Written evidence submitted by Fuller,
Smith & Turner plc |
In this report Fuller, Smith & Turner P.L.C.
is pleased to take the opportunity to respond to the committee's
call for evidence that the recommendations set out by the BISC
in 2010 have been adopted.
Fuller Smith & Turner PLC have been brewing beer
and running pubs from their Chiswick Brewery headquarters since
1845. Today we brew over 200,000 barrels of cask conditioned ales
and run 365 pubs throughout the south of England. We are one of
a number of successful independent family brewers who like similar
independent companies in other industries are passionate about
their people, their pubs and their business model.
The model revolves around a tie on wet products and
takes it's origin from a desire to sell our own cask ale beers
at the finest quality possible. By buying pubs brewers such as
Fuller Smith & Turner were able to produce and distribute
quality beers to be enjoyed locally by their customers. As transport
facilities improved so the distribution network has expanded to
the present levels of production stated above.
Our estate of pubs is made up of 166 Managed and
196 Tenanted houses all of which operate under the full wet tied
3. THE TIE
With the security of the tie, Fuller's buy, insure
and maintain the properties operated by our tenants. The tie system
provides a lower cost of entry for a tenant setting up in business
and creates new employment opportunities for entrepreneurs. As
business increases or decreases the tied system allows for the
financial impact to be shared between company and tenant thus
decreasing the risk of failure and closed pubs.
4. THE CURRENT
The past three years have seen an unprecedented period
of change and challenge for our industry.
The smoking ban, an increase of over 35% in beer
duty in 36 months and the recession, allied with aggressive pricing
strategies by supermarkets have put an enormous strain on the
Whilst, we have not been immune to pub closures within
our own estate we do firmly believe that the number of closures
have been far greater in the free market where banks and property
landlords are less understanding than pub companies such as ourselves.
There is no advantage to us to see good landlords/tenants suffer
and leave our business as our fortunes are so closely aligned.
This is why in the main we have increased the support available
during these trying times.
5. FULLER SMITH
& TURNER SURVEY
In the past year we conducted a survey of all of
tenants who are on a substantial agreement (three years or more)
with the company.
Highlights from the report were that:
are happy with the head office support they receive;
are happy with the training support they receive;
agree or strongly agree they are happy with the relationship with
their BDM (Business Development Manager);
agree we keep them informed of legislation changes;
are happy with the marketing and support they receive;
say the BDM has a good understanding of their business;
believe their BDM acts with honesty and integrity;
believe their BDM is innovative;
would renew the agreement they have with the company.
We also regularly hold open forums with tenants to
find out how they believe we can improve our business relationships.
6. BISC COMMITTEE
We would now like to comment on the action Fuller
Smith & Turner has taken to comply with the BIS Committee
Code of Practice was submitted to the BII in April 2010 and was
accredited by BIIBAS on 3 June 2010.
Codes apply to all tenants or lessees on a substantial agreement
with Fuller Smith & Turner. The Codes were explained to each
tenant who signed to say they had received the code. All new tenants
receive the code as part of the letting procedure.
(Pre-Entry Awareness Training)
insist of all new applicants with the exception of anyone who
has been in the trade for some years to undertake the PEAT qualification.
operate rotational guest ales once per fortnight which tenants
are able to take the opportunity to stock. However, our own portfolio
of ales is so strong only 33% of tenants take advantage of the
further confirm the removal of upward only clauses, during 2010-11
rent reviews carried out by the company resulted in 31% remaining
static, 19% were reduced and 50% increased. Overall rents at review
fell by over 6% during the year.
shadow rent calculation is provided at rent review.
operate a tie on machines on a 50/50 split basis. Once again we
believe the tied system serves both tenant and company well in
that we keep a close watch on the quality of machine, the income
and the need to change or improve the machine as income slows.
We employ a consultant to deal with these matters who tenants
can contact should they have any issues.
have completely removed machines from the divisible balance on
Flow Monitoring Equipment
is installed in 80% of our houses. We believe we have one of the
most constructive approaches to deficits and the lowest occurrences
of actual buying out of the tie throughout the industry.
fully support the PIRRS scheme and every tenant during rent negotiations
are informed of its existence. It is also a part of the Code of
Practice of which as previously said every tenant possesses a
copy. We have had no referrals.
believe nobody envisaged RPI figures rising to the levels they
have. Over the past three years we applied negative RPI when it
became applicable to all rents but more importantly we have capped
RPI at a maximum of 3% since 2008 whenever the RPI figure has
risen above that level.
believe that during the past year various companies have introduced
new ideas to their tenancies and leases to make them more attractive
to applicants. Whether by way of freedom of the tie, partial freedom
or improved allowances and services it confirms that in a competitive
market place the best agreements will prevail. We believe the
committee should take note of this thought that if an agreement
were not competitive then new applicants are unlikely to apply.
our part we have always had very competitive rent levels together
with a host of services some of which are listed below. This fully
justifies the difference between a free of tie and tied rent system.
of the very best pubs throughout the South East of England.
of fine ales arguably the best in the country.
enjoy £44 discount per own produced beers and £24 on
beers produced outside of Fuller's. Likewise tenants receive £20
and £10 respectively.
Investment in our houses is at an all time high.
Investment and repairs to houses reached a new high in 2010-11.
courses were increased in number and reduced in price to an average
of £50 per course.
has been capped at 3%.
Rating Advice for all tenants.
signage for both lessees and tenants.
design advice when a tenant/lessee wishes to carry out a refurbishment
of the house.
at a very low wholesale price direct from Britvic.
house magazine with over £1,000 at cost offers per annum.
Cellar scheme which pays out over £1,000 at cost in beer
membership of the BII.
Visitor twice per annum free of charge.
the past we have used the Ashridge Management School to assist
in training Business Development Managers in all aspects of their
fully support the new BDM training modules proposed by the BII
and have booked the two newest members of our team on to the first
courses that should be available later this year. We have a mentor
system in place for new BDM's and each is assigned a buddy to
make sure they have access to any information they require.
have 196 pubs with 5 BDM's each being responsible for circa 40
pubs. Our tenants expect and we insist on a call rate at worst
of once every eight weeks. Many houses are visited far more often
have removed restrictive covenants.
8. CGA SURVEY
We fully co-operated in the independent survey carried
out by CGA and recognise that whilst the results are heading in
the right direction there is still more to do across the industry
to ensure fairness to all.
We fully encourage greater awareness campaigns on
the following subjects:
sure every tenant and applicant is aware of the Code of Practice;
tenants aware of the PIRRS scheme;
tenants aware that upward only rent reviews have been removed
from the majority of agreements; and
every tenant is aware that any breach of the Codes should be reported
to the BII who will carry out a full investigation and report
on Breaches made by Companies. We further believe that by using
this scheme any rogue company practices will be indentified as
will any rogue BDM's.
We acknowledge that there was a need for change in
the pub industry however you will see from our own survey results
that tenants of Fuller Smith & Turner have a high regard for
the way we operate the company and believe we have a good landlord/tenant
It is generally acknowledged that having the discipline
of a more extensive and exacting industry code has been a positive
and productive process for our company. Not only has the exercise
been instructive in looking at our own internal procedures, we
believe it has better informed tenants and lessees with more rigorous
and transparent processes being beneficial to all concerned.
We believe we have met the majority of the BIS enquiry
recommendations (bar the question of a tie which is deep rooted
in our business model) and argue that we have gone beyond them
with many innovative and additional ways of supporting our tenants.
The Industry Framework Code of Practice is driving
change in the pub sector, and we believe that it is now important
to allow the industry to continue to build on the good start that
has been made.
We also have very strong feelings about the strength
of our business model compared to others and if there are problems
with individual landlords they should be addressed by them.
We urge the committee not to tinker further with
the livelihoods of good businesses such as Fuller's that have
been in existence for over 165 years to achieve headlines they
seek elsewhere. We would also like to thank the committee for
allowing us to take the opportunity to update the position at
Fuller's since the new Code of Practice was introduced and would
welcome dialogue with any member of the committee should they
16 June 2011