By Marcus Leach
Fears that pub companies are holding their small tenants to ransom have led to calls for stronger regulation of the industry from the Forum of Private Business.
The Forum has written to Adrian Bailey MP, Chairman of the Government’s Business, Innovation and Skills (BIS) Committee, which is carrying out an inquiry into pub companies, to share the experiences of its pub tenant members — including those who have complained about the ‘heavy handed and unfair treatment’ they experience at the hands of large firms.
The Forum is calling on the Government to strengthen pub industry regulation to ensure that:
-Pub companies comply with codes of practice,
- When it comes to pub rental, a tied tenant should be no worse off than a free of tie tenant,
- An independent disputes mechanism is created in order to deal with complaints,
- More pub leases free from product tie are made available.
While industry codes of practice have been introduced in recent years they are voluntary and have not removed the hold many pub companies have over their tenants, who often find themselves tied in to unfavourable contracts and subsequently struggle to control costs.
In 2009 the BIS Committee found that 41% of pubs cited the price of ‘tied products’ as the single biggest drain on their cash flow — more than any other financial worry.
“The first BIS Committee inquiry took place in 2004 so pub companies have had seven full years to improve their treatment of tenants but little progress appears to have been made during this time,” said the Forum’s Chief Executive Phil Orford.
“If we are to reduce pub closures the abuses of power by companies over individual tenants must be curbed by stronger statutory regulation, and these codes of practice must be enforced as it seems not all companies are complying. For example, evidence from our members suggests that grant concessions are not being given to struggling lease holders.
“In a deregulatory environment, this is one area in which better regulation could be used to support and protect small businesses.”
One of the most common complaints is that pub companies give preferential treatment to new tenants by giving them discounts on alcohol and other products in order to help them get started.
The Forum believes similar discounts should also be available to existing leaseholders so that they can compete on price and so that more struggling pubs are able to stay in business.
There can also be issues when one pub company takes over the lease of another. Forum member David Kehoe-Pank runs the Old Vic pub in Southsea and has had particular problems since Enterprise Inns took over the management of his lease from Whitbread.
He believes that Enterprise Inns has repeatedly been unreasonable in the way it pursues debts, including withholding product deliveries in lieu of payment.
“Every Monday Enterprise Inns’ accounts department telephones the pub to take our beer order for the week, we are then told how much we have to pay into their bank for rent and trade. If for some reason we cannot pay what is demanded we do not get a delivery,” said Mr Kehoe-Pank.
“On 16 February 2010 - out of the blue - we were taken to court by Enterprise because we owed them £10,573.46 and they wanted repossession of the pub. I was given three months to pay off the debt, which I did.
“Three weeks ago a bailiff employed by Enterprise came into the pub at 4pm wanting £12,000 we were in debt for. He would only accept cards or cash payment - at 4pm it was not easy to raise that kind of money, but luckily we did.
“We could not get into debt if we were getting deliveries. I think Enterprise Inns do not like tenants with a Whitbread lease which ties us in for beer only - they would prefer that we were tied for everything.”
In response a spokesman for Enterprise Inns told the Forum that they do all they can to support tenants.
“Enterprise Inns makes every effort to support tenants in times of difficulty, including maintaining supplies when there are payment arrears, and payment plans for clearing debts," the spokesperson said.
“Debt collection procedures are only instituted when tenants, despite our best efforts, continue to refuse payment. Neither our support nor our debt collection procedures are linked to the type of agreement a tenant has with us.”
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