Pub Companies - Business, Innovation and Skills Committee Contents

Written evidence submitted by Robert Wynne

I have experience of running both free of tie and tied pubs over the last 11 years and currently operate three pubs in Blackpool. Over the last 11 years I have operated up to six such venues. I also have a restaurant which we have owned and run successfully for 25 years.

I took on my first "part tied" pub in 2000. The tied pub model was flawed from the start, but did just about work when times were good, inflation was low and trade was growing. In the current market the model is completely broken and is causing hardship, family breakdown, bankruptcy and total despair for many of the tenants.

I have witnessed at first hand the miss selling of tied pubs to prospective tenants, which in recent years has grown worse not better. Approximately £25,000 will secure you a pub, which is just about what many people will have saved, be able to borrow on credit cards, or may have received as a redundancy or pension payout after a life-times hard work. In general the new tenant will probably manage to last around two to three years before losing the pub, usually owing money to many people and organizations. By this stage they will have lost everything.

During their two or three years they will gradually shed all the pubs staff as they try to make ends meet, they will end up working from early morning doing the cleaning until the last customer has left. They will have no time or energy left to market the venue and no money to maintain it to a good standard. Their costs will steadily ramp up as the rent rises with RPI and as their already inflated purchase prices go up above inflation. Their lives will fall apart under the strain. Other non tied venues will open nearby, or former tied venues will be sold off become free of tie and their customers will leave for cheaper beer.

I have been very lucky to have started in business elsewhere and still had resources to just about survive as the full horrors of the tied pub model enveloped me and my family. I now have two free of tie pubs and one tied pub, plus the restaurant. The tied pub is the first one I took on in 2000 and has various elements that have enabled that business to survive. There is no RPI increase in rent, there is no tie on the machines, there is no tie on soft drinks, wines or spirits. If there was this pub would now be closed.

In my free of tie venues my headline price for lager is £1.95 a pint; in my tied venue my headline lager price is £2.80. However because of the very different price that I can buy my products my GP (Gross Profit) at my free pub is 56% my GP at my tied pub is 52%. In a very price conscious market like Blackpool it is impossible to increase the cost of a pint to keep up anywhere near the increasing cost of the supplies from the Pubco.

I have colleagues in the pub trade locally who are right on the verge of disaster. Despite reducing profits their rents have risen consistently and recently risen dramatically in line with RPI. They ask for help and get nothing but patronising words telling them that they should run their businesses better. These are good operators, not necessarily brilliant, but people who are intelligent and hard working and who cannot make anything but an ever increasing loss.

Eventually the market will take care of the problem as tied pubs shut for good, but this will take another 10-15 years during which time many more lives will be wrecked and many historic and popular pubs will close forever. The Government could step back and say that the tenants should have known better, but believe me all of them have been miss sold their pubs.

I managed to extricate myself from several tied venues, but I watched as Pubco BDM's dramatically exaggerated business opportunities and glossed over costs and legal requirements to secure replacement tenants. These BDM's couldn't care less about the business ability of theses tenants, what experience they had, or what reserves they had to fall back on. As long as they could get the cash deposit and the first bit of rent they were happy. They would often set them up with a very low start up rent which would ramp up quickly, they would allow them to buy the fixtures and fittings over a couple of years, they would even defray the VAT element of the initial transaction for a month.

The new tenants were generally too excited about the prospect of owning a big pub to ask any questions.

In enticing new tenants, Pubcos show estimated takings figures which are often not too far from reality. However they show costs that are completely unrealistic, basing items like repairs and renewals on a percentage of the gross take, rather than the reality of the costs required to maintain large, old buildings and keep up with the ever increasing statutory requirements of building maintenance.

Estimates in all other areas are also kept artificially low, especially the potential cost of staff. Figures are produced showing that tenants will make around £50,000-£70,000 per year, when in reality they will be lucky to break even.

Because of the positive early cash flow in a pub, the problems for the new tenants do not become apparent for several months, from then on the tenants try to reduce their costs by cutting staff, entertainment, and maintenance. The pub enters a vicious circle of decline.

I have kept specific evidence relating to many of these matters, including what happened when I asked for help, the recent attempted miss selling of a pub and many other matters. All of this I would be happy to share.

Recently I bought a former tied pub back from a property developer, who had bought it from a Pubco at a bargain price. This Pub had existed since 1833 (before Blackpool was even a Borough) The Pubco had bought it from Bass in 2001 and between then and 2008 had had four failed tenants and numerous management companies filling in the gaps. Each of these tenants had lost all their money. The Pubco said this was a failed pub and sold it for development. I bought it and reopened it as a free of tie pub. It is set to make £35,000 profit this year and now employs six full time staff.

The company that I set up to operate this pub is called "The Unchained Pub Company".

I urge the Committee to attempt to free all tied pubs of their chains.

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Prepared 6 October 2011