Hamish Champ: Credit cards, pub leases and the small print
20 October, 2008
"There are some who suggest those with a card bill that’s out of control have only themselves to blame; after all, nobody forces them to have ‘plastic’, do they?"
We all know we’re in the midst of a financial crisis. Consumers are tightening their belts in readiness for the real storm many believe is yet to hit the UK economy, as unemployment plays ‘catch-up’ with the banking collapse.
But would someone mind telling all this to the credit departments of the country’s leading high street retailers?
Last week I received a letter from one such company with whom I have a store card, congratulating me on the news that I was having my card’s limit extended by five hundred quid. And when they're not doing this they're trying to get me to go over to 'their' credit card.
That’s just what I need; the temptation to get myself into more debt.
I hope I’ll be able to resist the urge to spend hundreds more pounds of money I don’t have on boxer shorts and socks I don’t need.
But not everyone can. We’ve long known of people getting into serious debt with their credit cards and this situation is likely to worsen for some as the economy heads south yet further.
There are some who suggest those with a card bill that’s out of control have only themselves to blame; after all, nobody forces them to have ‘plastic’, do they? Or spend beyond their means? And if they’re not savvy enough to read the small print and consider the consequences of overdoing it then that’s their lookout.
The same is said of people taking on leased and tenanted pubs. Don’t like the beer tie?, some ask. Then don’t take a lease with a company that operates the beer tie. Don’t like the rental environment? Save up to buy a freehouse.
I’m told procedures for those taking on a pub on a pubco lease are being made more rigorous than ever to ensure the right person is put in situ. And that support levels are improving all the time. Hopefully this is indeed the case.
We do still hear about this pubco or that sticking any old person into a pub just to get the thing up and running again, with scant regard for their suitability, monetary stability or trade experience. If true, I sincerely hope such a practice is a fast-fading one.
Meanwhile I trust prospective licensees do their utmost to read the small print, and don’t take on something that turns round and bites them on the backside at a later date.
Like my credit card statement…
Readers' comments
WOW, At last people speaking it as it is. Graham Allman needs to respond to this, bet he won't though. Seems there are more than 50 "whingeing" licensees out there after all.
Hamish - usually it must be said you talk with a degree of common sense but on this occasion I think you really have lost the plot. You state: "I’m told procedures for those taking on a pub on a pubco lease are being made more rigorous than ever to ensure the right person is put in situ. And that support levels are improving all the time. Hopefully this is indeed the case." Bollocks!! Who told you? Some PR rep from Punch or Enterprise Inns?? Pubco's are losing tenants by the day consequently they are literally offering pubs them to anybody willing to take them on- the alternative is to put a holding company in. I was offered one at a pound a week rent and a barrel discount just to keep it open. The Sunday Times recebtly reported that 18% of Punch pubs didn't currently have a tenant. Do you honestlty think Punch are going to be rigorous" in that climate???? You also state that "We do still hear about this pubco or that sticking any old person into a pub just to get the thing up and running again, with scant regard for their suitability, monetary stability or trade experience. If true, I sincerely hope such a practice is a fast-fading one." In the current climate they have litttle option because the majority of people with any degree of sense have walked away from a business model that is no longer sustainable and they have no-one to blame but themselves. With the recession beginning to kick in (the effects of unemployment has yet to make itself felt) this practice will grow rather than "fade". What they (Pubcos) seem to forget is that without tenants they don't have a business. Neither do they appear to understand that looking after the needs of their tenants does not conflict with the interests of the shareholders. In fact the two go hand in hand. Why don't they understand this fairly basic business model?
I love this bit about the pub owning property companies being more choosy than of previous in their selection of licensees. Tosh! The Area Managers (or whatever today's name is for them) are under so much pressure they are still giving it the "two arms, two legs, two thousand quid - here's the keys" test. They will be all over a prospective licensee like a bad rash until they are through the doors then all the promises (mostly not committed to paper) will be forgotten, ignored or given it the "no budget" excuse. All potential licensees should ponder the following 1) Once the lease is signed, you are locked in. 2) All future beer increases are inflicted on you and you cannot change supplier or renegotiate. 3) Rent reviews are carried out and though not meant to be, will be based on any increase in trade put on by the licensee. All pubs have a "fair maintainable trade". Do well, and that will increase. Do badly and it will stay constant as you are obvioulsy a "sub-optimum" licensee. 4) You will become responsible for all repairs including putting right any defects inherited when you walk through the door. 5) There may be lease support works included in the agreement you sign that are contractually responsibe by the property company. You watch those get delayed, ignored, or carried out to poor standards. If any defect comes to light after the lease is signed you will be responsible as "you should have engaged a surveyor" 6) All deliveries come from the nominated supplier. No chance of an alternative if service is poor. 7) Any additional off delivery day deliveries will be surcharged £45 for the inconvenienec of you selling more than you anticipated. 8) Very little promotion activity apart from a few telesales promotions which generally only provide a bit of free stock which netts the price charged a bit nearer the market price. 9) Any developments to your pub will be rentalised at 15% of the project cost, even if it is only restoring the pub to a condition that customers may be tempted to walk into. You will be allowed very little input into the design, colour schemes etc. 10) Your phone calls will go unanswered, but heaven help you if you are not in for a delivery, a telesales call or an Area Manager visit. 11) Your beer will be cut off if you miss the direct debit for any reason, even with an impecable previous payment record. 12) Your Regional Manager will often only call to check your cellar or ensure the Brulines are working. One ex colleague Area Manager told me proudly recently of how he is top of the tree for raising buying out fines. There are league tables at Area Manager level for this activity, there are no league tables for assisting tenants, offering advice etc. 13) It was my experience that many ex colleague Area Managers could not compile a Cash Flow forecast or a simple Profit & Loss account. Still interested?
Sorry Hamish you are so wrong,why do you think I am so against the pubco model,Go underground and apply for a tenancy and see how quickly a bdm can move if they see a potential mark.If you hold a personal licence they will have you signed sealed and delivered in no time at all because they are under so much pressure to keep the margins up on their patch.Watch the websites that show pub leases for sale the same ones keep coming up which would not be the case if they (the bdms) were doing the job properly.
Financial suitable or capabilities plays no role in finding a tennant. It's whether the Pubcos can rip them off to build their portfolio and finances up for the shareholders that counts. It's an immoral system built on greed and corruption that is destroying the "great British pub" and the listed buildings that often go with that in favour of blocks of flats to balance the account books for another year.
It;s PR rubbish, they will still take on anybody with a bit of capital behind them and don;t even ask if it;s borrowed. I was talking to a pub valuer recently who does tenancy and laese change-overs and says that he is often called to the same pub twice and even three times on one occasion in a year. The Pubcos and Breweries don't care, they keep the pub open, collect their exorbitant rents, and sell their booze at unjustifiable cost until the capital is gone then Hey Ho on to the next poor sucker.