Pub Companies - Business, Innovation and Skills Committee Contents

Written evidence submitted by Nicola Francey


1.  My name is Nicola Francey and I manage The Sun and Doves pub on behalf of Mr J M Dodds who is a Scottish and Newcastle Pub Company (S&NPC) leaseholder in Camberwell, South East London. We have been in the pub since 1995 and we are approaching our 16th year here.

2.  I am also a founder member of the Fair Pint campaign and I took part in the Industry mediation process in September 2009 as a representative of Fair Pint.

3.  My own experiences in the 15 years of working within the tied pub industry have led me to believe that the only way forward for a sustainable, vital pub industry is to remove the barriers created by the tie and encourage entrepreneurialism and diversity within our market place. Too many people have been burnt by their experiences as a tied publican, often with desperate results—losing homes, life savings, dignity, sanity, and ultimately leaving the industry never to return.

4.  Too many publicans have had what little profit margin they had squeezed and squeezed over the years by unfair increases in rent, high prices for beer with increases imposed by the pub company never matched by an increase in the "discount" offered by that pub company in the initial contract. This has left publicans with little profit to weather the storms of an economic downturn, the smoking ban and increases in duty. The profit in their pubs is retained by the pub company whose risk is at best, having to look for a new tenant to fill the gap left by another exhausted and bankrupted tenant.


5.  The key to a successful pub industry is a tenant's profitability. If a tenant's profitability can be improved by setting a realistic rent, regulated properly and a realistic price charged for the beer they are required to purchase through their agreement, then many more publicans would be able to survive. Smaller profits but from many more businesses contribute to a more stable, more attractive industry. It is time to move away from the boom and bust and concentrate on the small things, done well.

6.  The industry has been required to self regulate since the Select Committee report of 2004, yet five years later, a further, more damning report into the state of our industry was produced. Does this show effective self regulation? No. Will a further year, with greater pressure put on the pub company's at the heart of the issue, show any further developments? No.

7.  The pub company's efforts over the last twelve months have been to take the select committee recommendations and subvert them with all the resources available to them.

8.  Regulated rent reviews have been abandoned by pub companies in favour of retail price index linked rents avoiding the RICS rent setting guidance, free of tie "pricing" offered in return for an increase in rent, where the rent is set by the pub company again avoiding RICS rent setting guidance, complaints continue to be made by tenants but they either take so long to be addressed by the pub company concerned, that the tenant gives up before getting to the BII's complaints procedure, or their complaint is outside the remit given by the BII.

9.  The spirit of the recommendations has been taken and manipulated by the companies whose previous market manipulations have led us to this point.


10.  Many companies already had Codes of Practice prior to the changes suggested by the pub companies following the mediation process in 2009. The newer Codes have perhaps resulted in more clearly written documents, but they still place the onus of responsibility on the tenant. It seems that many of the codes are simply updated to include the PIIRS scheme. They do not address the fundamental issue of tenant profitability.

11.  My experiences during the Industry mediation process in 2009, led me to conclude that the BBPA and its member organisations, by pressing for amended Codes of Practice, hoped to sidestep the major issue of the tie and hide behind competition law. It showed how little the pub companies are prepared to compromise in order to ensure their tenants profitability. This short term attitude will ultimately lead to failure across the whole sector.


12.  In the S&NPC Code of Practise it clearly states "machines for example AWP machines, SWP machines, etc can only be installed by suppliers nominated by S&NPC". This does not constitute a genuinely free of tie option.

13.  The pub company can still share the income derived from the machines. But at least the pub company clearly states that "S&NPC receives royalty income from machine suppliers to help offset related administration and management costs." Surely, their share of the income derived from the machines installed could help offset related admin and management costs?


14.  In S&NPC new Code of Practice the company "readily acknowledges that the rent review can result in a reduction in rent". When we asked our Area Manager if, in our September 2010 rent review the company would consider a reduction in our rent, we were met with a categoric, "No". The only way we could challenge this would be to go through an arbitration process.

15.  We had previously gone through a lengthy and difficulty arbitration process for our 2005 rent review, when the pub company wanted to increase our rent from £54k a year to £82k a year, a 52% increase in rent. The Arbitration process went on for a further three years with the Arbitrator reaching a rental figure of £65k per annum and has left us with large legal fees, and an enormous back rent bill and ultimately our business failure.

16.  The PIIRs scheme, as a low cost alternative to the rather bruising Arbitration process, although recommended in the updated S&NPC Code of Practice, was not referred to by the company's representatives when discussing the 2010 rent review.


17.  In the S&NPC Code of Practice a tenant is required to sign and acknowledge that the code "forms part of the legally binding contractual relationship between us." The implication is that the tenant can at any time be legally challenged over the Code of Practice and my concern is that it will be used as another means to threaten the tenants when challenges are made.

18.  The interpretation of the codes is determined by the pub company that writes them. The enforcement of the codes is by the company who writes them. The only redress that the tenant has, is the BII, and only after they have exhausted the complaints procedure of the pub company they are in dispute with, and who can determine whether or not beer gets delivered and therefore whether or not the pub can trade within the terms of its original agreement.

19.  And what power does the BII have, other than to publish the outcome and hope that the companies are shamed by their actions? Has this form of shaming ever stopped any of the abuses perpetrated and documented before, from being repeated? No, they are still taking place and are still being documented.


20.  As a participant in the industry mediation process in September 2009, I was in a position to see whether the BBPA and its members would consider addressing the issue of the tie, and consider becoming more flexible in its approach. They refused.

21.  Since then, free of tie pricing options, offered by the major pub companies have started to appear. They are deceiving as they do not offer a truly free of tie option. They simply offer a bigger discount on the price of products, bringing them in line with the prices that many tenants can find through their local suppliers or national cash and carry stores, but the payoff in an increased rent, set by the pub company that determines the prices of your beer. Hardly fair or adequately regulated.


22.  The pub companies are looking to subvert the Select Committee recommendations, and ignore the spirit of the recommendation, which was to redress the balance of power in the pubco/tenant relationship.

23.  It seems that the pub companies continue to aim for complete control whilst dressing up their new agreements as partnership deals. The balance of risk and reward is not addressed by merely offering free of tie pricing. I believe that a truly open market where rents and beer prices can be freely negotiated by both parties is the only way forward and I urge the select committee to enforce the recommendations made in its previous reports and to ensure that pub companies give all tenants a genuine free of tie option that must be accompanied by an open market rent review.

June 2011

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Prepared 6 October 2011