Supplementary written evidence submitted
by the British Institute of Innkeeping (BII)
Thank you for the opportunity to clarify BII's response
to questions raised by the BIS Committee in the oral evidence
session on Thursday 30 June and the opportunity to respond to
other evidence provided at subsequent sessions.
COMPARABLES, COSTS
AND DISCOUNTS
It was clear that the Select Committee was keen to
see the availability of more information around comparables, costs
and deals that are currently available.
BII agreed to revisit one of the recommendations
from the March 2010 BISC report.
"In the absence of pub companies offering
their lessees a free of tie option with a full rent review we
recommend that the BII, as part of its new website, list the prices
pub companies charge for their tied products and the discounts
available with comparisons to the free trade".
BII gave serious consideration to this recommendation
and the practical value it would present to a licensee. It was
felt that it would not be practically possible to provide this
level of information given the large number of variables and agreements
available and practically impossible to keep the data up to date.
BII believes that the most important thing is to ensure that prospective
licensees get good advice and are aware of the pricing/discount
structures on offer to them.
The new codes require companies to be transparent
with regards to prices charged for tied products, eligibility
for discounts and whether they will allow guest beers supplied
outside the tie. At the commencement of an agreement companies
must provide a shadow profit and loss account with sufficient
detail to enable tenants and lessees to take proper professional
advice.
Following the strength of feeling on this issue from
the Select Committee, BII has undertaken to revisit the recommendation
and ascertain what could be provided. The Select Committee suggested
it should be possible to band the various levels of discount available
in relation to rent.
BII has sought the assistance of a number of companies
to determine what could be provided. The majority of operators
stated that rent and product pricing in the tied estate is based
on a multitude of variables and is negotiated by individual pub.
It was agreed that the prospective licensee needs to understand
the rent/discount deal applicable to the specific pub that they
are interested in and they get this via the profit and loss account.
At these companies there is no such thing as a standard pricing
arrangement and as a result any derived average is likely to be
so general that it is meaningless.
Companies that do operate discount levels have suggested
they could display the full wholesale price list for the top ten
selling products then indicate the various company discounts from
there. This information is of course already made available to
the prospective licensee.
In order to determine the relationship between rent
and discounts it has been suggested that companies could provide
details of the lowest and highest rent agreed on every pub on
a particular level of discount. This would prove or disprove the
assertion from some companies that there is no formulaic approach
to discounts and rent.
Whilst academically interesting, the important question
is whether this information is meaningful and valuable to the
prospective licensee.
BII stands by its view that the level of information
requested will be of little practical value to the prospective
licensee. There is no single industry standard tie and some companies
operate multiple agreements which may then be subject to negotiation
and amendments for a specific pub. What matters is that the prospective
licensee understands the potential relation between rent and discounts
and what is available to them. BII feels the best way to achieve
an understanding of pricing is through a professional advisor
and BII is now considering a service.
To that end the Pre Entry Awareness Training (PEAT)
will be updated to include more details of agreements including
free of tie options and/or free of tie pricing. A direct link
will also be made to the BIIBAS Panel of Advisors as a source
of professional advice on the various agreements available.
Questions have arisen over the relevance of another
source of information, the ALMR Benchmarking Survey to the leased/tenanted
estate. There seemed to be some confusion over a reference to
these houses being managed outlets. We understand much of the
data emanates from either free houses or leased/tenanted houses
and all but a handful are run with managers who work for the owner/lessee.
This inflates the wages of these pubs above those of tenanted/leased
pubs run by a tenant/leaseholder and should be taken into account
when making any comparisons.
Despite this, and in the absence of reliable alternatives,
all codes of practice are required to reference the ALMR Benchmarking
Survey in relation to costs. BIIBAS would welcome the ALMR Benchmarking
Survey being made freely available to licensees which it is not
at present.
SANCTIONS
It was noted that the Select Committee was concerned
with the strength of sanctions available under the current self
regulation scheme. The scheme, in its present form, enables the
focus to lie firmly on the individual circumstances of each case
and allows BIIBAS to work with both parties to seek a satisfactory
resolution.
BIIBAS shares the view expressed to the committee
that the withdrawal of accreditation would have a significant
commercial impact on a company. Presently, resolution depends
partly on the goodwill of the parties however BIIBAS reports good
cooperation with companies in reaching resolutions, some of which
have resulted in financial consequence for companies. More importantly
BIIBAS believes that the current scheme puts the emphasis in the
right place, assisting the individual licensee who is not concerned
whether there has been a breach or whether their company could
be fined, but in resolving their own situation.
Although the permitted error rate benchmarks favourably
against other regulation schemes, BIIBAS will be recommending
the steering committee decrease the number of breaches required
before instigating the sanction of accreditation withdrawal.
MEDIATION
It was noted that the Select Committee was asking
questions about the enforceability of agreements reached at mediation.
To clarify, mediated agreements can be made legally binding. The
mediator, be it BII or an alternative provider does not need powers
to enforce as the agreement becomes enforceable in the usual manner
through contract law.
TIMETABLE SLIPPAGE
It was reported to the Select Committee that BIIBAS
was partly responsible for slippage in the timescale for accreditation.
Whilst it is true that there was a process for gaining accreditation
BIIBAS was ready to receive codes from March 2010. We designed
this to be a thorough process. Every code underwent a prima facie
check against the Framework code, any omissions or opportunities
for improvement were communicated to the company concerned before
the code was formally submitted to the benchmarking committee.
The Benchmarking Committee then convened with representatives
from the companies. At the benchmarking meeting further recommendations
were made and following further amendments and resubmission codes
were duly accredited. The process has been evaluated and people
responded that it was well explained and therefore the BIIBAS
process cannot be held responsible for delays.
July 2011
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