Gone is the time you could just throw open pub doors and do well

May 20 2009 by Alastair Gilmour, The Journal

The pub industry seems to lurch from one crisis to another. Alastair Gilmour looks at the latest controversy.

GOING to the pub has been the number one leisure activity in this country since 793, the year King Offa of Mercia founded a monastery in St Albans. It became Ye Old Fighting Cocks, the nation's first inn.

Today we’re still fighting in pubs in some form or other over licensing laws, binge drinking, “happy hour” promotions and tax rises, with the latest bout of verbal fisticuffs landing on the pub-owning companies themselves.

Members of Parliament have called for an urgent competition investigation into the pub industry amid fears that ties between pub firms and licensees are forcing up prices for drinkers.

The Business and Enterprise Select Committee (BES) said the current practice in which pub companies compelled their tenants to buy drinks from them – known as the “beer tie” – should be “severely limited”. The report said: “The failure of the pubcos to pass on the benefit of their discounts to the lessees prevents the lessees from passing on the benefit to the consumer in terms of reduced prices.”

This has led to an “ever increasing disparity” between the price of beer in pubs and off-licences – undermining the viability of many pubs, as tenants are forced to increase prices and encouraging the trend towards drinking at home.

“There are strong indications that the existence of the tie pushes up prices for consumers,” the MPs said.

With the background of an average of 39 pubs shutting up shop every week in the UK, it has to be said that the MPs have a point. Some pub companies fail to realise what the customer wants – and what the customer wants is a quality experience, well-kept beer and a safe, friendly environment.

But, apart from decent ale, there has to be some other special quality that allows strangers to enjoy their visit and for regulars to keep returning. It could be good value food, an enviable line-up of spirits, a selection of continental beers or an imaginative wine list.

But are pub companies really to blame for what doom-merchants bill “The Death of the Great British Pub”?

Are we moaners simply taking pot-shots without being aware of the full facts on pricing? Is the tie necessarily a bad thing? After all, it gives people the opportunity to run a business that they might never have had. A pub belonging to a pubco is run in much the same way as a franchised business – the operator pays a premium plus rent and sells the agreed product to the customer.

What the operator gets in return is the benefit of a large organisation with readily-available marketing and sales techniques – and high-quality merchandise. It’s using another person’s business philosophy, a short-cut into commerce, almost.

Every pub – and there are 57,000 of them in this country – is a small business, whether it’s like the Star Inn at Netherton in Northumberland, a one-woman enterprise, or a multi-sited group.

Pubs cater for every walk of society and are not just the preserve of the bearded philosopher or the village bore. When former French president, Jaques Chirac, visited the then prime minister’s constituency in 2000, where did Tony Blair take him? To the pub (The County in Aycliffe Village). And in November 2003, when teetotaller George W Bush paid a similar call, where did they go? To the pub (The Dun Cow in Sedgefield).

Every television soap revolves around a pub – The Rovers Return in Coronation Street, the Queen Vic on EastEnders and Emmerdale’s Woolpack – and the sets have even each been visited at some time or other by royalty, including the Queen. In 1984, The Bull in The Archers on Radio 4 played host to Princess Margaret – as herself – and Prince Charles made a guest appearance at The Rovers during Coronation Street’s 40th anniversary celebrations. He played The Prince of Wales.

So, before you enter into any franchise or partnership agreement, isn’t it a good idea to negotiate the best terms possible? It’s no good signing on the dotted line while keeping fingers on the other hand crossed behind your back then complaining if things don’t pan out how you expected.