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Fri 13th Feb 2015 - Friday Opinion |
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Subjects: The benefits of running pubs free-of-tie, breathalysing customers, fake charities and the alcohol problem and bingo in pubs
Authors: Ted Kennedy, John Gaunt, Paul Chase and Tim Shield
Free-of-tie pubs need not be a Valentine’s Day massacre but rather the start of a new romance by Ted KennedyWith 14 February looming, my thoughts have drifted to pondering the current very public tiff between politicians and tenanted pub companies over the tie, and some of the relationship advice that has flowed from the analysts and the press over the potential ending of it through the "market rent only" option.
Like any good bust-up, there is plenty of emotion. But do the facts really support the notion that we are looking at another Valentine’s Day massacre? I don’t think so.
The big pub companies have already started forming their new strategies, despite some rearguard actions. Punch and Enterprise have both started to make themselves more attractive suitors by offering innovative free-of-tie rent options, developing franchises that actually add value to both parties and dipping a toe in the managed dating pool. If you cannot add value to a tenant’s business, can you really charge a premium for your service? Of course not!
Change is in the air. Any entrepreneur running managed pubs will tell you that the tie is unfair unless it comes with a much lower rent for the property. Even then it is pretty galling to find you can almost buy the beer you sell cheaper over the counter at JD Wetherspoon than from your landlord. So the entrepreneurs seek out free-of-tie options, develop new style partnerships with pubcos, buy freeholds if they have the cash, or move their talents to new sectors.
As with all relationship advice there is always someone saying you should tough it out. But our experience of taking over 500 pubs in failed companies and turning those companies into free-of-tie operators suggests a new tack can revitalise relationships. We have converted more than 75% of those 500 pubs to free-of tie outlets, sold more 300 pubs to private landlords and developed a core of more than 150 pubs that have a great future.
So, the big question: if you end the tie as a pub landlord how do you replace the income? The simple answer is, you don’t. Rather, you square the circle by reducing your outgoings. Over the five years we have been working on this, which includes the recession that wiped out so many pub companies, we have seen the average closed pub ratio fall below 2% of the estate, rent concessions fall to less than 4% of the rent roll, and, of course, bad debt plummet, because the tenant is free to buy from whom they want.
In addition, there is a completely changed relationship dynamic. Remembering that these are consenting adult relationships, the role of chaperone, in the form of the ubiquitous and much maligned BDM, changes completely. Gone are the “Fifty Shades of Grey” torture implements of Bruline reports and cellar inspections and in are adult-adult relationships where the ability of the tenant is the most important thing.
If the tenant pays rent, the world is happy. If not, then it is not. Simple as. The pub moves from a bizarre threesome of politicians, pub owner and pub tenant to a standard commercial arrangement between two parties. So instead of tenants seeing more and more of the BDMs, they actually see them when commercial reality dictates. Industry standard ratios of one BDM to thirty pubs disappear in favour of outsourcing of back office, and empowered operators. These savings offset the loss of the tied income, and almost everyone is a winner.
I am not saying that this is the only relationship that works. What I am saying is that it is an enlightened one that suits entrepreneurial tenants who don’t want their hand held. For brewers with strong beer brands, like Fuller Smith & Turner, then the tie may be attractive for the tenant. The same applies for big-volume pubs where the capex requirement is equally high, and then there is a symbiotic relationship with a Punch Taverns or an Enterprise Inns. But it is hard not to think that the future for smaller pubs, such as those recently sold by Greene King and Marston’s, is the perfectly viable, and mutually satisfying world of free-of-tie. I for one will raise a Valentine’s Day glass to that.
Ted Kennedy is chief executive of GRS Pubs and former chief executive of Mill House Inns and managing director of Whitbread’s managed pub division
Breathalysing customers is a concern by John GauntBeathalysing customers is increasingly a hot topic for discussion, with news of planned introduction of breathalysers in Birmingham, where more than 40 pubs have signed up, reportedly, after trials or proposals in Croydon, Norwich, Durham Plymouth and elsewhere. Indeed this topic was discussed at Monday's meeting of the licensing group of Business in Leisure (formerly BISL) and was also discussed at the National Pubwatch Conference this week, with a presentation from Norwich police, which provides a useful example of the scheme in practice. The idea is that pubs and clubs voluntarily sign up to breathalyse customers on entry, and if the customer fails the test, admission should be refused. To us, this seems a dangerous precedent. In the first place, it could be argued that it removes the discretion on admission from door staff. It could be a catalyst for confrontation or issue: being drunk is not defined and takes on different form in different people. A failure to pass the test should not necessarily lead to a presumption of being drunk And whereas the threshold for these machines is currently set at twice the drink drive limit, what is to prevent this limit being reduced once a scheme is established?
We have a concern about a "voluntary" initiative such as this, imposed in an apparently blanket manner. In Norwich, the police have apparently being operating a voluntary scheme together with town centre venues since late 2013. After an initial trial period of three months, the scheme was extended and continues today. The police insist that it is entirely voluntary and have no plans to make it compulsory through the use of licensing conditions. The presentation was made jointly with the trade, who expressed their support for the scheme on the grounds that it made their job easier by demonstrating to potential customers that they are drunk and refusing them entry.
Both the police and the operators maintain that the discretion of the door staff remains, who may decide that despite a customer recording a positive breath test admission may be granted, though this does seem unlikely. According to John Gaunt consultant Martin Rawlings, who was at the meeting, the general consensus seemed to be that the use of breathalysers could be a good way of combating pre-loading, and no doubt the venues using them will sell more drink as a consequence. There did not appear to be any particular resistance from customers who, it was maintained, generally accepted the refusal to allow entry. Incidentally, it appeared that the venues were sharing information so that failed test would be made known to other venues. After initially sharing the results with the police during the testing period, information is not now passed to the police as to the number of tests and/or failures.
The main concern expressed by the conference was whether the use of breathalysers would be extended beyond the late-night economy and whether the voluntary use would become mandatory. In the short term, at least, it would appear that police forces using them or contemplating using them would confine them to the late-night economy and their use would remain voluntary. The chief concern at Pubwatch, however, remains the imposition of their use through conditions. While Norwich police can and did give the assurance that they would not seek to impose conditions on their use, this is not a guarantee in the rest of the country, or even in Norwich, in the future.
In Durham, the breathalyser initiative is apparently part of a wider package of measures being put forward by the Durham City Safety Group aimed at tackling the city's safety and drinking culture, after the drowning of three students in the River Wear over a 14-month period. Operators should perhaps proceed with care (and with the benefit of legal advice if desired) in contemplating the introduction or imposition of breathalysers at their premises.
John Gaunt is principal at the solicitors' practice John Gaunt and Partners
Fake charities and the alcohol problem by Paul ChaseSocial problems do not just fall from the sky. They are socially constructed, both in the sense that human beings living in an organised society may behave in ways seen as problematic, and in the sense that how problems are defined, and by whom, has a major impact on how we perceive them and what, if anything, we think should be done about them. The history of the "alcohol problem" is but one example of how a problem is socially constructed, in this case by an interest group of policy entrepreneurs that lobby for change. I loosely refer to this interest group as the "health lobby".
The health lobby has cultural ownership of the alcohol problem, and as such it has gained much political traction when it comes to defining what constitutes the problem, and what policy initiatives should flow from that. The main activists in the increasingly hysterical war on alcohol are a clutch of fake charities which, directly or indirectly, fund their activities by sponging money from the taxpayer.
In Scotland there is Alcohol Focus Scotland, which is described as Scotland’s national alcohol charity, but is almost entirely funded by the Scottish government, ie, Scottish taxpayers, who involuntarily and probably unknowingly lend their financial support. It is also a member of Eurocare, a European-wide alliance of anti-alcohol cranks, which in turn is funded by the World Health Organisation, ie, European taxpayers. If you Google its website you will find that there is a distinct lack of specifics about its finances, so it is difficult to know how much money it squeezes out of the taxpayer.
The organisation claims not to accept any money from the "alcohol industry", although through Servewise, its training arm, it sells training in the SCPLH personal licence holders course. So, to all who buy that training from Servewise, please be aware that you are financially supporting those that craft your doom!
Alcohol Concern, which operates in England and Wales, is also almost totally dependent, directly or indirectly, on government largesse. Despite losing its "core funding" from the UK government in 2012, Alcohol Concern now receives an annual income of £222,000 from the Department of Education and £225,000 from the Welsh Assembly Government, plus it has recently received £500,000 from Public Health England to fund the marketing of Dry January. Add to this more than £250,000 a year income from selling training and consultancy to other arms of the state and Alcohol Concern’s total raid on the taxpayer is £1,197,000 a year. Insofar as it has managed to get income without putting its hands in our pockets, it has come from the pharmaceutical industry and also from another charity – Comic Relief!
There are a couple of other organisations worthy of note which also subsist almost entirely on taxpayer’s money: Balance Northeast, and Drink Wise (not to be confused with Drinkaware, which is a worthy industry initiative). Balance Northeast receives £680,000 in taxpayer’s money for its booze-bashing activities, but I have been unable to find any account of the money given to Drink Wise, which is funded by the directors of NHS North West.
So what has this disparate array of taxpayer-funded public health sock-puppets been up to recently? Alcohol Focus Scotland, Alcohol Concern, Balance North East and Drink Wise have all called for alcohol advertising to be restricted to factual information in the adult press, cinema advertising only to be allowed for 18-certificate films, and the phased removal of alcohol sponsorships from sport. In the longer term, they want a total ban on alcohol advertising and sponsorship. All this is justified in the name of “protecting children”. This, of course, is part of the health lobby’s long-term strategy on alcohol, known as the "three As" – reducing alcohol’s availability, affordability and its advertising. They regularly switch, in a co-ordinated way, from one to the other of these three strands of policy agitation.
The mere fact that these organisations take an anti-alcohol line is not in and of itself what concerns me – everyone’s entitled to hold an opinion and seek to persuade others. It is the use of taxpayers’ money to do this which I think is scandalous. I describe these charities as fake charities because I think that characterisation is justified when you set up a charity, not because there is any substantial constituency of support amongst the public or indeed from industry for what you do, but because your pals in the public health racket can syphon off public money from the government so that you can lobby, er … the government!
Here in the UK, we are world leaders in the implementation of this technique of government using taxpayers’ money to fund its own critics. It is difficult to know how much public money is being wasted on funding the anti-alcohol public health succubus, but if we add to the known amounts the unknown cost of funding Alcohol Focus Scotland, then we are talking at least £2.5m a year.
If our sector got together and decided to raise an annual fund of £2.5m to pay for a rapid-response team to counter the health lobby’s false claims and phoney statistics, in addition to the excellent lobbying work the sector’s main trade bodies already do, imagine what we might achieve.
Paul Chase is a director of CPL Training and a leading commentator on on-trade health and alcohol policy
Bingo in pubs: the story so far by Tim ShieldYou may have seen the toing and froing between Greene King and the Gambling Commission in relation to the attempts to obtain authorisation to operate higher stakes and prizes bingo in some of their pub premises. Bingo is the critical word!
The story started in earnest last year when Greene King’s application for an operating licence to authorise higher stakes and prizes for bingo in pubs was refused by the Gambling Commission . Had the operating licence at that stage been granted then the next stage would have been to apply for individual premises licences under the Gambling Act to the local licensing authorities. It never got that far. Along with the appropriate authorisation to operate high stakes and prizes bingo would come the ability to offer certain higher jackpot gaming machines in pub premises (possibly the real benefit or prize (no pun intended) in all this. These machines would allow prizes of up to £500, as opposed to the normal pub machine prizes of £100.
The Gambling Commission refused the initial operating licence application. It did not contest the suitability or competence of Greene King or indeed the offer proposed by way of gambling activities put forward by Greene King but appear to have refused it on the basis of concerns relating to anticipated applications for bingo premises licences being subsequently made. Greene King appealed the decision to the First Tier Tribunal and was successful. In essence the First Tier Tribunal indicated that the stated reasons for refusal were not legitimate grounds for refusal.
The story far from ends there. The Gambling Commission subsequently and most recently sought and obtained permission to appeal; we shall see how that progresses.
Entirely separately but not unrelated the Gambling Commission have been undertaking a review of the social responsibility provisions in the Licence Conditions and Codes of Practice (LCCP) for all gambling operators. The process started last summer and included a consultation which completed in October and has resulted in a response document and the amending of conditions which for the most part which come into force in May 2015. The interesting part (in relation to bingo) is that in this document, which extends to some 145 pages, and hidden away at page 124/125 are paragraphs in relation to bingo and gaming machines in pubs and clubs. This reiterates the position the Gambling Commission has expressed in the current battle with Greene King. What is also interesting is that in the response document the Gambling Commission refer to a number of responses received – 141. The Gambling Commission indicate that “the vast majority of respondents agreed with the risk to the licensing objectives and commissions policy objective.”
It is perhaps not surprising that in a consultation in relation to general social responsibility and gambling the respondents appeared to be mainly from the gambling industry rather than the pub trade. It may perhaps be interesting to canvass the views of the pub and associate trade associations in relation to their views on bingo in pubs.
Certainly, on our reading of the law at the present time, what Greene King has proposed does not breach any of the laws that currently are in force. The Gambling Act aimed to permit gambling with suitable safeguards.
The law was not intended to restrain trade or competition. Some may say that gambling has moved on in all sorts of ways since 2009, when the Act came into, force but with the law as it stands it would seem to us that the proposed bingo in pubs provided the laws can be complied with as to financial suitability, competency and promotion of the licensing objectives, then there is no reason an application such as made by Greene King should not be successful. It will be interesting to see how the process unravels. At the moment we are aware of operators in the alcohol licensed trade who operate bingo within licensed premises outside what would be considered traditional bingo clubs. Is that not the purpose of the legislation, to permit gambling with suitable safeguards but not restrict competition?
Although a distinct issue, there are echoes of the “primary purpose” arguments the Commission pursued in relation to betting offices. There the Commission sought to ensure that betting offices provided a book along with the higher value machines. The Commission’s policy of inferring intention not apparent on the face of the legislation is not new.
Our final point is perhaps something for the leisure industry (pub operators and the like) to consider as to whether they wish to become more actively involved in this area and through their trade organisations lobby and be seen to lobby more actively going forward. Most certainly it currently seems that the Gambling Commission has the loudest voice on this issue.
Tim Shield is a partner at the solicitors' practice John Gaunt and Partners
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