Written evidence submitted by Philip Liddell
EXECUTIVE SUMMARY
— (1) Examining
the IFFB's justification for the Tie and their perceived clean
cut image.
— (2) Punch
Tavern's desperation for tenants and their misleading profit projections.
— (3) Punch
Tavern's What's Brewing advert promoting an imaginary Free of
Tie option.
— (4) Countervailing
Benefits that don't justify the Beer Tie.
— (5) Deeds
of Variation—a simple means of addressing the legalities
of change.
— (6) Codes
of Practice—Documents of substance and change or a false
dawn.
1. The Independent Federation of Family Brewers
has recently produced a brochure circulated amongst MPs to persuade
you that "family brewers" are more trustworthy than
the big Pub Cos, and that Breweries with less than 500 pubs should
retain the right to the beer tie. This body is fairly insignificant
in the sector, though it does contain some high volume cask brewers.
There are only 29 brewer members, but investigation will reveal
that all is not as it looks. Their website is rather misleading—Youngs
and Charles Wells are listed as separate family brewers—they
actually amalgamated in 2006, Youngs own 222 pubs, Wells 250,
so only just under the 500 threshold. Brakspear beers are now
brewed by Wychwood (Refresh), who are actually owned by Marstons
along with Ringwood, Jennings, Bank's etc. Brakspear branded pubs
exist as a separate company. So all is not transparent in the
fold of the IFFB:
— 1.1 Will
members of the IFFB, or BBPA or any other organization for that
matter, split their estates and operate as separate companies
to conform to a limit on tied houses? Will fudged legislation
spawn another raft of independent Pub Cos and subsidiary companies,
still tied to nominated suppliers or Breweries exactly as the
Beer orders 1988 did—I would bet my life on it. There should
be no "get out clause" when finally sorting out the
draconian Beer tie.
— 1.2 If
the members of the IFFB practice what they preach, they should
allow their tenants to go free of tie. By their own statement,
if their support is worth £8,040 in the first year, any of
their tenants would be stupid to go elsewhere. If their figures
are somewhat inflated, they are trying to pull the wool over the
eyes of the Committee. Should the Committee allow free of tie,
then the open market place will dictate whether IFFB members and
any other Pub Co or Brewery offer value for money in their tenancy
terms. Also quoted in the leaflet "57% of pub failures in
'recent months' have been free-of-tie sites"—were they
sold as "free of tie" or did they operate as "free
of tie", and what relevance does that bear on the IFFB case?
The leaflet should be seen as a clumsy attempt to muddy the waters
and cajole the Committee into a less radical shake up of the Tie,
by playing on the "Family Brewers" tag. Not all members
are family owned, not all are brewers. I won't disagree that some
of the smaller Brewers operate the tie as it was originally intended,
and that they do offer true support to their tenants, but beware
of the wolves in sheep's clothing.
Q1. I implore the Committee to challenge the
IFFB to quantify their countervailing benefit figure and provide
the source of their data and criteria for their FOT pub closure
figures
2. I recently received a glossy brochure advertising
three pubs locally which Punch were desperate to install new lessees
into. I knew of two out of three pubs, the Royal Oak and the Beeston
Castle. Both had a checkered recent history with numerous lessees,
tenants and management companies. What is striking in the brochures
is the promise of a "potential earnings" of £31,000
for the Royal Oak, and £240,000 for the Beeston Castle. This
forecast is totally misleading, indeed it is grossly miss-selling.
Please examine Appendix 1 to substantiate these figures. Also
note RV figures compared to proposed rent.[27]
Punch need to be asked,
Q2. How is that figure generated—the
projected P & L should be examined and trading hours / shift
patterns / staff dispersal / duty hours of lessee and whether
a spouse is included in the earnings potential. Is this figure
realizable in the first year, or any year thereafter
3. Further instances of Pub Companies cajoling
and misleading their potential business partners into taking tenancies
and leases manifests itself in the wording of adverts such as
the one included in the CAMRA publication What's Brewing February
2011, see Appendix 2.[28]
Punch's advert directly targets the Real Ale sector with its emphasis
on Free of Tie agreements. Let us be clear, none of the major
players have a true FOT option available in their leases or tenancies.
Their claims are gravely misleading. They offer FOT "pricing"
which reinforces the fact that tied prices are inflated well above
FOT prices, but they do not allow the tenant to purchase freely
from where he wishes to. The fact that many microbreweries refuse
to join the SIBA DDS scheme, due to high fees and low returns,
(see previous submissions), excludes many of the "local"
breweries that the CAMRA member would wish to buy from.
Q3. Directly question each Company as to whether
they have a true FOT option available in their lease and tenancy
agreements
4. The whole "Beer tie" debate is based
on the declarations by the Pub Cos that the high prices paid by
tenants for tied products (please refer to previous submissions
detailing price comparisons between tied and free of tie suppliers),
is justified by the countervailing benefits granted by the Pub
Co.
— 4.1 One
of the so called benefits has been the "support" of
a BDM. However, it has generally been admitted that training of
BDM's is substandard. Although my business is doing well at present,
partly due to a re-alignment of my customer offer and partly due
to the closure of a local pub, I was looking to the future and
consolidation of current success, and e-mailed my new BDM in April
2011. I am still waiting for a response. Indeed, in the time it
takes for these monoliths of modern business to act, a pub can
go out of business. Furthermore, a 20 year lease on a RPI rent
arrangement cannot react effectively to a downturn in business
and extraordinary set of circumstances that has affected business
in general and pubs especially. A local award winning pub, The
Bull at Shocklach, will close it's doors as the Committee sits,
because the BDM and Admiral Taverns are too pig headed to listen
to reason. The lessees are handing in their keys and this recently
renovated, very successful gastro-pub is to be boarded up. There
are many similar examples across the Country. The overriding advice
from all the BDMs I have been involved with, is make sure you
provide food and increase your prices (to compensate for depleted
G.P. margins on tied products).
— 4.2 Other
countervailing benefits touted by the Pub Cos include training,
provision of a sales and office team. Training is generally paid
for by the tenant, a sales team is available at any wholesaler
or brewery at no charge. The office team are very good at providing
phone numbers for the tenant to ring themselves, however if the
problem occurs at the busiest trading times—weekends or
evenings, there is no support what so ever as the office is closed.
There is also a monthly magazine, AGENDA, with various deals and
ideas for trade enhancement. Incidentally there are no discounts
offered on tied beers, Ironically, Agenda highlights the deals
that the Company could offer their "partners" permanently
and underlines what a rip off their standard prices are.
— 4.3 Unhelpful
trading terms and conditions such as cash paid two days before
delivery, ullage replacement paid for before recompense, high
insurance premiums, greatly inflated tied prices, do not compensate
for the so-called benefits received. Marketing and promotional
benefits to the Peal O'Bells would average out at about £50
per annum. This contrasts rather sharply with the £8,000
claims of the IFB.
— 4.4 However,
the benefit of the tie to Admiral, in my case, calculating on
average barrelage per annum and a very conservative mark up per
brewers barrel of £100, would add up to £14,500. Realistically,
with Admiral demanding substantial discounts from their suppliers,
this figure would be double. Yet open market rent is realistically
similar to the actual figure of £15,000 (current RV 1200)
yet we are effectively paying wet plus dry rent of £30,000.
Hardly a case of tied tenants should be no worse off then if free
of tie!
Q4. I request that the Committee explore the
validity of these "benefits" and demand that the various
Pub Cos put a value on each and every benefit on an individual
basis
5. Despite a recent thawing of relations with
my Pub Company Admiral Taverns, I am still very dubious as to
their long term intentions. I received a very welcome freezing
of the RPI (Upward only rent review clause). This has been completed
in a deed of variation to my Lease. I think it is worth noting
that this amendment was completed with one brief paragraph, and
added as a single page to the lease documents. I suggest that
any amendments to leases as directed by this Committee, ie suspension
of tied agreements, could be completed with a similar simple documentation
amendment.
6. The COPs are little more than a paper exercise,
however, I shall leave the arguments as to the relevance of these
documents to others, but suffice to say, they flatter to deceive.
As I have found out to my detriment, even within a legal document
such as my lease, there are many ways in which the Landlord can
extort money from me, just by having the power to interpret the
lease as it seems fit. What is said and what is done are two entirely
different matters.
SUMMARY AND
MEASURES TO
BE TAKEN
There has been a lot of activity from the Pub Cos
and their various trade representatives, (BBPA etc), and much
"spin" put about via brochures and documents—such
as the COPs, but much of the contents of such documents are extremely
vague and can be interpreted in many ways. I am sure the Committee
will also discover that the crux of the recommendations listed
last year have not been addressed fully or totally ignored in
the COPs. Examples would be provision of a true free of tie option
for leases, removal of the machine tie, and removal of upward
only rents. I would like to add that I haven't found all negativity
on the behalf of my Landlord, but fear any concessions given to
me and others may be window dressing to placate your investigations.
Most importantly, legislation must be instigated immediately.
Whilst the Committee have been deliberating, thousands more pubs
have been closed forever, and thousands more will continue to
struggle and close in the time recommendations become legislation.
Punch have committed themselves to their shareholders to ditch
a third of their pubs—they don't care for the community
pub, they don't care if it's the last pub in the village, it is
now clear their true vocation was as property developers, but
that lucrative market is now beyond their finances, so the properties
have to be disposed of. The major Pub Cos and Breweries are beholden
to the City, are in the pockets of the Banks, yet the British
Taxpayer has bailed out these same banks. The British public needs
to be informed that these Companies are not fit to run half of
the Nations pubs—it is their pubs, their community hub which
will be lost for ever. As a pub lover and a proud owner of a traditional
British pub, I beg that the Committee make the following decisions:
— (1) The
Beer tie must go. There should be no exemptions on size of Company.
FOT options must be applied to existing leases and tenancies as
well as new agreements.
— (2) The
machine tie must go on all agreements.
— (3) There
must be an open market rent review imposed with immediate effect,
at minimal cost to the tenant, and with guidelines agreed with
the various trade bodies and the RICS.
— (4) Provision
for alternative Insurance policies should be allowed.
— (5) Immediate
notice to be given to the Pub Cos and Breweries to instigate these
measures and six months (max) to put these measures in place voluntarily
by deed of variation, otherwise all tied agreements should be
suspended until legislation is passed.
— (6) Fines
instigated via unreliable flowmeter measurements used as evidence
in "buying out" disagreements should be refunded.
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