HC 1369 Pub Companies

Written evidence submitted by Green King Pub Partners

Greene King Pub Partners is the leased and tenanted pub division of Greene King plc, the national pub operator and brewer. It has a core division of 1,000 tenanted and leased pubs and a further 300 pubs within its Independence division. Recent research released by HIM research and consulting questioned 100 Pub Partners licensees alongside the same from Punch, Admiral Taverns, Marston’s and SNPE. Greene King were top when supporting current tenants on advising on driving food sales, the training offered to them, information and advice provided, promotions, the pubco’s website and joint top for clarity of the contract. HIM has written to Greene King to announce the label of 2011 Tenant Track Pub Co of the Year can be used for the company if wished.

The following is the evidence submission for Pub Partners and the pubs represented in its core estate.

Executive Summary:

· Greene King is committed to operating its tenanted and leased estate to the highest standards and received accreditation of its new Code of Practice (COP) from the BII in June 2010. This COP has been developed to support its licensees on tied tenancy and leased agreements, it goes above and beyond the minimum requirements outlined in the BBPA framework code and it builds on previous company COPs.

· COP compliance is imperative to Greene King and its licensees’ success. A number of rigorous systems and ways of working have also been introduced into the business to ensure compliance, alongside an initial six day training programme for all business development managers (BDMs). This COP and ways of working training are now integral parts of the Greene King Induction Programme for new BDMs.

· The Greene King COP commits to providing licensees with total transparency of information provided throughout the entire letting process and operating agreements.

· Greene King has invested in a new IT infrastructure which ensures a consistent approach to the review of rents in association with fair maintainable trade and overheads Profit & Loss (P&L) models, which are provided to licensees as part of the rent review/pub letting processes. The rent models follow the RICS guidelines and we operate a rent panel to ensure a consistent approach to rent setting and compliance across the estate.

· Greene King strongly believes that failure to enforce its COP would seriously affect its ability to operate the business or recruit good quality licensees. Greene King has worked closely with the BII through the COP accreditation process and believes that the BII is the appropriate organisation to effectively and independently ensure that pub operators comply with their COP commitments. A statutory COP is unnecessary and would only add to the already significant amount of ‘red tape’ licensees have to deal with.

· Through the addition of the new BII PEAT licensee training course, and alongside the existing Greene King training programmes, Greene King fully supports the BII guidance. This has been developed in a clear way to provide new licensees with sufficient information when taking on a tenancy or lease agreement. In addition, Greene King has introduced further compulsory training programmes for both licensees and BDMs.

· Greene King’s COP provides a firm commitment to more business support for licensees and greater clarity of information. For example, improvements in flow monitoring equipment clear processes have been introduced should a potential breach of a tie be found.

· Licensees can choose a free of tie machine option on new tenancy and lease agreements with Greene King. AWP Machines that are tied are not included in the licensee’s rental assessments.

· Greene King is both a brewer and pub operator and firmly believes that any freedom of tie is considered on a pub by pub basis. As such, free of tie and guest ale provisions already exist within the estate. Any enforcement of a totally free of tie provision would result in a loss of licensee support which is an integral part of the Greene King tied agreement.

Submission

1. Greene King’s COP, submitted to this committee in October 2010, has been developed to exceed the de-minimus requirements of the BBPA’s framework code. It includes extra elements to ensure that Greene King’s licensees have a fair, transparent and profitable relationship with Greene King. Additional aspects include:

1.1. All BDMs will have participated in an exclusive Post Graduate Diploma in Multi Site Retailing with Birmingham City Business School. This will ensure that Greene King’s BDMs provide the best and most relevant support throughout the agreement term with their licensees.

1.2. An Annual Business Review (ABR) has been launched which is a detailed, full review of an individual business on top of the regular business reviews licensees receive. The ABR is conducted around the annual anniversary of the agreement and looks at all aspects and opportunities for the business against the licensee’s business plan. The review also ensures that all health and safety aspects of the business are complied with.

1.3. Mandatory Training for all new licensees before they take on a Greene King pub includes our "Go for Growth" induction course, a finance course and a cellar management course. The "Go for Growth" course sets out the business plan against the break even point, marketing and offer for the new licensees for their particular pub, while the finance course covers all areas of financial management of the business. Greene King will reimburse the cost of these courses when the term of the agreement has been completed or following three years if the agreement is longer.

1.4. Greene King will not allow any new prospective licensee exemption from the BII Pre Entry Awareness Training, irrespective of experience. This, alongside the mandatory training, provides a strong foundation before entering a pub with Greene King.

1.5. Greene King has introduced new IT systems to ensure that all new licensees are provided with a transparent summary of the entry information required under the framework code so that this information can easily be provided to an independent professional advisor in one document.

1.6. Greene King has developed a full and detailed range of guides to support its licensees throughout their agreement. These guides have been endorsed by BIIBAS and include:

· Guide to Moving In

· Guide to Maintenance & Service

· Guide to Leaving

· Guide to Buying a Lease

· Guide to Selling a Lease

· Guide to Purchasing Obligations

· Guide to Insurance

1.7. Greene King has developed a fully integrated and IT based rent centre which enables a detailed Profit & Loss account relating to each pub to be provided to every licensee. This is a commitment within the Greene King COP. The rent centre has been developed within the RICS guidelines for pub rental valuations.

2. COP compliance – Greene King initially trained all BDMs within its business over a six day programme in September 2010 to ensure that the COP ways of working were fully understood and complied with. This training together with the new IT systems ensure a consistent approach to information provided to all licensees before going into a pub eg. entry information requirements, P&L transparency, mandatory training conducted, independent professional advice gained and COP briefed is all recorded centrally. The BDM induction programme has been updated to cover all aspects of the new COP and ways of working which is undertaken before commencement of role.

2.1. Licensees received a visit from their BDM to brief in the new Greene King COP to ensure that all pubs were fully aware of the ways of working between both parties.

2.2. The rent centre has been developed to ensure that all licensees’ rent reviews and end of agreements are processed in a formal and transparent manner within the COP.

2.3. All Rents and FMT P&L models are signed-off by a central rent panel, which includes RICS qualified Estate Managers, which ensure they are compliant with the COP and RICS guidelines.

3. Enforceability of the COP - IT systems have been enhanced to ensure compliance alongside an extensive programme of training for BDMs.

4. AWP machines - Some agreements within Greene King are tied on AWP machines and some are not. For those that have chosen a tied agreement on machines, full details of rental is provided and the machine income is not included in the rental calculations.

4.1. For free of tie AWP agreement, any machine income will be included in the licensee’s rental calculations.

4.2. Greene King works with the very best suppliers of AWP machines providing the licensee with better quality packages than they may be able to attain themselves. Greene King’s machine manager provides licensees with advice on the best way to maximise machine income.

5. Flow monitoring equipment is used by the majority of Greene King licensees. In order that they can maximise the benefits of these systems the licensees have been provided with an easy to use reporting system and guide. When flow monitoring equipment has identified a potential breach of the purchasing obligations by a licensee, Greene King now provides at least one other piece of evidence to confirm any claim. In agreement with the BIIBAS committee considering Greene King’s COP, there has been a 14 day appeal process introduced where a licensee is able to provide any evidence to the contrary of Greene King’s. This also allows the licensee to seek professional advice and attend a meeting with their advisor and a Greene King representative should they wish to do so.

6. Complaints procedure - Greene King’s complaints procedure for its licensees is clearly outlined within the COP.

6.1. The new IT central system records when a complaint has been received by a licensee and the actions required.

 

6.2. Greene King also fully details the complaints procedure for rental disagreements eg. PIRRS and arbitration, and has endorsed the use of PIRRS when appropriate. Greene King has also recently taken advantage of the mediation services provided by the BII to ensure that a dispute with a licensee was amicably resolved for both parties with the help of a BII independent mediator.

 

7. Availability of free of tie options - as a vertically integrated pub operator and brewer, Greene King believes the tied agreement is a fundamental part of its offer to licensees wishing to take a pub with the company.

 

8. Greene King is a vertically integrated brewing and pub business with the majority of the leased and tenanted estate tied on draught beers and an increasing number being free of tie on wines, spirits and minerals (68%). Greene King currently has 24 pubs which are fully free of tie.

 

8.1. The level of tie is based on the most appropriate agreement for the pub and the individual licensee’s business plan. Of 574 Greene King licensees independently surveyed last year, 92% said the tied agreement with Greene King provided value to them. 64% chose the tied agreement because of the low cost of entry, 70% valued the business advice provided by their BDM, 63% valued the training Greene King provided, 59% valued the association with the Greene King brand and 74% liked that Greene King’s agreement offered a free of tie option on some products. Only 33% wanted a guest/local ale provision and 24% wanted to be free of tie on AWP.

 

8.2. These survey results show that the majority of licensees value and are happy with what the Greene King tied agreements offer. Greene King remains convinced that any enforcement of a free of tie option across the estate would significantly impact the financial viability of a large number of pubs through the loss of Greene King licensee support which the tied model provides.

 

9. BII Guidance - Greene King fully supports the guidance provided by the BII on different agreements and different models available, provided through their BII PEAT course. All new licensees taking a pub with Greene King must complete the PEAT course irrelevant of experience.

 

10. Licensee Involvement

 

10.1. Greene King developed and implemented its new COP in conjunction with its Licensees Forum which is comprised of independently elected licensees

10.2. A quarterly independent licensee survey has been conducted over three quarters since the launch of the COP last year. This survey gathers feedback from Greene King’s licensees as to the standard of support and service they receive from their BDMs and the head office support teams. The results form part of the BDMs performance management programme.

20 June 2011