Pub tenancies explained.

Published on: 2010-01-10

A pub tenancy is by far the easiest way to become the landlord of your very own pub and regional brewers tend to prefer this format because of the level of support it allows them to provide. There are both benefits and drawbacks to being a tenant and you will need to weigh them up when deciding if a pub tenancy is the right route for you.

Pub tenancies usually range between 2 and 5 years in length and are not assignable. The exact details of a pubs tenancy differ from pub chain to pub chain, but one thing that’s likely to be included in all tenancies is a “tie” which we will get to shortly. You should also take note of whether you will be held responsible for the general upkeep of the premises or whether your landlord is prepared to undertake work to ensure the general upkeep of your pub.

Ties

Tenancies almost always mean that you are fully or partially tied to buying certain beers and other products from your landlord or a designated supplier. This does limit your freedom to stock whatever you like in your pub and ties can even be as far reaching as to specify the wine or snacks you are required to serve at your premises.

Being tied to certain product ranges can be a good thing because your landlord may have already negotiated discounts with suppliers which could help you make the most of your new venture. You could also benefit from the experience of your landlord, who may have already tested the market to see which drinks work best in a pub environment.

One of the disadvantages of being part of a tied pub, are that you must rely on the popularity of the products you are contractually obliged to sell. So for instance, if your landlord is a regional brewery and you are required to sell their brand of beer. If the popularity of their brand diminishes over time, so do your profits and worst of all you may not be able to stock more popular brands because of limitations set out in your tenancy agreement.

Non-assignable

Pub tenancies are known as “non assignable” agreements. This means that after you become the pubs tenant you cannot sell your tenancy on in the hope of realising a capital gain. This can sometimes be a problem if you no longer wish to pursue the venture because breaking out of your tenancy early can result in considerable financial penalties. Having said that, some pub chains offer cooling off period which allows you to terminate your tenancy early on if you feel you’ve made a mistake.

This drawback can be especially painful if you’ve worked hard to improve your pubs fortunes only to realise that your landlord is the real winner.

Outlay required

Becoming a tenant is probably the cheapest route to becoming a pub landlord. You will be required to pay for stock, fixtures and fittings before moving in and a monthly rent will be due to your landlord. Rents vary and you can expect to pay substantially higher rents on pubs that occupy a premium position within a community.

Being a tenant isn’t for everyone and you will need to weigh up the pros and the cons when deciding if the life of a pub tenant is the right life for you.

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