Enterprise Inns promises reform

Enterprise has promised a series of change to its lease agreements, including more discounts and "royalty-free" AWP machine share options, in a letter to Business Secretary Lord Mandelson.

The company has set out 13 commitments in a letter to Mandelson, in which the firm argues against a fresh investigation into the beer tie.

The Business and Enterprise Committee (Bec) recommended a new Competition Commission probe and Mandelson's department is set to decide what action to take within the next few weeks.

Here are the commitments in full:

1. "Enterprise believes that tenants and lessees would benefit from the existence and availability of a national, independent body, similar in constitution and capability to the Federation of Licensed Victuallers' Association. This should be resourced to provide advice, support and representation to all licensees, including individual tenants and lessees. We are willing to provide financial support to facilitate the establishment and ongoing operation of a national, independent body to offer this essential service to licensees.

2. Enterprise recognises that clarity and transparency of the assumptions on which profit assessments are based is essential. Therefore we will forthwith review and expand our existing level of disclosure, in order to ensure that it will meet or exceed any minimum industry disclosure standards that might be agreed in the future.

3. Enterprise already insists, where possible, that licensees take independent legal and financial advice before entering into any substantive agreement with the Company. To provide additional licensee protection, we will in future ensure that all licensees, whether upon new let or at assignment, will simply not be allowed to enter into a binding lease or tenancy agreement (excluding tenancies-at-will) without a formal business plan which has to be signed-off by the licensee, ETI and a qualified trade accountant (on behalf of the licensee).

4. Enterprise has always accepted that arbitration may be prohibitively expensive for some licensees and has therefore been a longstanding supporter of the principle of a low cost, independent, binding rent and dispute resolution mechanism. We are pleased to reaffirm our commitment to utilise the low cost, independent, binding rent and dispute resolution mechanism being developed by the three trade organisations British Institute of Innkeeping (BII), Association of Licensed Multiple Retailers (ALMR) and the British Beer and Pub Association (BBPA).

5. Enterprise is currently reviewing and updating its Code of Practice, which governs the manner in which all aspects of the Company's activities are carried out, the expectations that ETI has of its business partners and the expectations that they should have of ETI. When this review is completed, we will issue the revised Code of Practice to every agreement holder. Furthermore, we will submit the revised Code of Practice to annual revalidation under the BII accreditation scheme, to include an evidence-based audit of compliance with the commitments made.

6. Enterprise already provides discounts on the supply of tied beers and ciders to approximately two thirds of its tenants and lessees. In future, we will offer a range of discounts, up to £150 per barrel, on all tied beer and cider purchases for every new agreement, and will instigate a rolling programme whereby all licensees may, at their discretion, opt for a new agreement on these terms not later than at the time of their next rent review.

7. The majority of Enterprise's estate is already free of tie for the supply of wines, spirits and minerals and we offer a free-of-tie option on all new agreements. In addition, we will instigate a rolling programme whereby existing agreement holders may, at their discretion, opt for new free-of-tie wines, spirits and minerals terms not later than the time of their next rent review.

8. Although we intend to continue to offer new agreements with a full tie for gaming machines, we have already removed the "royalties" paid by machine suppliers to pub companies and others on Amusement with Prizes machines ("AWPs") from over 2,200 machine share agreements. Enterprise will in future offer "royalty free" AWP machine-share options in all new agreements and will also instigate a rolling programme whereby this option will be offered to all existing agreement holders not later than at the time of their next rent review.

9. In relation to insurance matters, Enterprise already provides, upon annual renewal, a summary of cover to every agreement holder against which a competitive quote may be sought, if so desired. We will maintain our existing guarantee to reduce the insurance recharge to any agreement holder who can secure equivalent cover at a lower cost.

10. In relation to Upward Only Rent Review clauses, notwithstanding our Code of Practice policy to ignore such clauses, we have already committed to remove, at a licensee's request and cost, any UORR clauses by Deed of Variation. In addition, we will issue a side letter to every tied agreement holder (at no cost and to be appended to the lease) confirming our policy to ignore UORR clauses for as long as all other terms and conditions of the lease remain in place, and for as long as Enterprise (or any ETI group company) continues as a party to the lease.

11. In accordance with its current practice, all Enterprise agreements that are subject to RPI indexation of rent are adjusted on an upwards or downwards basis regardless of the terminology of existing lease clauses. To provide additional reassurance to lessees, we will issue a side letter to every tied agreement holder (to be appended to the lease) confirming that, where such indexation applies and notwithstanding the terminology of existing lease clauses, all RPI adjustments may be upwards or downwards.

12. In relation to disposals of pubs to other parties, Enterprise will not impose restrictive covenants preventing the continuing use of the premises for licensed purposes.

13. Enterprise is committed to having a team of highly trained, committed Regional Managers (RMs), the key interface with licensees, and already invests significant sums into training. To provide further confidence in this area, we will support a BII initiative to create a range of relevant qualifications and accreditations for RMs and will ensure that every ETI Regional Manager has achieved a minimum qualification standard."

Enterprise said: "We have already made good progress towards the implementation of these developments. Further details will be provided to ETI tenants and lessees and other parties as appropriate over the coming weeks."

The company said a further probe into the beer and pub market "would not be in the best interests of either the pub industry or the general public."

"It would cause damaging uncertainty at a critical time for investment and employment in the industry and would be a waste of taxpayers' money.

"However, the Business and Enterprise Committee report on pub companies did highlight some legitimate areas of concern which require clarification. In light of this, and in order to move the debate forward in a positive way, ETI has written to Lord Mandelson setting out thirteen commitments which we believe will have a positive impact on the leased and tenanted pub sector.

"We regard these as significant commercial changes, relevant to the ongoing success of ETI and our licensees, alongside the quality of our pubs, the underlying fairness of our business relationships and the skills and commitment of our team."