Tenancies, leaseholds and other routes into pub ownership

Peter on pub tenancies...

"As a tenant you rent the pub for an agreed rent, normally on a three-year rolling contract so that every three years you have a rent review. You agree the review with the brewery or pubco [chain of pubs]. If you wanted to leave you’d give notice – normally three months, sometimes it can be six months.

"And that’s it. At the end of your notice period the incoming person or brewery then pays you for liquor and fixtures and fittings. 

Leaseholds...

"You purchase a lease from an outgoing leaseholder, or if it’s a new lease from a pubco or brewery, for a specific amount of time – standardly 10 or 20 years, but they’re normally non-assignable for the first two years. So you know you can leave after two years. 

"If you want to leave after two years you put the lease up for sale. You find a purchaser and the lease is then assigned to them. The brewery or pubco must agree to the incoming person before they can buy the pub. They can’t prevent a sale for any arbitrary reason, but it has to meet right and proper person ‘criteria’."

Freeholds unfortunately are the most likely to fail, because often, the reason they are still freeholds is because they are not in great positions – falling trade and so on

Pub franchises...

"A lease franchise – and there aren’t many of those – is halfway between being a manager and a leaseholder, but it’s for a fixed length of time, say five years. You can’t sell it to anyone else – you sell it back to the franchisor. 

"The company puts their own tills in and sends in their own auditors so they know exactly how much you are making etc, whereas with the other types of pub ownership you can keep it secret."

Freeholds...

"Freeholds tend to be in the countryside, out of city centres. Most city-centre pubs are tied up by pubcos and breweries. Freeholds unfortunately are the most likely to fail, because often, the reason they are still freeholds is because they are not in great positions – falling trade and so on. 

"That’s where most pub closures have come from in the last few years – freeholds. Not the managed or the tenanted sector."

Being a manager...

"As a manger, quite simply, you run a managed house and get paid a salary."

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