If you are thinking of buying a pub, before we talk about the different ownership options, we need to ask you…
Do you have what it takes?
Although the pub trade is one of the choices of business for budding entrepreneurs, the demands of the job can be overwhelming to some. The long hours can be both emotionally and physically exhausting, this coupled with the stringent checks you need for your stock, understanding of the licensing laws, health & safety, food safety as well as managing sales activities can be too much. That said, it can also be one of the most rewarding occupations there is and the social nature of the job means the ‘pub’ can become the hub of a community.
Having previous experience of working behind a bar is extremely useful as will an outgoing personality and knowledge of great customer service – I’m sure we’ve all been in a situation where someone has served us, either at a restaurant or behind a bar, that has made us feel under valued and not want to visit that establishment again. But don’t be deterred if you don’t have this experience, you can still be a landlord. The British Institute of Innkeeping (BII) offer courses across the UK for new and existing landlords, and the National Landlords Association (NLA) offer a foundation course for new landlords to develop their professional skills.
Despite the challenges that exist with in the industry, with the right approach and thorough research beforehand operating your own pub can provide a pretty good income.
First things first, location, location, location…
Buying a pub shouldn’t be seen much differently from buying a house – that is in terms of location, each have their own merits or indeed challenges. So what are your choices?
- Country – Although for most, an idyllic lifestyle choice, you may need to work harder to ensure your pub gets it’s fair share of tourists or passing trade, be prepared that you will need to bolster with dry (food) income.
- Suburban – You may be lucky that it is already the central place for the community to gather usually place in well populated areas.
- City – Usually a different vibe from the other two options, a more niche customer base and character potentially
When you see a location you like, try and frequent the pub and take an interest in the area. Talk to the landlord and observe how they operate and the type of custom it already has. This should give a pretty good idea of what you may expect and whether or not that is the right location for you – it may surprise you when you’re observing ‘business as usual’ rather than just reading the agents particulars.
So what are the ‘ownership’ options available?
Managed – this is not really a style of ownership as you work for the brewery or Pub Company. You will have to run the pub to their operating manual and in exchange will receive a salary and usually a bonus if certain targets are met.
Tenancy – This is entry level of “ownership”. The Brewery or Pub Company will own the building and you will rent the pub under a short term tenancy agreement. You will be tied to buying stock from the landlord or nominated suppliers. The business is yours and you will be responsible for the running costs. You will have to purchase the stock and fixtures and fittings. A security deposit is frequently paid, which would be equivalent up to three months rent – this provides security against non-payment of rent and brewers trading accounts..
Leased/Leasehold – The Brewery or Pub Company own the Building but you lease it for usually 10 , 15 or 25 years. You are tied for beer, but you are usually allowed to stock on guest ale. You may be able to find a private lease, these are usually “free of tie” in which case you can buy your beer from where ever you want. You might also see a Leasehold Pub described as “Franchise” this means that it will be a branded pub and you will have to adhere to the Brand Manual. Lease hold premises are usually conducted under a fixed term and pay rent set out by the Landlord. You may find that with a Leasehold business, you are tied in to suppliers and pricing agreed with the Landlord.
Freehold – This is where you buy the “bricks and mortar”and are free to run the business as you wish subject to applicable laws and regulations. With this type of business the profit can be much higher than with leases and tenancies as you are ‘free’ to negotiate prices with suppliers rather than be tied in to accounts as when a tenant or lessee. Usually these opportunities are found through transfer agents such as KSA Commercial.
This is often confused with the term “freehouse”. The term “freehouse” refers to how the business is run, i.e. without a “tie”. There a “freehouse” can be either Freehold or Leasehold.
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