Punch: We agree with many BEC points
The boss of Punch Taverns leased division Roger Whiteside has stated that the company agrees with seven major areas of criticism within the highly critical BEC report on pubco/tenant relationships.
Whiteside, who was speaking at yesterday's Morning Advertiser and M&C Report organised Tenanted Trade Summit, said Punch agreed, in line with BEC conclusions, that:
• The tied model needs to improve transparency in rent setting and profit for tenants
• There is need for an independent and cheap rent review dispute resolution service
• Current machine tie arrangements are not fair
• There is a lack of transparency on insurance premiums
• Restrictive covenants need to end
• That the calibre of business development managers needs improving
Whiteside said the tenanted sector has "only got ourselves to blame" for the lack of progress in setting up a BII-overseen low-cost rent dispute resolution panel.
He said tenants too often did not understand the nature of the risk they took on when they move into a pub.
More generally, Whiteside, who joined Punch six months ago to replace Deborah Kemp, said the challenge of evolving the tenanted pub model is what had attracted him to the job in the first place.
He said that any retail model would struggle in the current climate. In the case of Punch Taverns beer volumes were down by more than 10% last year as the estate struggled with the double hit of a smoking ban and the recession.
Whiteside reported that a Punch licensee taking £5,100 net of VAT a week in 2007 — £264,000 per annum excluding VAT — will have seen an almost 50% drop in profit over the last two years.
Punch's model Profit and Loss account showed this licensee taking £100-as-week less in 2009 compared to 2007 but his profit will have slid from £30,000 per annum in 2007 to £24,000 per annum in 2008 (a 21% drop year-on-year) and to £16,000 per annum in 2009 (a further 34% drop year-on-year). Whiteside said, however, that future market dynamics are very supportive of the pub sector with a "underlying positive trend towards mixed sex social, eating and drinking out".
Whiteside added that there is a responsibility on licensees to respond to falling trading.
The smoking ban is also attracting more females and ABC1s to the pub. But he added: "To succeed more pubs have to develop their consumer proposition to reflect the changing market place."
Whiteside said that the average pub offers much more versatility than the average off-licence in terms of "the development of the retail platform". He noted that the best pubs tend to be owner-operated and consumers were looking for an "individual experience".
Tenanted pubs still offered the opportunity for "unique creative executions" but fewer, better pubs will thrive at the expense of weaker operators. Whiteside argued that when "well-executed" the leased model has a competitive advantage with a motivated owner/operator, a local consumer focus, a creative non-branded execution, diversified revenue opportunities and economies of scale in support.
He said that Punch was creating a platform for growth that meant working out a consumer vision for each pub which offered the opportunity to move away from a wet-led dominated estate. The company would identify and sell those pubs that didn't have growth potential. The company would also introduce added-value business support, including a new agreement that motivates business growth.
