The Association of Licensed Multiple Retailers (ALMR) has proposed implementing major changes to the pubco model to ensure a "fair distribution of the economic benefit between the landlord and the lessee".
At a policy briefing with its members, ALMR chief executive Nick Bish said that the time had now come for changes in the pubco-tenant relationship and the way in which the beer tie operates.
It called for a set of set of new conditions to address the balance to be drawn up and inserted into leases — failure to do so would see the ALMR call for a an official investigation into the pubco model.
The ALMR proposals included:
• A challenge to the usual requirement for compulsory supply agreements on long, fully repairing and insuring leases and seeks the opportunity for prospective lessees to negotiate lease terms that properly reflect the open market — and then to be able to enter into separate supply arrangements.
• All fully repairing and insuring tied leases must include a list (to be agreed) of Standard Compulsory Clauses (SCC) that address the continuing fair distribution of the economic benefit between the landlord and the lessee.
• The SCC list is to be drawn up by a working group of all relevant stakeholders whose involvement will be an expression of their commitment to the principles of this proposal, and the working group, under an independent chairman, should aim to report by the end of this summer.
• All trade associations having members that issue fully repairing and insuring tied leases and/or members that are lessees of such leases should make it a condition of membership that members adhere to the SCC principle.
• That there be a reasonable timetable (say one year) for the SCC to be devised and enshrined within all applicable leases and that if this timetable was not to be achieved then the Association should call publicly for there to be an official investigation into the pub leased model and the contractual supply arrangements within it. (ALMR would regard this real sanction as nevertheless being a last resort because of the time and resources it would take to investigate and legislate.)
"The relationship between the major, national pub companies and their tenants has come under tremendous strain over the past year," said Bish. "This is because the tied lease model has been insufficiently flexible to adapt quickly to the macro-economic downturn, resulting banking crisis and soaring operating costs.
"The ALMR believes that the time has now come to rebalance that relationship and reform the way in which the product tie operates.
"There is a need to ensure a fairer share of the economic benefits for lessees and the division of profits accruing from the individual outlet.
"That will require both parties to be more open about the income they gain from all income streams within the business, the true operating costs they incur and the long term investment they make in the outlet.
He added: "This can be achieved — not by means of legislation — but through all sides working together to deliver a more equitable business partnership. We believe this is achievable and a pragmatic solution to the current state of impasse."
Government blame
However Bish was also at pains to stress that the Government was also to blame for the current woes of the trade.
"Significant as this debate is, however, what unites lessees and landlords in the pub industry is much more important than what divides us," he said.
"The ALMR will not lose sight of the fact that, whatever the nature of lease agreements, it is the government which takes the lion's share of our industry's profits — for an average community pub, the government take is 40% more than the profits available to lessee and landlord."