Why buy a pub?

There are plenty of compelling reasons why a prospective business buyer would avoid the pub sector, and yet, one of Britain’s best loved institutions – and indeed greatest gifts to the world – remains one of the most popular choices for budding entrepreneurs.

Some of the challenges of pub ownership relate to the nature of the work, while others relate to a myriad of factors that have conspired against the trade in recent decades.

Starting with the work itself, running a pub is demanding, both in intensity (and if there is no intensity then you probably don’t have enough customers) and the working hours. A part of the hospitality sector, your peak trading times are evenings and weekends and you have to deal with the great, and sometimes not so great, British public.

The pub trade has also been the subject of much negative press coverage, as the smoking ban, rising alcohol duty, cheap supermarket alcohol, a growing propensity for people to drink at home, and the worst downturn since the 1930s have all made life difficult for publicans. In the history of pubs, it's a challenging time, for sure.

It is a way of life, and for the right person, it’s a fabulous and sociable way of life

John Gower, SBS Commercial

You’ve probably seen press reports about high closure rates in the sector. A net total of 1,013 pubs shut their doors between July and December 2009. However, this at least represented a slowing of closures, from a rate of 52 a week to 39, signalling an improvement in fortunes to mirror the nascent economic recovery.

National institution

Pubs for sale are still exciting business opportunities. This is still a massive industry, and massively important to the British people. Around 15 million people – about a third of the adult population – visit pubs every week, not something you could say about many other hospitality businesses. Meanwhile, a YouGov poll for the British Beer & Pub Association revealed that 58% of British people see pubs as a national institution and an important part of their cultural heritage.

It’s this affection for a cultural icon that makes so many people go into the trade for the wrong reasons, probably more than in any other sector. However, if you have experience behind a bar, are prepared to sacrifice weekends and have an enthusiasm for customer service, there are plenty of reasons to buy a pub.

Most obviously, there’s the social aspect. If you’re a gregarious person then the pub is a great environment to work, even if engaging in banter at the bar will likely be a luxury enjoyed in the quiet of the afternoon rather than amid the peak-time rush. People visit pubs to enjoy themselves and, with customers’ mood heightened by a beer or two, the atmosphere tends to be lively and jovial.

Serving food is increasingly fundamental to success nowadays, with 80% of pubs now providing meals alongside beers, wines and spirits. So if you have a culinary passion then a pub, as well as a restaurant, can be a suitable route into business ownership.

Despite the well-publicised challenges facing the industry, pubs can still extremely lucrative. If you are worried about the risk of failure in this trade then you could bolster your chances by buying a leasehold rather than freehold.

John Gower, who has managed several pub sales as operations director of business transfer agents SBS Commercial, says leasehold pubs tend to be more suited to less experienced publicans with modest capital.

“If you decide on a leasehold, the ingoings are a lot lower,” he says, “but you do need to look carefully at the terms of the lease. You have a lot more support from the pub operator in the way of training courses and so on. It allows people to get into running a pub at a lower capital outset.”
However, another downside of the lease model is that tenants, who usually sign up for a three-year period, are obliged to sell the brewery’s own products.

If you like the idea of having the support of a large operator but find such constraints off-putting, then you might be interested to know that Punch Taverns offers a long-lease system, whereby landlords are granted far more latitude in choosing which beers to stock and in other areas of the business. And, unlike the traditional tenancy, the lease is transferable.

Running a pub is certainly not something to do as an expedient to making lots of money. It’s called a lifestyle business partly because many people enjoy the lifestyle, but also because it consumes your life.

“It is a way of life, and for the right person, it’s a fabulous and sociable way of life,” says John Gower. “I’ve met many people who’ve been in the industry for 20 or 30 years and they still thoroughly enjoy it.”

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