Doing the right thing

Rob Jones, profit partnership director at George Bateman & Son, explains how the company has set about creating a deeper relationship of trust between itself and tenants

I read the lead article "Punch on full alert" in the MA two weeks ago with interest. The story tells of Punch's eight-week "support drive" to "maximise help for its licensees" and "spend time in the field". The sentiment is commendable and Punch should be applauded for focusing on the issues that retailers currently face. This initiative is rich in political capital for those who wish to point fingers at the pubcos — as an industry, they'll say, is that not what we should do 52 weeks a year?

At George Bateman & Son we believe in genuine partnership between landlord and tenant. In my 10 years in the tenanted sector I have heard much about partnership, but genuine partnership is built on trust between two parties. All too often I have seen landlord and tenant withholding information for fear of recrimination, or trying to catch each other out. No way to build a long-term, trusting relationship.

We've been in business since 1874, so have been through economic downturns in the past and will do so again. We believe in the long term. Many companies are entering rough waters for the first time and I believe the short to medium term nature of their business models makes for a challenging time ahead. I feel for tenants and BDMs as shareholders demand increased dividends and a greater slice of a shrinking cake.

In 1953 Harry Bateman — the grandfather of our current managing director Stuart Bateman — said: "In your business don't ever lose the human touch with your employees and tenants". This ethos is pushed hard by Stuart today and not only is it refreshing but it also motivates tenants.

My department's motto is "Good honest pubs run by good honest people" and our desire to deal with our tenants with honesty, transparency and integrity runs through everything we do. These values, combined with creative thinking and a fresh modern outlook, are a powerful combination. Our code of practice "Eyes Wide Open" was recently accredited by the BIIBAS. We are proud of the code but in reality it was easy to write as there is nothing in the business relationship that we needed to brush under the carpet.

Our standard agreement is a traditional three-year tenancy. The management team at Batemans spent considerable time evaluating different types of agreement but concluded that a traditional style agreement operated fairly and openly is a great model, especially during times of economic hardship.

Our standard deal does have a full trade tie but our rents are discounted significantly below the commercial rate. We have launched a tenants' bonus discount scheme, which drives down the price of tied products. As we grow our business we are able to negotiate better terms with our suppliers. Any purchasing savings we make are passed on directly to our tenant partners in full.

The benefits of the scheme were cost neutral to the company in 2007 but tenants' purchasing costs fell by £60,000 across the estate. Our tenants therefore have a vested interest in the company's growth, as improved buying on our part leads to greater discounts and cheaper prices.

Our rents are benchmarked independently and are discounted below commercial levels to reflect the trade tie. A lower fixed cost in the form of rent proves attractive and takes the pressure off the tenant a little in leaner times. Our rent review policy is completely transparent — we are happy to show tenants the basis of the rent calculation in full.

Furthermore, unlike many companies, we discuss rent for the new three-year term more than six months before the expiry of the agreement, within the contractual window when the tenant can still legally serve notice. We rarely get into rental disputes and are proud of the fact that we have never been to arbitration in our 134-year history.

We're up for innovation and change and have recently launched an exciting and industry first, a "goodwill agreement", linked to capital investment, which combines the benefits of an assignable lease with the lower start-up costs expected of a traditional tenancy. No goodwill is purchased at the start of the agreement but the tenant has a financial incentive to grow the profitability of their business. If agreed profit targets are achieved then we (the landlord) commit to make a one-off goodwill payment upon exit. Furthermore the tenant has no rent review for six years.

We've recently refurbished the Mill in Boston and tenants Paul and Tracy Topliss signed up to the new agreement. Although early days, the business is performing well and the agreement has created an open and transparent relationship. Tracy and Paul know there is no stick I have to beat them with and are aware they will be rewarded for revealing how well the business is doing.

It is a breath of fresh air to have genuine, informed conversations with licensees about wage percentages and gross profit margins. We believe we have created a genuine long-term partnership 52 weeks a year.

Jones's background

Rob Jones joined Scottish & Newcastle in 1997, where he worked as a trainee BDM, BDM, brand manager and commercial manager in Scotland. He also had a spell as a regional sales manager with Waverley. Joined Batemans in September

2006 as profit partnership director overseeing the tenanted estate.