inns have been unscrupulous and unrelenting in their pursuit of collecting money with absolutely no regard for landlords or the extreme trading conditions at all, indeed they have just sent into my pub bailiffs, no prior warning, just sent them in, despite the fact that we are still making an attempt to keep our rent to a manageable amount by making some payments. When the bailiffs were asked why they were there, we were told because of rent arrears, we are two weeks in arrears (£1,200), Why? Because I have taken the decision that it is only fair that my other creditors get some money and not only Enterprise. In order to get the bailiff to leave I was told by the head of Enterprise Inn's credit control department, that I would have to let the bailiff take all the money in our safe and till, when I pointed out I had very little, the reply was "you have been trading all weekend you must have money". When I pointed out that other creditors had been paid, I was again told that the bailiff would not leave. It was not until after the event that I discovered this is illegal, again another example of the bullying tactics employed by Enterprise Inns. The bailiff also made a walking possession order, listing all our fixtures and fittings, again unbeknown to us at the time, these cannot be removed, they have absolute privilege and only a court can issue an order to remove them. Next the bailiff said he was required to go into the residential part of the pub, my daughter's home, when she refused him entrance she was told the police would be called, again intimidation, bailiffs have no rights to touch personal belongings and no right to enter the residential part at all.

  The following day I met with my regional manager to discuss the situation, when I pointed out that if Enterprise had wanted us out they could have entered and changed all the locks which they are quite allowed to do, that would have saved all the unpleasantness of the bailiffs, the response… "well you haven't bought any beer off us for weeks so we knew you had no money so we tried to get what we could before it was too late". I will admit to having broken my "Tie" but to make more profit, as Enterprise told me, well all I can say is that I have gone from a perfect credit rating to personally owing £78K in two years, admittedly not all Enterprise's doing, but a huge percentage of it definitely is. We broke our tie because of the restrictive manner it was applied, the cost of Enterprise's stock and to survive.

  The point I am trying to make is the unscrupulous manner in which a so-called business partner conducts themselves. I am on the verge of losing my business; I'm certainly going to be bankrupt, a possibility of losing my home and possibly my marriage all due in no small part to Enterprise Inns business model. If I was the only publican in this situation then I would look at myself and question whether I did things wrong, but these unscrupulous people are doing this to hundereds of publicans countrywide and I know of at least one more city centre pub owned by Enterprise Inns that is on the verge of closing. I know there is nothing that can save me now, but surely you can do little to affect the setting of rents, but I would implore you to look at in great detail the "Tie", had I been able to pay competitive prices for my stock then I would have, to a large extent, have been able to satisfy my other debtors, offer competitive prices to my customers and would not be in anywhere near the situation I am now and another viable public house would not be on the verge of closing.

  I have proposed what I considered a mutually beneficial arrangement to Enterprise in order that we can continue to trade and hopefully begin to repay our debts, not only to them but our other creditors and obviously try to make a success of our business, Enterprise have chosen to take us to court, the judge making the comment that the Pubcos should be helping publicans, not taking them to court for £1,200 not even two weeks rent.

  The most recent event that has happened to me, I made the offer to Enterprise that I would surrender my lease, hand back the keys and vacate the property, if Enterprise would drop all financial claims and the on-going court case, the answer was no but if I would admit all liabilities and vacate immediately Enterprise would deal with the matter by Consent! They have also now stated that we owe £20,000 dilapidation which they have ascertained without completing a report!

  What happened to the virtues of integrity, endeavor, fortitude, hard work and honesty? I'm only one voice but how many has this diabolical occurrence already happened to? Why have no questions been asked? I would ask again please look into this intolerable practice and stop it before more people suffer.

  I believe the facts in this statement are true.

22 January 2010

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