Robbed

Many years ago a young man, probably slightly before his 18th birthday, discovered a drink called Old Peculiar. It was probably 1982 and the pub was in a well known Lakeland Valley. This young man had on several other occasions disgraced himself drinking far too much fizzy Scotch Bitter to only be subsequently calling out on the great white telephone. OP was found to be quite therapeutic and provided many a jolly evening of convivial socialising in this classic Cumbrian pub and little ill effects suffered except for a thick head the next day.

Thinking it was bitter that was the problem and that dark beers were OK a Guinness drinking career ensued for many years. Unfortunately this young man did not understand the difference between real ale, bitter, old ale, stout or keg beer.

A little while later a small up and coming brewery in Cumbria found this pub to be useful as an outlet. Yates brewery, started by the late Peter Yates, found this pub to be ideal for promoting his beers. Yates beers have been sold there ever since. Possibly, without the likes of this type of establishment, the little brewery would never have got going. Drinking OP, and remembering about Yates, contributed significantly to the young man in this story and his fascination with beer.

The young man is a little bit older now and is of course me. I run a real ale pub and micro brewery and my introduction and understanding of the trade was helped significantly by my time drinking and working at the above mentioned pub.

In a recent local CAMRA branch meeting Yates and Robinsons were both commented upon. Yates is a Cumbrian microbrewery. Robinsons is not. Which do you think the branch likes. Yes, your right, Yates. It's a damn good beer and much better then Robinsons. But the sad ending to this story is that Robinsons have bought the aforementioned pub. The end of Yates in one of the first pubs to support the brewery. Now do my readers understand where I'm coming from when I object to the tie?

Please excuse the rubber bands in the picture. The Landlord is quite rightly demob happy. I wish him all the very best in whatever he does. He's a good guy and I don't blame him one bit. I hope the incoming lessee can make it work - I doubt it personally, he'll be paying too much for the beer.

Scaremongers

The recent report from SIBA indicates that there is growth of success for the many microbreweries in the country. This is such fantastic news for anyone in the freetrade or who are owners of a small local independent brewery. It is also good news for the discerning beer drinker as the opportunity for choice increases. The only limiting factor to this success is probably a limit to the number of freehouses that these breweries have as outlets. Hopefully the Fair Pint Campaign will help to do something about this.

The Independent Family Brewers of Britain are obviously worried. In the Morning Advertiser there is an article that rather over exaggerates the role of the family brewers in providing choice. Furthermore, there is a claim that cask ale would have died out had it not been for the family brewers. Interestingly, I cannot find the article online but only in the printed version of the trade publication.

In the article, Paul Wells who is the chairman of the IFBB is quoted as saying.

"Cask ale has only survived because of the tie. Consumers only have choice of beer and regional diversity thanks to it. It is only because of the tie we have been able to resist the lager tide that Edward Taylor created with Carling Black Label through the '50s and '60s onwards, and the subsequent rise of the property pubcos."

The article seems to me to be suggesting that if the tie were to be outlawed then we would see the end of real ale and choice. I'm sorry Paul, but from where I am the freehouse is where you find good real ale. The freehouse is where you often find interesting beers from small independent microbreweries.

The industry figures would suggest that as a proportion of the total number of pubs there is a continual increase of tied houses. If we believe that the tie should remain to keep the family brewers in business then I don't think that's a good enough reason. When there is an increasing demand for micro brewed beer and an increasing number of microbreweries starting up, maybe we should consider how valuable the tie really is.

If a brewery is good enough and the beer is good enough it should not need to monopolise an estate of pubs to survive.

FREE of TIE tenancy

I've been in the cellar all day moving a consumer unit, fuse box to the lay man. I've been putting in circuits for the new gents lights, hand dryer and replacing old red and black cables with brown and blue. Oh, and tidying up cabling so that Alan can put back the ceiling he has previously demolished.


This did involve a brief venture into the VOID - but only Ted would fully appreciate that.


I have noticed with all my refurbishment of bar and cellar equipment, the amount of gear bearing the words "Property of S&N". Well, considering the amount of damage S&N engineers have done to the fabric of the building in the 20 or so years they had run of dispense equipment, I'm going to damn well keep the lot.

Most of this work is fairly mind numbingly boring. It's why I gave up being an engineer in the first place. But you do get lots of chance to think about things. For instance subjects for blog posts. I've got a few going on in my little brain right now. After getting the electric powered back up I came through to the office to set to on tonight's post. Ann however had left a couple of post cards, sent from S&N, on my desk.

FREE OF TIE LEASE - A JOKE??

It seems not. I do hope they manage to lease them. If you're looking for a lease on a pub, now is your chance. Negotiate your own terms. So I'm almost sorry for the thoughts I had about S&N earlier in the day - It's just a good job I can't blog straight from my cortex, that's all.

Meanwhile, it seems there are comments on other bloggers blogs that I need to catch up on - also, I should go to bed as I've convinced myself I need to go to some beer festival in Manchester tomorrow. Ho hum, the life of a beer geek!

What makes a great pub?

I know that there will be plenty of you will disagree with me on this one. I will of course make broad sweeping statements here that will have many, many exceptions. I think though, it is an interesting question worthy of airing.

I would say, without doubt, the best pubs are freehouses. This is a non negotiable point in my view. It is just not possible for a tied house to do everything that I want from a pub. There will be an element of predictability in the beer range and rarely anything at all from a good microbrewery. Generally there will be ties in other areas of the business such as bottled beers, wines and spirits which will limit customer choice. There will be a product range which generally leaves me feeling cold. I like to see things that I have never seen before when I visit a pub, not the predictable range of mass marketed products I can get down the supermarket for a fraction of the price.

Now I know Tandleman and Tyson will jump in and tell me how good the tied houses are around their neck of the woods. I will certainly be disappointed if they don't comment. But while tied houses can be good, the best of them are never as good as the very best free houses. Tied houses are a reality though, despite some of us, me included, wanting to put an end to it, I rather think it's a futile struggle.

It is possible to make a tied house very good, not the best but putting on a good show. The best example in my view, that I have visited recently, is Jeff Bells pub of Stonch's blog which gets a mention here. I hope Jeff doesn't mind me using his pub as an example, but having visited and talked to him he clearly is working the ties he has to his advantage. When I was in there I had two good beers. He had Timothy Taylors on, which I can get easily anywhere, but two others of a reasonably interesting rarity for me. I believe he chooses carefully off his list to give good variation for his customers. My only complaint was the lack of use of a sparkler on northern beers.

The key though to a great pub is the right ambiance. This is affected by so many things. Lighting, furniture, temperature, decor, music and hosts welcome; a thing that Jeff Bell clearly works very hard at. The ambiance is also affected by the customers themselves. This can be a difficult ingredient for the publican to get right. What I find is that for me, the more pleasant clientele are generally to be found in the freehouse. The tied system normally encourages a volume style of trade. The landlord, be it pubco or regional brewery are looking to maximise barrelage and so marketing and promotions are on a sell more save more basis. These pubs tend to push the higher profile, mass produced and mass marketed products such as "cooking lager" and "Alcopops" that are associated with, in my view, less savoury clientele and "binge drinking".

In discussions with a friend of mine who runs a highly regarded pub we shared our experiences of "regulars" affecting the ambiance in the pub. In my friends case the existing customer base sat right in front of the handpulls in a way that was intimidating to new customers. Effectively staking their right to be sat exactly where they were. Eventually this group had to be banned for the pub to progress. This is one of several pubs I hold in high regard, where they are completely and proudly free of tie. The lack of any mass produced products make this type of pub very special. Lager HAS to be properly lagered rather than some fast fermented thing that is effectively a light mild just gassed up and chilled to death.

Another great freehouse closer to me has the most wonderful ambiance due to it's refusal to serve any mass marketed products. Keeping out the "cooking" lager reduces the mass brand conscious types that are, in my view, the source of the social problems facing the pub industry. The sense of belonging to the establishment is so much appreciated by the regulars that they positively welcome all comers to peruse the array of handpulls, and if Continental fizzy is your thing then you are directed to the discreet gassy stuff that might contain many true pilsners or lambic fruit beers.

Clearly some of the smaller tied houses are suffering. Looking at the reports from the Pubco inquiry that is currently getting going there seems to be some worthy grilling being given to the pubco's. Jeff Picthall has provided some links. It is my belief that the tie is not good. It may help some regional breweries to survive, but this is at the expense of small community pubs being able to be flexible. I have tried to take a balanced view here but I believe that the disadvantages of the tie far outweigh the advantages.

For me the tie restricts the abilities of smaller community pubs to be flexible and limits the customer base to a bland, one size fits all, mass produced, mass marketed and go large style product range. It encourages volume consumption by the methods of promotion brought down from the pubcos and breweries.

Yes, phasing out the tie may well result in some regional breweries failing. But why is that a problem? We have more new microbreweries springing up all the time. Loosing Tetley's for instance is no bad thing. There are so many newer beers around and many more to come, I expect. If that is the price to pay for better pubs then I'm all for it.

I have found myself damning the tied system here more than I intended to. My intention was to support the freehouse. I maintain that the best pubs will always be freehouses. So why then is it that the industry is stating that it is the freehouses that are more likely to close? I think the main reason is because when they could, the pubcos bought up the more viable properties leaving the rubbish to the free market. Although I have no firm data to hand, the number of free houses as a proportion of the overall number of pubs has been falling for many years. This has to be a concern for the beer drinker.

The pubcos and the regional breweries alike are only interested in money. Yes sure, I am too as a pub owner. But I also care about what I'm selling. Pubcos and big breweries alike only really care about money for the shareholders. They may own the precious rights to the brand of beer that you grew up with, but they can't all live forever.

We must remember one thing, and if the rest of what I have said does not ring true, then I hope these final words you can agree with. We need to do something fast about our pubs. With so many closing we need to rethink what we are doing, and rethink fast. This is happening with the pubco inquiry, but as Nick Bish has pointed out “evolution” and not “revolution” is required and that any dumping of the tie overnight would be "cataclysmic".

I just hope it is not too late for many pubs.

More on the tie

Firstly, Hoppy Birthday Tandleman - It's not the blog authors birthday you understand, just his blogs first year. I have Tandleman to thank in part for helping me find my way in the blogging world by comments on my blog, and putting up with my comments in reply to his writings.

Another blogger who has helped me is Jeff Pickthall, who regularly puts up worthy issues for discussion and provokes Tandleman into interesting counter comment. Recently the discussion has been over the tied pub. Tyson also occasionally has some things to say on this and other subjects that cause stimulation of my thought processes.

What is interesting about these three worthy characters is that although they seem to disagree on finer points, there seems to be a general consensus that there are problems with the tie system. What is not being agreed upon is just what should be done. Ho hum, at least there is some common ground. Mr Tandleman has helped me realise that the discussions are good.

But what shall we do about it??

I don't know, but Mr Tyson made an interesting post here about the governments ideas to tackle drink related problems. His post seemed to have a level of sarcasm in it as far as I could tell. No? Must be my imagination then. Anyway, after recent postings by all three of these bloggers I started doodling - and the diagram here is the result after tidying up.

Jeff's recent post

Tandleman's recent post Actually I thought he'd made more posting on the subject - perhaps I'm just getting mixed up with comments

I knew there was another one,It's here

The Tied Pub - for and against

The beer tie and pub companies (pubco's) are being blamed for much of the trouble that pubs are suffering. I'm not altogether convinced that this is true. I am however against the beer tie as I believe it restricts the potential of the craft brewed market, limits customer choice and is a monopoly which exploits the aspirations of up and coming licensees often dashing all their dreams of running a good pub. Conversely it has also provided many people with the ability to gain a foothold on the ladder of pub management, one that they might otherwise have been unable to attain.

In this piece, I intend to explore some of the advantages and disadvantages in a constructive way. I hope, that if nothing else, it might provide an insight for the prospective pub entrepreneur into the various methods of starting out with your own pub business. Careful shopping around at this time, if you can finance the right project, could be very lucrative. Although the pub market is in a bad way, there is the possibility that it will turn around some time soon. As they say, invest when the market is at the bottom, it's judging when the bottom is. It could be a very exciting market to be getting into for those who are brave enough.

The models of ownership

There are 4 basic models of ownership: managed, tenanted, leased and freehold. All these can have a tie associated with them. Freehold is much less likely to have a tie and is only very subtle in the form of a loan with strings, it only requires alternative financing to enable the removal of tie. All other forms normally, although not always, have a tie of some form or another. There is however normally only a tie on the wet trade so the pub that does food or even better has rooms will have various areas of the business with better freedom.

Before I proceed though, I have to point out that whatever model of ownership is in force the thing that will effect success more than anything else is location of the property. I will look at this in more detail later but a pub that is located near centers of permanent population will always do better. Where there is the ability for several pubs to survive in a close proximity, they can often feed off each other, provide a pub "circuit" or an area known for diversity. For location, I would argue that where one pub has a population of less than 500 within a 1 mile radius there is doubt about it's viability. There are special cases in tourist locations, but weather and seasonal effects can make it difficult to make a pub viable where the vast majority of the trade is from visitor numbers.

I am not going to discuss in any details the managed or tenanted model more than to say these properties normally offer the licensee the ability to run a pub without any risk of his own capital. Handing back the keys and walking away is often an option without loosing out. The risk is low but the gains are also likely to be low.

The tied lease

The vast majority of tied pubs after this are leased. There are free of tie leases available but they are not as common. When you "buy" a lease, you are paying for the right to operate the business that runs the operation in the pub building. This lease has a value and the value of the lease is influenced by how well the business runs: a combination of turnover and profit. The building is owned by somebody else, often a pubco or brewery. The responsibility of the owner of the building and the owner of the lease will have been defined when the lease was drawn up by the property owner, although with a new lease there is sometimes a chance to negotiate the terms.

The terms of the lease will determine such things as who is responsible for maintenance of various aspects. Some leases will require the lessee to carry out all necessary work. Often though the property owners will ensure the fabric of the building is maintained and internal decor, fixtures and fittings becomes the responsibility of the lease.

Most importantly the lease will state where the lessee may purchase various product from. In a tied lease much of the "wet" product, i.e. beer, wine and spirits will need to be bought through the property owner, sometimes this can also extend to soft drinks and occasionally food. Sometimes though there is an agreement where flexibility of the tie is permitted.

The cost of buying a lease is a fraction of what it would cost to buy the freehold of the same property. Sometimes it can be a significant portion and sometimes less so. It is though, a significantly less expensive option than a freehold in most cases. There is a bias to this as leased properties tend to be better located for reasons I will come on to. Better location results in a better trade which results in the business being worth more.

Pros and cons of the tie

A significant advantage of the tied lease model is the great support that the pubco or brewery gives to the licensee. They will normally look after such things as the building infrastructure and significantly invest where this is required. If the pub needs a new roof, then it will get one. If the electrics are not to regulations then they will be upgraded. Wet rot, dry rot, rising damp and subsidence should never be a problem for long to the leased pub licensee.

A further advantage is that there is often significant support to deal with legislate issues such as employment law, health and safety and accessibility. Training is often provided and support for cellar management are all provided at either reduced prices or without cost. In short the leased model has inherent built in support. It was recently estimated that current legislative overheads now accounts for £30,000 on average per property.

The leased model has it's disadvantages. For a start the whole of the licensees investment is into the pub business. His only assets are often a few tables and chairs and maybe the kitchen equipment, most of which will have very little second hand value. The majority of the capital he puts into the project is to buy a viable business. If this business turns out to not be viable and folds, he looses everything he has put in.

Free of tie

The free house does have huge advantages. The initial investment costs are normally significantly more but the licensee will have full ownership of the property. A bank may have first call in the event of bankruptcy, but by and large this is a technicality. The property itself would normally have intrinsic value in the bricks and mortar. Even if the pub business were to fail then the owner may still sell the property, although it's value may be reduced due to there being no viable business at a commercial property and the problems associated with applying for a change of use.

It is then, somewhat easier to purchase the lease on a pub than the freehold. But I'd like to explore that a little. As the lease on the pub only has intrinsic value while the business is viable, it can be harder to get a loan. Any loan would have to be an unsecured loan with higher interest rates and the proportion put up by the prospective licensee would have to be greater. For this reason it is often the case that the new lessee will be putting all he has into the business. This can often be the equity in any property he might currently own. Conversely it is perfectly possible to put the equity of many houses owned by 40ish year olds into the deposit for a reasonable freehold property and get a mortgage for the rest. In my limited experience of looking at purchasing freehold against lessee hold the deposit is not that much different.

The current credit situation does make this rather more difficult just now, but then everything is a bit difficult right now. It is important to remember though, and I can't stress this enough, with the leased model, if the licensee fails he will loose everything, but the pubco or brewery will still have the freehold title to the property, the property owner, the pubco or brewery, is putting up very little risk. The leasehold model is there to pass the risk on to licensees and away from pub companies and breweries.

Forming a monopoly

It has become apparent to me that very successful free houses tend to be the properties that get bought up by the pubco's and breweries. They are prepared to pay just that little bit more for the ownership of a very successful pub as it is guaranteed to provide a significant outlet for their own product. This has resulted in a bias in the trade. As mentioned above the location of the pub is going to provide success over and above the type of beer sold, quality or style of food or the friendliness of the staff. Not that I'm diminishing the value of these pub features, but it still remains a fact that some pubs are much harder to run due to location and some will be much easier. The pubco's and breweries avoid like mad the more difficult to run establishments, the ones that rely on food and accommodation for the majority of the revenue, basically, the ones where the location results in low beer volume. The remainder that are in the free trade are more marginal, as a rule or are not true pubs but diverse pubs that might be simply a public bar in a hotel or similar.

Where the tied pub is really a problem is in the removal of customer choice. There will always be a restriction on what the landlord is permitted to sell. A tied pub will almost never sell micro brewed ale. The economics of it will not permit this to happen. Pubco's and breweries own pubs so that they can sell their beer into these tied estates and make money out of the pseudo monopoly it creates. Without this commercial advantage of owning tied pub estates they would not be investing in pubs. In short, it's a double edged sword that cuts at the pub industry.

It's down to choice

The reason that the tied houses work is because both licensees and customers alike choose to get involved. Without customers who patronise these establishments they would not work. People who are looking to run their own pub find the leased property as a perceived lower risk and lower cost option. I don't believe this is the case, but perceived like that it is.

If every person who was looking at investing into the pub trade thought very carefully about what they're taking on there would probably be less successful leases taken out. If every customer looked twice at the beer range and realised that they had chosen a tied house then the free house model would do better.

The most disgracefully action of pubco's is the act of putting a failed tied house on the free market with a covenant on it to prevent it ever being used again as a pub. I am all for free houses that have failed being allowed to be sold and converted to dwellings if the alternative is for a licensee, who has put his life's worth and more into a pub, to loose everything. But it must be tested on the free market first. There are examples of tied houses, where the pub company has competing property close by,  are being sold with a legal covenant that prevents it being opened as a pub.

We do have to remember that there are some good tied houses out there. Generally the vast majority of the general public like the product that is delivered by the tied houses as it represents a consistent and reliable product. This is the same reason of course that keg beers still take up the majority of the market. Bland and predictable is what the majority of consumers want.

Disclaimer - I am not an expert on the legal issues surrounding leasehold's and it is possible I have some details wrong. Please seek independent  expert advise if you are thinking of taking on a leasehold. This independent advise will not come from a brewery, pubco or estate agent. I would recommend the BII in the first instance.

As this is an important issue, please comment on any inaccuracies as I believe we need the issues into the open, as I've said, if for no other reason than to advise new licensees.

From Ted on the tied house..

On Stonch's blog there are some comments on the beer tie.

See Ted's opinions - he's in Oregon Brewers Union 180:

The tied house prohibition came about as part of the repeal of prohibition in 1933 (the blessed 21st Amendment), a silly law that did enormous damage to the quality, variety, and peoples' perception of beer in this country. Debates on the subject of the "evils" of the tied house resulted in the national tied house prohibition. The alcohol industry was conceptually divided into three tiers: the manufacturer (or supplier), the wholesaler and the retailer. No business was allowed to be involved with or own more than one of the tiers. Therefore, a brewery or wholesaler could not regulate who could sell their products. It is completely up to the retailer to stock what he saw fit. It was also legislated that the states retained the power to regulate the production, distribution and taxation of alcohol.

Oregon has been a great pioneer in making sensible laws about beer. In 1985 the manufacturer and retailer of beer was allowed to be the same entity, in the form of a brewpub. That's why I'm sitting here with a brewery in the back of the building and a number of hand pulls in the front. This makes sense. There are also no laws that restrict what we brew, or cultural and historical precedent that in effect prevents us from branching out. As a result, Oregon has such an amazing variety of beer styles. I just got this in an email from a new brewer up in Portland:
"I was telling some beery friends yesterday that Oregon is finally branching out, with you doing proper cask beers, Heater-Allen producing great lagers and myself in the near future specializing in farmhouse-style ales. An exciting time!"

Also, in 2003, a brewery that produced under 1000 BBL/year was permitted to self-distribute.
Because of its laws, and the unprecedented enthusiasm for beer, Oregon now has almost 100 breweries. Check out the Oregon Brewers Guild (oregonbeer.org). We also have some of the lowest duty in the country. Our national duty rate is $7/US BBL for small breweries, and the state tax, called the "privilege tax" for some reason, is only $2.60/US BBL. And Oregon has no sales tax. So whenever I brew my 2 UK barrels of warm flat beer, I pay $19.53 to the feds and $7.25 to the state.

And I can put on any guest beers and ciders that I want. I now have a cider, perry, strong IPA, amber, oktoberfest and a stout on the gas taps.

It surprises me that the duty on beer in the UK is so high. And, also, I can't understand why the tied house is allowed to live - the advantages escape me.