Logo at head of page and on the plethora of TO LET signs copyright Enterprise Inns plc
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Enterprise Inns plc have the over-riding aim to enjoy a mutually profitable, open, respectful
and honest working relationship with all of their publicans, based upon a shared commitment to abide by the obligations, responsibilities
and ways of working that feature throughout their Code of Practice.
If you are considering taking on an Enterprise Inns lease
then you will be trying to balance a real desire to enter the world of the pub landlord with overwhelming evidence depicting
the PubCo as directly responsible for much of the pub industry's problems.
Any legal or business advisor worth their salt
will tell you NOT to go ahead with a PubCo lease or tenancy - and, like so many before you, you may be driven to adopt a blinkered
view of the evidence and the advice and, encouraged by what could be seen as unsubstantiated promises made by the PubCo, you become
determined to convince yourself that you are taking a cost-effective yet profitable route into the pub business.
is designed to help you to make the right decision.
Making the initial decision
The overarching and the hardest advice to
take on board is: 'don't let your heart rule you business decisions'.
Although there is much, much more to running a pub
than evidenced by the jovial landlord easing pints into a roomful of happy customers - without a doubt it can be a very pleasant lifestyle.
As a prospective tenant you should keep your business head firmly attached at all times. If everyone did then all PubCo/tenant agreements
would have to be mutually beneficial and this advice unnecessary.
Too many would-be pub landlords, however, make heart-led decisions
and enter into non mutually beneficial agreements. Many go bust. Don't be tempted by a reduced price or 'nil premium' offer unless
you can get up-to-date trading figures from the outgoing tenant - and the reason they left the business. Few leave wealthy enough
to retire to their second home in the sun, so beware.
Making the right business decision
Sidney Phillips (UK based licensed
business agents) advise (http://www.sidneyphillips.co.uk/advice.php?p=12) that sustainable rents are generally in the range of
10%-15% of sales. 20% is unsustainable. So for a projected turnover of, say, £100k per annum the rent should be somewhere between
£10k and £15k per annum.
Before you can make any meaningful business forecasts you will need to understand how Enterprise
Inns collect rent. Rent is levied in two separate forms: the advertised, or dry, rent and the 'wet' rent as a percentage
of sales of tied products. Enterprise have a pre-determined income expectation for each pub and the combination of both wet and dry
rents make up what Enterprise Inns consider to be fair. In reality it should be a figure to allow a 'reasonably competent
operator' to achieve a 'fair maintainable trade'.
You will not be told how the Enterprise expected income figure is reached.
You will not be told the amount of the wet rent. You may be told previous barrelage figures but not the rent levied per barrel - only
the 'discount' per barrel. This is based not on the retail value of the barrel - but the Enterprise selling price of the barrel.
You cannot begin to calculate the actual 'rent' per barrel as Enterprise buy from suppliers at a heavily discounted (yet undisclosed)
rate, add on an amount for the 'tie' then sometimes (but not always) give discount to the tenant from the 'tied' price of the barrel.
As an example an Enterprise wet-led pub (kind enough to reveal trading figures) has a dry rent of £11k
and a wet rent which turns out to be around £33k. A combined rent of £44k should result in a turnover in the region of £300k per
annum to make the business viable. Sadly, for this tenant, sales of £150k per annum either mean that the tenant is 'underachieving'
or the rent 'expectation' is too high. (please see 'Code of Practice' sections for tenant options should they find themselves
in a similar situation)
Please be aware that without knowledge of total (wet + dry) rent or Enterprise's expectations of potential
turnover or actual trading figures, you will not be able to forecast accurate trading figures. Many people take a stab in the dark
using 'gut' feelings. DO NOT DO THIS. Your Enterprise Inns representative (usually the Regional Manager) will be happy to give you
the information you need. If he is not then WALK AWAY from the deal.