Written evidence submitted by J Mark Dodds
1. SUMMARY
1.1 Pub companies do not do what they say on
the tin. My tied pub turns over £750,000 a year; almost four
times as much as the national pub average. I am a model, multi
award-winning, entrepreneurial tenant. Even S&NPC say this.
This "success" is down to my own long experience in
the catering industry, my personal flair, endeavour, vision, energy,
hard work and substantial financial investment in "my own"
business. S&NPC has not spent a penny on the premises I have
owned a tied lease on for over fifteen years; In the next few
weeks I will be made bankrupt with over £300,000 debts to
Inland Revenue, business rates, my bank, lease hire companies,
myself (the biggest loser) and to S&NPC, the pubco whose inabilities,
intransigence and poor business practices created this hole. My
suppliers will not be affected as my payments to them are all
up to date. But eleven full time and five part time staff will
lose their jobs and a local institution will come to the end of
what would in free of tie conditions be a continuing business
serving its community.
2. THE REALITY
2.2 The tied pub industry is totally morally
bankrupt at the top and that is why it has descended to the state
of disarray that it's in. The people responsible for these events
turn a blind eye because it suits them, their pay packets, their
bonuses and their pension schemes. Simon Townsend recently told
me "I may not be liked but I AM a gentleman". He's lying
to himself, as does everyone employed by pubcos. It's the only
way to work for them.
2.3 The behaviour of landlords who work this
way is quite simply completely unacceptable in contemporary society.
These Rachmanesque tales are the practices of early Capitalism
unbridled. Elsewhere this could be described as entrapment into
bonded labour through deception and misrepresentation. We hear
news of people being brought into the UK illegally on the promise
of getting respectable work cleaning homes or as nannies and being
tricked into work in conditions of slavery. It makes headline
news. In our industry it's accepted as pedestrian routine.
2.4 Bringing up "caveat emptor", as
everyone does, to skirt around the true causes of serial business
failure (churn) in the tied pub sector is wrong. It puts distance
between the legally weak position of bankrupted lessees against
the absolute wrongness of the behaviour directed toward them by
their abusive landlords and is splitting hairs. Unemotionally
and objectively, this type of professional behaviour is just very
bad business practice. By no measure of contemporary expectations
of professional standards in any area of commercial activity can
this behaviour be condoned.
2.5 When property companies overstate income
and understate overheads when marketing their buildings, as pubcos
do all the time, it is misrepresentation pure and simple. Pubcos
have been completely free to do this for the decades since they
were established because there is no industry arbiter, no scrutiny,
no objective overview no one to pull them up and make them pay
for their essentially illegal activities.
2.6 The tied pub sector has been allowed to get
off the hook of regulation for well over a decade beyond its natural
life expectancy (the beer tie was supposed to wither on the vine
by 1998) because politicians have been concerned not to compound
the dreadful error of the Beer Orders and then being lied to by
pubcos, the BBPA and most other bodies whose hands are in each
others' pockets enough to be convinced that intervention would
lead to the closure of even more pubs than are already being shuttered
up forever all over the UK.
3. THE STORY
3.1 The story is mine but its pattern will be
broadly familiar to Select Committee members who've read pubco
inquiry evidence before. It's the story of thousands of tied tenants
whose businesses and lives have been destroyed by the "tied
business model" leaving a landscape of boarded up pubs in
their wake. The pub industry is being bled dry while the nation
looks on, unaware of the tawdry business reality that sits underneath
the scenes of devastation of a significant part of our society's
particular heritage.
3.2 I am about to be made bankrupt. On 28 June
2011 I am in court for a forfeiture hearing for my lease. I cannot
defend myself in law; I cannot meet my rent demands anymore; my
cash flow has run out; my business has been bled dry. This is
the outcome of my 2005 rent review where S&NPC applied to
increase from £54,000 to £96,000 when I argued vociferously,
with open book accounting, that any increase at all would put
me out of business. S&NPC simply ignored all my evidence,
as do pubcos with all their tenants at rent review. Having almost
been put out of business by my 2000 rent review where it went
up by 68% I vowed that I would see the process through arbitration
and to the bitter end, hoping against hope that a eventually sustainable
rent would be settled on through the construct of the law and
common logic. In the event the review was legally resolved in
October 2008 and I lost, owing S&NPC a total of £126,000
back rent and legal costs. Going through arbitration cost me £47,000
and contributed to my current debts.
3.3 As with all tied lessees, my pubco earns
more than I do out of my business. It has consistently taken well
in excess of £150,000 a year while the paltry £9,000
income I paid myself at the beginning as a budding entrepreneur
fell steadily as the pubco's rent and beer charges increased;
unsustainably. I have not taken a salary from my pub for the last
six years, since my last rent review, because there has not been
any profit for me to draw on. The last rent review has put me
out of business.
3.4 Pubcos do not support tenants at all. Pubcos'
relationship with tied tenants is entirely adversarial. Evidence
proves that Codes of Practice exist only virtually, to be downloaded
in pdf and admired from afar. Try finding tenants who have a good
word to say, or a good experience, about a relationship with a
pubco. The only tenants who support pubcos cautiously are those
who have so much to lose thy dare not be open about the reality.
Typically these will be bosses of multiple operators who hold
a lot of tied leases... their businesses are in such a precarious
financial position that it is not in the interest of the pubcos
to let them go down the pan. Otherwise support for the tie does
not exist. In fact, contrary to all application of rational logic,
pubcos actual practices, actions and inactions, contrive to force
individual tenants out of business. At base this is why there
are so many closed pubs all over the UK.
3.5 Below I indicate that S&NPC fails to
comply with even a single aspect of their COP. I state with absolute
conviction that my experience is in perfect alignment with that
of lessees of all pubcos; even those cuddly "Family Brewers"
who keep their head beneath the publicity horizon behave exactly
the same way when dealing with tied tenants whose business is
falling. Bad business practice, intimidation tactics and corporate
bullying are routine in the tied pub industry. It is not complicated;
It seems irrational and perverse but Pubcos behave this way simply
because they can, they always get away with it; there is no overseer
to bring them to account; when they are asked to account for their
actions in front of government, Oft and so on, they are also asked
to bring the evidence of their behaviour with them. Quite rationally,
they only bring the packaging and never get out the contents for
you to rummage through. COPs mean nothing; in practice they do
not exist.
3.6 You will see that submissions from individual
tied tenants are charged with emotion. Although they are recounting
what actually happens to them their "evidence" will
come across as being more anecdotal than as fact. Thus this evidence
will be devalued and regarded as impossible to act upon. It will
be in stark contrast to the evidence submitted by the employees
of the pubcos and their indentured representatives such as BBPA.
3.7 The "evidence" put in front of
the Select Committee by pubcos is considered as rational, objective
analyses of their pub industry backed up by figures that contradict
everything every individual tied lessee submits. This is because
it's all made up. It is not reality, pubcos hold all the figures
and stats for the whole industry, and they make them say what
they want. Tenants have only their own experiences to recount
and no way of verifying them with reams of stats. Tenants do not
even have the resources or time to talk to each other on a regular
basis to share information and experience.
3.8 The pubcos and their reps have suntans, they
have pensions and company cars, they have weekends off, often
abroad. They have evenings to themselves and their families, they
have time to reflect and make decisions about how to invest their
earnings, where to go on holiday and how to spend their bonuses.
They are paid to write their BIS submissions during working hours
and they have secretarial help, legal teams and IT departments
to draw upon whenever they feel the need for support.
3.9 It is impossible for a tied tenant to write
a submission such as this without expressing emotion. When you
are a tied tenant You are broke. You are overworked. You have
emotional problems brought on by stress. You have sleepless nights.
You feel threatened. You are scared. Your life, your livelihood,
your family and your closest relationships with significant others
are on the line. You are depressed. You can see no future. You
have to write your submission when your head is full of the above,
between shifts, after mopping the floor last thing at night. After
taking in the beer delivery at 7am and cleaning the toilets at
8am. And you have no one to turn to for advice about how to write
it. You are isolated. You're on your own.
4. WHAT HAS
HAPPENED SINCE
2010 - SOME NICE
WORDS WERE
PRINTED
4.1 Code of Practice. Objectively S&NPC's
COP is a convincing document.
4.2 The S&NPC COP has never been given to
me, or sent to me by post; I found it on the BII website; it seems
not to be available from S&NPC's own site.
4.3 No employee of S&NPC has ever referred
to the company's COP without my bringing it up first.
4.4 Point 3 of the COP states: "Lessees
and representative bodies will be consulted before any changes
are made to this code". At no stage have I, as a lessee,
ever been told that the COP exists let alone been asked to comment
on proposed changes. BII and FLVA are the examples given of representative
bodies who may be included in consultation. BII is not representative
of lessees and FLVA is funded entirely by fees paid by pubcos.
4.5 Point 7.2 "Making Commitments"
States: "it is important that the lessee ensures that written
confirmation is received from S&NPC whenever they believe
that a specific commitment has been made. This is vital to avoid
any misunderstandings later.
4.6 The COP has been revised since 2010 but there
is no evidence that it has been distributed to tenants. Its creation
and availability is designed to nod in the direction of being
in the shop window of an upstanding company than as business reference
tool.
4.7 Evidence is that S&NPE employees never
act within the spirit or detail of their own published document.
Prior to COP, post COP, their behaviour has unwaveringly been
the same throughout sixteen my years with the pubco. While their
published material is improved and updated their behaviour on
the ground does not alter one jot.
4.8 In October 2008 I specifically asked, verbally
and in writing, for a COP rent review due to adverse trading conditions.
My request was completely ignored. Any further reference by me
to the COP has consistently studiously been ignored... the COP's
existence has never been acknowledged, except obliquely in a meeting
in March 2011 where S&NPC's Regional Director said: "Going
back through the paper work, why did you ask for a COP rent review
in 2008?" He went on to explain "You understand that
a COP rent review is not possible when a rent review is already
underway?"
5. COMMUNICATIONS
5.2 The COP contains a lot of stuff about Contact
and Communication. It reads nicely. The default position with
a pubco is NOT to answer queries from tenants unless they are
of the most anodyne nature. They only return calls about the least
contentious matters imaginable.
5.3 Pubco employees never put anything in writing.
Nothing is provided in writing unless it is a legal document that
states at the top: "Without Prejudice" and has printed
at the end: "I have chosen not to take legal advice and understand
my obligations contained in this agreement" and "I have
taken legal advice and understand…" tick as appropriate.
5.4 I have thick files full of notes taken during
phone calls and meetings I have had with S&NPC employees.
I have always followed up calls and meetings by sending emails,
and in many cases letters, and sent these to the relevant S&NPC
employee for confirmation of agreement. I can honestly say that
the normal response is nothing. These communications range from
simple confirmation of meeting content through to acknowledging
important operational changes to my business where S&NPC have
committed to commissioning essential work to the cellar or beer
dispense equipment during a refurbishment. Not only do they not
reply in writing, they often do not even do what they committed
to during the meetings. It is clear that Company policy is that
all these communications are routinely completely ignored.
5.5 Calls, emails or letters to anyone at S&NPC,
no matter to whom in whichever part of the organisation, whether
it be credit control, property, operational issues or legals,
are generally ignored - unless it is to do with your paying them
money. And if it's to do with your NOT being able to pay them
money, there is nothing they can do - they will not discuss.
5.6 There is no recourse to this train of events
because, quite simply, there is no one to turn to. There is an
internal complaints process. Making complaints to apubco is like
throwing tissues into a bottomless waste bin.
6. RESOLVING
ISSUES
6.1 Point 11.3 of the COP states a whole lot
of important things about how S&NPC will respond to "issues".
Not a word of it is even remotely adhered to. When an Area Manager
has failed to do something as promised their line manager takes
their side. When dissatisfied with the response of the line manager
there is no one else to refer to. Call head office: "We do
not give out the numbers of people further up the business".
When you write to the Managing Director, the matter is always
referred back down to the regional team who then tell you that
such communications are "not helpful" but that they
will try to get the relationship back on a firm footing. Get in
touch with the overall Chief Executive about the whole "issue"
and, eventually the Regional Director will say "there was
no need to get in touch with him". And nothing ever changes.
6.2 My local MP is Harriet Harman. In an attempt
to gain some traction in the "issue" stakes I corresponded
with Harriet about my 2005 rent review and the actions of S&NPC.
Harriet kindly wrote to the MD of S&NPC and got a reassuring
response from the Commercial Director which told her that nothing
was at issue and there, essentially, was no problem. Working with
this unending reality is a thoroughly intellect and life sapping
process.
7. THE IMPACT
OF THE
TIE
7.1 There are no countervailing benefits. It
is all "what's yours is ours and what's ours is… ours".
7.2 At this time of year the value of my weekly
beer order through S&NPC is around £2,000. If I pick
up the phone and make an order for exactly the same products and
quantities of beer from a local wholesaler, the bill is £1,300.
7.3 When I place an order with S&NPC I have
to pay for the beer three days before delivery. It is called Cash
With Order. I can readily get thirty days' credit through a local
wholesaler. If I were able to negotiate an annual supply deal
the beer would be substantially cheaper through the wholesaler.
7.4 Typical of the sector is the level of rent
set for tied pubs. It is a myth that tied pubs are let cheaper
than free of tie. My pub in Camberwell is in the middle of three
of the most socially and economically deprived wards in Britain.
I have one of the most difficult catchments of any pub but I have
always managed to attract custom because I am an exceptionally
good operator (as told by S&NPC). My current rent is £65,000
a year. The rent on a free of tie leased pub, The Vale, local
to me in East Dulwich (this type of pub is few and far between)
with a hugely wealthier catchment, within a few seconds' walk
of a busy commuter rail station is £58,000.
7.5 Last year S&NPC began taking £450
a week through Direct Debit from my bank account in an attempt
to force me to repay the back rent owed from the 2005 review.
They did this without consent, without warning, without reference
to me. I cancelled DD payments and demanded to be reimbursed.
They point blank refused. They then stopped delivering beer -
even when I had paid for it in advance (£2 or £3,000
a week) because I would not pay the £450 against the rent.
I told credit control these are separate issues. One is trade,
one is property. I was told they can do anything they want with
the accounts. This was a lie. This happened every week, for months.
A fight every Monday over getting beer. The disputes meant that
payment would be delayed and the beer deliveries would not be
made on the normal Thursday run. They would not deliver on Friday
unless I paid £150 to have it delivered outside then normal
run. If I do not have beer I cannot trade so I'd pay the delivery
"fine", make a note of it, and carry on the dispute
with Regional Director.
7.6 S&NPC sent bailiffs to my pub because
I had not paid rent on DD. The reason I had not paid rent was
that someone at S&NPC's accounts department had tapped in
the wrong digit on the DD call and it was rejected by their system.
There was more than enough money in my account but nonetheless
the bailiffs had a demand for £6,000 plus £400 for their
costs and they would not leave, even when someone at credit control
told them it was a mistake. They were at the pub for four hours
on a busy Friday lunchtime. They made an inventory of everything
on the premises, telling my customers and staff that I had defaulted
on the rent. I complained about this action to everyone from Area
Manager to Managing Director, asking for a letter of apology that
I could use to reassure my employees that their jobs were not
in danger of being lost; no one ever got back to me, no one apologised.
The Area Manager said it was a mistake but they always send bailiffs
in when a tenant defaults "to protect the company's interests".
He even told me, "it actually is your responsibility to make
sure that you pay the rent on time". I had never missed a
rent payment before. Not once.
8. CONCLUSION
8.1 Since I signed my lease in 1995, in fact,
I have never been more than two weeks away from bankruptcy. This
is what happens to the majority of tied lessees. The only ones
who survive are those whose business far outstrips even the pubco's
dreams of "Fair Maintainable Trade", they make rubbish
margins because of the tie but are cash rich. I've been stuck
in the middle, in an awful ground hog day limbo, lasting this
long because I have managed to duck and dive, rob Peter to pay
Paul for all these years solely by dint of my business having
strong cash flow and by learning, of necessity, how to navigate
through impossible financial odds which now, as recently published
in the pub industry trade press, put the majority of tied tenants
in the position of being out of business within two years of signing
their tied lease.
8.2 The above is a fleeting glance into the shadows
of the darkness that lies in the business practices of the pubcos.
In truth the experience, skills, talent, hard work, vision, cash
and determination to succeed which I brought to this business
have earned me nothing other than a steadily accumulating mountain
of debt, a broken relationship with my partner of seventeen years,
and imminent bankruptcy. For the last six years I have earned
nothing directly from my business. My partner and I survived only
by being paid Working Family Tax Credits and from undeclared income
gained by renting out the flat above the pub against the terms
of my lease. No wonder my partner left me and took our two boys
with her.
21 June 2011
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