I’m often asked by my regulars how the new deal for tied tenants is going to affect the pub trade.
With a weary smile I explain that all will not be rosy.
MPs have recently voted for a market rent only option for tied tenants in the pubs code following a passionate debate in the House of Commons, putting the future of the beer tie into question.
For those that don’t know, the beer tie is where a tenant is basically strangled by the brewery in having to buy all their beer and spirits from them at the price they dictate.
A tenant is the person who has come into the industry and invested in the business within the bricks and mortar of the building which is still owned by the brewery.
He or she in effect is an entrepreneur who is trying to earn his money working a long stressful day.
Unlike entrepreneurs in other sectors, breweries almost ride roughshod over their tenants with high rents and exorbitant prices for beer and spirits.
As an example, two licencees could be purchasing a barrel of beer from the wholesalers; one is a tenant and the other owns his pub.
The owner may pay £80 for his barrel and the tenant will possibly pay £150 – almost half as much.
Who is going to be able to make the most money by charging less for the beer?
Not the tenant.
What may happen in the future, and don’t hold your breath for a quick resolution, is tenants may soon be able to buy their stock from wherever they can get the best deal (like every other type of business in the country).
Breweries will not take this lying down.
One option open to the brewers is to raise the rents, great if they make good on a lot of maintenance that needs doing but another cost to the tenant.
I’ve heard of one tenant though who reckons if the rent is doubled he could still make a profit and lower his prices buying his beer on the free market.
Brewers could have implemented this years ago – and possibly prevented many pub closures.