The benefits of owning a pub tenancy
If you dream of becoming a pub landlord, perhaps having left the Services or because you want to run your own business, there are a number of options available to you.
The big question is how to proceed? You can buy a pub and run it as an independent business taking sole responsibility for every aspect of the pub operation; i.e. buying the freehold. Or, alternatively, you can take a lease or become a tenant of a major brewer or pub company.
Opting to buy a freehold can be very hard work, and expensive for someone without experience of running a pub, especially given the complexity of the brewing industry and the licencing laws. You really have to know the business, and have a lot of contacts within the industry to make it work. If anything goes wrong – it is your responsibility to deal with every problem and your business that suffers.
Running A Pub As A Tenant
Instead, many people choose to lease or become a tenant. This is the best way of sharing responsibility since the tenancy agreement will allow you considerable flexibility to operate a pub as you would like, but with the comfort of knowing there is a large organisation able to provide advice and support as required.
Here we share some of the key benefits of a pub tenancy:
Start Up Costs
Look closely at the costs involved before choosing which avenue you wish to take. As a freeholder you will be responsible for all costs including finding and buying the pub. A pub tenancy involves a much smaller start up cost for people seeking to develop a business venture, and capital costs relating to property are much lower.
Pub tenancy costs vary depending on the size of the pub and the type of agreement you enter with the pub operator, you can find a list of typical costs here.
Generally short-term tenancy agreements last five years. During this time you will gain great business experience and skills such as people management and customer service skills, financial knowledge, and marketing expertise. Towards the end of your tenancy you may then wish to consider extending it or taking on a different pub.
Partnering With A Pub Company Or Brewery
If you want to become a tenant landlord, then it is important to choose a pub company or brewery carefully. Make sure you feel comfortable with the company and the way it operates. Check out the beer – do you like it? Selling and promoting a product you do not like is not conducive to a good business relationship. Investigate the training and support systems provided by the company. What do they offer? Do they provide all that you are likely to need?
As a tenant pub landlord, you will be able to choose your pub from a selection of available locations owned by the company. Check out each location, and decide what is right for you. Consider factors such as town versus village, noisy versus quiet. Accessibility in terms of schools and services may be a key factor if you have a family. Businesses such as Greene King try to match tenants to a pub, so that personalities are suited to the location. The company will be able to provide trading information about each site and this should be studied carefully.
The Economies Of Scale
One of the advantages of being a tenant landlord is that you have the benefits of being self-employed together with the benefits of being part of a larger organisation. This does make running a pub much easier since you can gain from the economies of scale that become available. Greene King for example has over 1200 pubs. This means that its’ buying power for food, cleaning materials, banking, insurance, and equipment is considerable. Discounts can be negotiated which can be passed on to the individual landlords, thus reducing their bills. Many brewers will also offer their tenants discounts on drinks and other promotions, for example though our ‘Bar Gains’ incentive.
Support and Advice
The level of support provided by a company to its tenants is crucial. Each pub landlord is responsible for the success of a venue, and attention has to be focused on generating sales and customer service. By signing up for a tenancy agreement, you can have the freedom of being able to run your own business while accessing high quality support whenever it is required. You have the benefits of being self employed yet have the expertise and support of an established and successful business.
Companies such as Greene King recognise the value of the entrepreneurial streak present in any pub landlord. It is, after all, one of the reasons why a landlord has chosen that role – they want to stamp their personality, their ideas onto a business concept and make it successful. While it is important that pub companies and breweries protect their brand and business image, many allow tenants to personalise their pub business under the umbrella of that company. Tenants have the opportunity to discuss potential business ideas to make their pub a great success taking into account factors such as their location and customer demographic. For example through gourmet gastro menus, specialised catering, promotions, and music, sports and other entertainment. Landlords should be able to seek advice as to the best way to proceed from their Business Development Manager
Finally, another key benefit of buying a pub tenancy is job security. During the tenancy, pub landlords are protected under the terms of the Landlord and Tenant Act 1954. However, the level of support and advice from a good brewery or pub company, also offers pub landlords additional job security: knowing that they have expert help on hand to make their pub business a great success.
If you are interested in a pub tenancy and would like to explore the options further with myself or another member of our Pub Partners team, please get in touch.