Written evidence submitted by Nicola Francey
OVERVIEW
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.
SUMMARY
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.
CODES OF
PRACTICE
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.
AWP MACHINES CLAUSE
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?
CODE OF
PRACTICE RENT
REVIEW CLAUSE
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.
ENFORCEABILITY OF
THE CODES
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.
FREE OF
TIE OPTIONS
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.
CONCLUSION
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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