Buying a pub in the UK.

Published on: 2010-01-10

The idea of buying a pub in some small village and winding down to enjoy a slower paced life is one shared by many of us. Some of you may even be able to close your eyes and imagine the perfect pub in your mind’s eye, complete with ivy vines scaling the walls, wooden window frames and your name above the door.

Unfortunately, the reality of running a pub is very different. The life of a successful pub landlord involves long hours, hard work and attention to detail. But if you’re prepared to take the rough with the smooth then owning a pub can be a very rewarding career.

There are multiple routes available to the aspiring pub landlord, with some options offering more freedom than others. It does really depend on the amount of money you have to invest. The following list is for those of you who are not familiar with the types of pub ownership that exist, or for those who are simply curious about what their money can buy:

Tenancy

Taking out a tenancy on a pub is by far the cheapest way to get your name above the door of your very own pub. Tenancies normally range between 2 and 5 years, and are normally subject to a rent review annually.

As a tenant you’ll be expected to pay for stock, fixtures and fittings before you move in and pour your first pint. Tenancies are almost always tied, which means you must buy beer and other items from the brewery who you rent from.

The disadvantage of being a tenant is that your tenancy is not assignable. This means you cannot sell it on. So you can only make money from income derived while your tenancy is valid. Most entrepreneurs find tenancy unsuitable because they cannot sell the pub on to realise a profit.

Lease

If you don’t have the capital to buy a freehold pub outright and you don’t much like the idea of being a tenant, then leasing a pub might be the right option for you. Pub leases range from 10 and 25 years terms, and are assignable. This means that you can sell on your lease to realise a profit, but most agreements restrict you from doing so in the first 2 years of your lease.

In most cases you will still be tied to buying certain beers or other products from your landlord but these agreements are usually less restrictive than tenancies, allowing for greater freedom to choose what you stock.

Most leases are granted on a “Full Repairing” basis, which means you as the lessee are responsible for the general upkeep of the property. It is recommended that a structural survey be carried out before taking on a new lease, so that major problems can be identified and resolved before you take on the lease and become responsible for the property.

Freehold

Owning the freehold to a pub is probably the most desirable form of ownership for most entrepreneurs and means you own the property outright.

You won’t be tied to any breweries and you’ll have complete control of what you stock behind your bar. A good freehouse can bring in a return of as much as 20% per annum and represents a great investment if you can come up with the initial capital required to buy it.

This option is normally the domain of the experienced publican who has no need for the support and training offered by larger operators.

Franchising

Franchising is also an option for those who could benefit from the support and guidance offered by the franchisor. This option is available from as little as £10,000 and is mostly offered by Scottish & Newcastle Pub Enterprises.

You as the entrepreneur will need to decide how many limitations you are prepared to put up with and how much you are prepared to invest.

Raising Finance

Most entrepreneurs will require finance to purchase a pub and there are a number of sources to consider. It’s important to remember that pub finance is quite specialised and you’ll need to supply a detailed business plan to persuade lenders that you are able to deliver on your promises.

Finance brokers can help you arrange finance too. We recommend that you use a broker registered with the National Association of Commercial Financial Brokers.

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