15th May 2008
A Fair Pint campaign welcomes CAMRA’s decision to join the debate on the future relationship between lessees and pubcos. We are also grateful for their support for our efforts to see a further Select Committee Inquiry. The Fair Pint campaign, however, fundamentally disagrees with CAMRA’s position that the removal of the supply tie is counter-productive and would lead to higher rents.
They suggest that the removal of the tie may lead to increased rents, but we would argue that it is more likely that we would see rents decrease; not least as substantial parts of the tied estate are already at free market rental levels.
Where rents do increase, however, this will purely be as a result of the extra profitability that a removal of the tie would bring, and would not outweigh the other potential benefits.
Let us explain. Rent would be calculated by using the industry-wide and adopted ‘Profit Test’ method. This method assesses the Fair Maintainable Trade (FMT) of a pub, for an average hypothetical tenant (not necessarily the current tenant). The FMT is then used to calculate the gross profitability of the pub, from which the operational expenses are deducted. What is left over (the Divisible Balance) is split 50/50 between the pubco as rent and the tenant as operational profit.
This fair and transparent rent calculation method will encourage lessees and pubcos to work in true partnership, and maximise potential profit for both parties.
Responding to CAMRA’s statement, Steve Corbett of the Fair Pint campaign said:
“We welcome CAMRA’s observations and are pleased to see there is much common ground. It seems that the only substantial difference between CAMRA and our campaign is CAMRA’s belief that the removal of the supply tie would lead to increases in rents.
“It would appear that CAMRA have not recognised that, at worst, the rent may increase by 50% of the extra discounts which a tied tenant would enjoy were they free of tie. For example, the ability for landlords to sell 200 barrels at an extra £60 a barrel as a result of being free of tie could not transmit into a rent increase of more than £6,000, probably much less if the TISC recommendations are enforceable. That would mean that the tenant would be better off by at least £6,000 a year. This is real money that tenants need to ward off the effects of higher fuel and wage costs. They need the fairness of freedom to survive.
“On the marketing of Real Ales, we recognise that cask conditioned ales have fallen by more than 50% over the last decade and we are aware that CAMRA is concerned that work needs to be done on the choice of ales available.
“We would welcome the opportunity to sit down with CAMRA to allay their fears on both of these important issues, so that we might work together to resolve the current inequitable position in which pubcos and their tenants operate.”
1. A Fair Pint campaign has produced an advice sheet (PDF file) on how breaking the tie would affect rents.
2. To arrange interviews or for further information, please contact Hugo Legh or Sarah Hyder at Connect Public Affairs on 020 7222 3533 or firstname.lastname@example.org