Pub Companies - Business, Innovation and Skills Committee Contents

Written evidence submitted by Stephen Docking

I write as an individual, regarding my experiences with the Tied Business Model as operated in my case, by Enterprise Inns plc, up until March 2007 the time of my Lease surrender followed by personal bankruptcy; my submission to the Inquiry and subsequent treatment as an "individual case" and the Supplementary Memorandum from Enterprise Inns plc August 2009.

As an individual, with little direct experience of the workings of "Committee", may I first say how difficult it is, not to be intimidated by the process of submission. No doubt, the use of on-line access has brought the workings of "Committee" to a wider audience and, for that, us poor complainants must be thankful.

As a Personal License Holder with some 35-plus years experience in the hotel & catering trade, I can hardly be described as a "newcomer". My interest in the Inquiry into Pub Companies goes back to 2005. Having followed press reporting and being into my fourth year of tied-leasing and experiencing the difficulties brought about in trying to make or run a profitable business; I really needed to learn if anything could be done to redress the balance.

Having just disposed of one of two Tied-lease premises at a loss of some £60,000, I was able to turn my full attention to my original project, a town centre premises in a South Wales coastal town. After four or five years in the premises, I had brought a previously closed and run-down pub, to be the leading "independent" in the town with a turnover in excess of £10,000 weekly. The real difficulty was in making a net profit out of that £10,000 - given the constraints imposed by the greed of the Pub Company and the late-discovered anomaly that is the "divisible split" in profit.

At the time, I complained about a lack of input from the "BDM" - the area manager charged with helping me build a bigger better business. Four changes of BDM in as many years, made absolutely no difference to the "support" I received - it was still nil.

Working 100-plus hours per week and paying a host of "expert" lawyers, accountants and stock-takers to deal with a range of problems, belied the fact that the Tied-lease system as operated by the likes of Enterprise Inns is inherently weighted against the tenant/lessee. They continue to get away with this unfairness because of their duplicity. They know little about the practical aspect of running a pub business but they get coaching in how to obfuscate, and deal with Committee questioning. They appear to be expert only in re-letting property - the Churn.

Following my submission to the BESC in 2008, I was one of a number of selected cases to be dealt with on an individual basis, at the suggestion of the then Chairman.

It is the response of Enterprise inns (by way of Supplementary memorandum) ref: with which, I wish to take issue.

—  (1)  Enterprise claimed I sought to re-invent circumstances and blame them entirely for my financial situation:

—     There was no re-invention on my part - merely the fact that for five or six years, in the absence of any support or assistance from the so-called BDM, I had sought to deal almost entirely alone with problems of a long-standing nature, of which they were totally aware. They were happy to let me do so - in the certain knowledge that I would fail. The only reason I was in debt to HMR&C was because, under financial pressure from the Pub Company, I had on a number of occasions used receipts of VAT payment to assist my cash-flow. On one occasion I had owed the VAT £28,000 whilst Enterprise were in credit - I recovered from that position but was unable to do so in 2006-7 due to the extent of my capital expenditure on THEIR premises, combined with their inactivity in relation to the upcoming Ban on Smoking.

—   (2)  Enterprise inns, with no knowledge or investigation, glibly claim that I failed to resolve a four year dispute which led to HMR&C petitioning for bankruptcy: Their "knowledge" of a four year dispute is based on my conversation with a Regional Manager in which I mentioned a long, drawn-out "routine inquiry" into my tax affairs pre-dating my business arrangements with Enterprise. However, had Enterprise been good enough to provide me with a cheque for £10,000 (of a volume-related discount of £13,000 which was due to me at the time) I could have settled 50% of that liability in an instant. Seemingly, the worst mistake I made was "not to raise concerns or complaints in relation to the profitability of the three sites he occupied..." Well, of course I raised concerns - I raised them with each of the BDM's, I raised them with Head Office personnel when I attended the "Pub of the Year" award ceremony - as a Finalist. I raised the issue with Mr Tuppen CEO and with other Board members - from whom I received NO reply.

—   (3)  They claim my submission is "littered with fabrications and innuendo, none of which is supported by the documentary evidence (they) have." They do not challenge a single line of my submission - they merely seek to dismiss it. They do not have an answer to most of the points raised, that will not incriminate them and their tawdry business practices.

—  (4)  "...all matters handled by administrators acting on behalf of...": Yet another supposition by the anonymous respondent from Enterprise Inns. As far as I am aware, Enterprise did not make a claim via the Official Receiver for "monies owed" by me. It was seventeen months later that I discovered what those "monies" could be. I had visited the offices of Enterprise Inns to enquire whether the derisory sum of £13,000 for my fixtures and fittings had indeed been paid to the Receiver. I say "derisory" - I had not long completed a ground floor refurbishment of the premises costing me in excess of £30,000.

—     The majority of that investment was "claimed" by Enterprise as "Landlord's fittings" - the installation of fixed seating, new and matched skirting boards, wall-boarding and fitted glass shelves throughout, new flooring and bar-fronts and a hand-built fire-surround in matching Welsh oak. All fitted with the knowledge and "support" of the BDM who failed to point out that such a refurbishment would not form part of saleable F&F! What I learned on that Head Office visit, was that Enterprise had issued a Dodgy Dilapidations Dossier - effectively wiping-out my minimal credit position and keeping everything, but everything, for themselves. It's what they do. It's how they earn extra revenue. They drive their tenants into the ground with high rents and even higher tied- beer prices; they insist that the tenant's repairing obligations are met but often fail to attend to their own historic responsibilities and then to add insult to injury, they profit from the Churn, constantly charging and re-charging for Dilapidations, of which they fail to attend.

—  (5)  My "...scurrilous and entirely false insinuation in relation to the fire..." seem like hollow words now. The fact that "...all statutory compliance certificates were in place at the time.." are not borne out by the fact that Enterprise inns were fined £15,000 plus £7,500 costs in a prosecution brought by the Vale of Glamorgan Council: for two offences in relation to breaches of Health & Safety regulations concerning compliance testing. It was patently NOT in place, at the time they claimed. The story about "an unattended chip-pan" was a complete fabrication on their part. The tenant, who was severely injured in that event both physically and psychologically, lurched from disaster to further disaster in a very sad turn of events - but Enterprise would claim that they bore no responsibility for that, either. The pertinent fact is that Enterprise were fully aware of the shortcomings in relation to the missing compliance certificates - because they sought to charge me for that requirement at the time of their Dodgy Dilapidations report. These Company "representatives" are merely playing a game with you. They are as dishonest in their dealings with the Committee as they are with their tenants and lessees - and they use colourful language and seemingly compliant turns of phrase to hoodwink anyone who dares to question their ethic.

—   (6)  In an effort to dispel the myth of "Churn", their response to my claim of licensee changes is to refer to "failed substantive agreement". That is patently rubbish. It does not provide for the fact that in their desperation to keep open a failing house, they will recruit anyone who has the slightest chance of temporary success - and a line of credit. Deposits are taken and lost. F&F are sold or rented at the highest possible price and re-taken for nothing. Dilapidations are filed against the out-going tenant and not acted upon.

I am incensed, that a further four years on we are no nearer to ridding this once great industry of the parasite Pub Companies who bring nothing to the party - other than a desire to reduce their ludicrous levels of financing and to increase their individual earnings.

The so-called Code of Practice obviously requires just that - lots more practice. The headlines will show a handful of "successful" cases where parts of the Code have been implemented. The reality is such, for the majority of tied tenants that absolutely nothing has changed. I receive emails on a regular basis from struggling tenants, having read of my experiences, looking for help or guidance on how to deal with their particular Pub Company.

In most cases I can only offer cold comfort - they are bounded by compliance requirements from so many statutory and regulatory bodies - and working all the hours under the sun in an effort to stay afloat, the last thing they need is a complicated battle on contractual issues with their rapacious landlord.

The reality is, most people just give up quietly. They take the view that the Pub Company cannot be beaten and, more concerned about where they might live next and keeping their partner/spouse/family together, they just give up. A sad indictment of a once thriving trade, decimated by the out of control actions of a very few all-powerful Pub Companies.

I sincerely hope, in line with the previous Committee's leadership under Peter Luff MP, that the recommendation of this Committee will be the referral of the entire workings of the leased and tenanted pub market, to the Competition Commission. From the so-called claim of low-cost entry, to the ludicrously expensive supply of tied products together with supplier discounts paid only to the Pub Company (for purchases by individual pubs), and the wholly unfair share of machine incomes and arbitrary use of Dilapidations schedules; the Pub Companies (as opposed to brewers) should be found to be unfit for purpose.

June 2011

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Prepared 6 October 2011