Last Friday (14th) the government's much vaunted consultation into the relationship between pubcos and their tenants closed amidst much congratulatory back slapping by certain sectors of the pub trade. Whilst the mutual appreciation is well-deserved one must voice a cautionary note on the danger of becoming over confident and more importantly reducing the pressure the reform lobby has exerted thus far.
It can be of no small concern pubcos kept their 'powder dry' until the very end of the consultation process, with little detail given of the "unintended consequences" for the pub trade that has become the latest mantra for the pubcos and pub-owning brewers.
Only Ted Tuppen, CEO of Enterprise Inns, has stuck his head over the parapet to articulate the dread unintended consequences if regulation is the outcome of the consultation. He is widely reported as saying:
- "A material increase in the rate of pub closures, particularly smaller pubs and pubs in rural locations
- Closing off the industry to newcomers
- A “huge reduction” in the level of investment into pubs
- Reduced consumer choice, the closure of cask ale breweries and the dominance of international lager brewers
- Brewery closures, job losses, “and of course a massive tax hit to the Treasury"
... will result from regulation. Hands up anyone who believes anything Ted has to say, after all he stands accused of lying to Parliament in the past?
So tell me Ted with the £10,000 average you spoke of to the Publicans Morning Advertiser potentially to be transferred from Enterprise Inns to each of its tenants if the RICS/BIS forumlae are applied, why would this result in increased pub closures? Ten thousand quid per pub might go a long way towards allowing your tenants to invest in their respective businesses and might just make them viable in the current economic climate. And that's not just a one off transfer of value, that's every year and in many cases £10,000 will be a huge underestimate.
As for closing off the industry to newcomers, if it means your much touted "low cost entry" for newcomers to the trade is brought under legislation ensuring a fair and transparent business relationship between tenant and landlord then so be it if a few prospective publicans decide not to risk it with your company.
Any property company that doesn't invest in its own assets is unlikely to attract the reduced number of would-be tenants (remember the industry will have been closed off to newcomers, leaving only seasoned veterans of the trade), so will there really be a huge reduction in investment and for many of your tenants would they notice the difference? I mean your company isn't renowned for the investment it makes in the majority of its tenants businesses, unless you're talking about your infamous SCORFAS?
And let's see if the mandatory free of tie option or guest beer provision is enacted in any regulations arising from the consultation whether this will mean less choice for consumers and fewer breweries. Despite your price gouging of both tenants and brewers there are more brewers now than in the past 70 years, with more sustainable tied pub businesses the rebalancing of risk and reward is likely to deliver, I would hazard a guess brewers will do just fine thank you very much. And whilst we're on the subject just how patronising can one person be with only one head? Surely it'll be consumers who determine whether micro or regional brewers do well out of them as opposed to the multi-national brewers? Given your attitude to tenants and MPs it's not surprising you think so little of the British beer-drinking population.
Ted I sometimes wonder whether you're a fit and proper person to be running a plc, if you think what might potentially be a £200 million injection into the pub market is going to result in less revenue for HM Treasury. If anything 20,000 tied tenants being able to afford to, oh I don't know, maybe pay themselves a living wage and become "good consumers" will result in increased revenue for the government and outputs for the economy.
20,000 tied tenants having increased confidence in their respective businesses and maybe investing in their pubs might even have a knock on effect as their customers realise mine host is not going to be the latest in a string of hapless tenants bankrupted by the Enterprise Inns "low cost entry" business model and is going to stay in their pub. It might even result in a couple of extra visits to the pub and increased customer commitment to the pub. That's gotta be worth a couple of hundred mill in duty and VAT as well.
Maybe with 20,000 sustainable tied pubs the banks might offer up more lending to an industry in recovery?
Who knows with all that increased confidence and lending maybe some of the chronic underinvestment by your company (and other pubcos) in the national pub estate might be put right as an army of local tradesmen and women repair the material damage done. Oh, and did I mention how this increased capital spending would bolster buillders'/decorators'/furnishers'/electricians' order books, which, will result in increased spending and profits for these artisans? Could it be that HM Treasury would see an increase in tax from them too? Stranger things have happened at sea Ted.
Anyway you can get the measure of the man from this:
“In my opinion, the consultation document is a disgrace. Biased and almost completely lacking in genuine evidence, it espouses as truth the opinions of a small but obsessive group who have been campaigning against the pub companies for almost a decade.
Fair Pint, IPC - they’re all the same people, including a high proportion of failed or failing publicans looking for someone to blame, or self-serving campaigners looking to make a turn.
For heaven’s sake let’s have a sensible debate based upon the evidence rather than hearsay and the prejudice of an MP who has never quite got over being called a moron.”
I'm sure I don't need to bore you with my ripostes to these sparkling observations... the evidence given by the 'tenants' panel' express more eloquently and passionately whether it's just a minority of malcontents and "failed publicans" or a tsunami of opprobrium. I wonder how many heads of other estates, even those who have less than 500 pubs, are thinking the same way? Ted Tuppen, whilst no longer the poster-boy for the pub trade, may well have articulated the prevailing sentiment within board rooms up and down the country. He may also have dealt their campaign to avoid regulation or exclude sub-500 estates from regulation a crippling blow with his latest outburst. After all it never goes down well to remind people whom one has lied to and insulted of the original calumnies and rudeness, especially if they have the power to put you firmly in your place. In Ted's case let's hope his place is a retirement home for the permanently bewildered.
At the close the consultation over 8,000 responses have been received, of which I'll wage a significant majority are from pubco victims in favour of reining in the pubcos, especially as CGA's Tenanted Pub Licensee Survey revealed (Monday 17th) 94% of tenants are in favour of regulation. Hardly a "small but obsessive group".
If there was any justice in this world Tuppen would be stripped of his CBE for the damage he has done to our industry, in the same way Fred Goodwin was stripped of his knighthood for the unholy mess he made of RBS. That being said it's a bit rich of Tuppen to opine thus:
"Are we going to let a small group of campaigners and a handful of MPs bugger up our great industry?”
Ted it's the likes of you and the gone (but not forgotten) Giles Thorley, late of Punch Taverns, who have done the most to "bugger up our great industry". Admittedly MPs have a lot to answer for with crippling beer duty, high VAT and the smoking ban, however, their actions were carried out in the 'interests of society'. Your company and other pubcos don't give a stuff about society and certainly haven't given a rats arse for many of your tenants or cared unduly about what may still yet prove to be, the irreparable damage you have done to the pub trade. Your overarching drive has been greed and profit at all costs, the very worst type of capitalism.
Anyways, back to last Tuesday's committee session... a hint of things to come might have been given in the evidentiary session in the blustering and often combative performance of Brigid Simmonds of the BBPA. As ever with these events its the sub-text one has to pay attention to and in this instance I sense an almost cabalistic undertone and it centres around the "franchise option".
There was much talk of Wolverhampton based Marstons' franchise offering and to be frank I have little knowledge of how successful this is for their franchisees, although I'm guessing it's working just fine for Marstons or they wouldn't have put some 500 pubs over to this particular business model. (I shall be making it a mission over the summer to find out how their franchisees are fairing).
Whether or not the franchise option is fairer on the franchisee than many pubco agreements will be quickly be demonstrated if the pubcos seize on this as a way of circumventing any regulations arising from the pubco consultation as a way of doing 'business as usual'. The mountains of debt some of these pubcos are stuck with and the need to service that debt will no doubt make any franchise offering from the likes of Punch Taverns or Enterprise Inns just as disadvantageous to their franchisees as their current tenancies or leases are to their tied tenants.
BIS would do well to consider the increased murmurs about franchises and leave provision for franchises to be brought under the scope of the Pubs Adjudicator should the very same companies who have brought such ruination to our industry pursue their usual business model of exploiting their franchise "partners" as they have done with their tenants and lessees.
The nice nurse is bringing my little paper cup now with the lovely little pills... oh and she says if Ted's to lose his gong I need to suggest it to the Honours Forfeiture Committee...
