Pubcos set out 'fundamental reform' plans

The British Beer and Pub Association (BBPA) has reached a binding agreement with licensee groups, which it claims will make any further intervention by Government or competition authorities unnecessary.

The agreement, with the BII and the Federation of Licensed Victuallers Associations, has not emerged as part of the official mediation process, which ground to a halt yesterday.

However, other members of the mediation process have formed a new group — the Independent Pubs Confederation (IPC) — calling for the Government to implement changes to the system (Pub trade back at loggerheads​).

The new BBPA Framework Code of Practice on the Granting of Tenancies and Leases will be mandatory for all BBPA members from 1 January 2010. Member companies will have until 30 June 2010 to incorporate the new code in their own code of practice and seek BII accreditation.

The BBPA will also fund the Independent Pub Rent Review Scheme (PIRRS) to offer a low-cost alternative to arbitration in rent disputes.

The code calls for members to:

• Establish standards of competence for BDMs and set out a procedure to deal with complaints and resolve disputes.

• Describe the various rental and purchase obligations offered by the company.

• Demonstrate transparency with regard to prices charged for beer, eligibility for discounts and whether they will allow guest beers supplied outside the tie.

• Make clear the pub company's policy in respect of rent setting and review including full transparency in regard to how the Fair Maintainable Trade (FMT) has been calculated with a breakdown of costs and detailed information on the assumptions made on turnover. The BBPA Code will also incorporate a checklist of information to be requested by the tenant or lessee from the pub company.

• Provide shadow P&Ls which must provide sufficient detail to enable tenants to take proper professional advice.

• Draw attention to the availability of ALMR and other benchmarking reports.

• Ensure Upward Only Rent Review clauses are not included in new leases and offer existing lessees the opportunity to convert to new leases subject to agreement.

• Remove AWP machine income from the divisible balance and make clear how machine income is considered.

• Supply lessees with full details about insurance cover and excess payable and price-match where lessees are able to find a cheaper like-for-like policy.

• Set out a clear policy for the operation of flow monitoring equipment in accordance with minimum standards be set out in the BBPA Code.

• Make clear the company policy with regard to restrictive covenants.

• Require lessees to undertake pre-entry training, produce a business plan and take qualified professional advice prior to taking on a lease.

• On assignment the lessor must also give any assignee the same financial information disclosed by the pub company.

Lasting settlement​

"The BBPA has reached a binding agreement with key licensee groups, the BII and FLVA, in response to the BEC report, which will see fundamental reforms that will benefit all licensees," said BBPA chief executive Brigid Simmonds. "What has been achieved is a sound basis for a lasting settlement.

"The industry will implement a comprehensive set of reforms to the way tied agreements operate. The result will be greater openness and transparency, better and clearer information and improvements in support and accountability. The BII is pivotal to the agreement, as through its accreditation process, it will ensure that all BBPA member companies abide by its terms.

"These commitments will now be submitted to both Government and the OFT. They should make any further official intervention in the sector unnecessary.

"This new framework provides a solid foundation for both licensees and pub owning companies to move forward on a positive agenda of improved understanding about the expectations, roles and responsibilities within their business relationship.

"The BBPA and all its member companies have devoted considerable time and effort in coming together to agree a wide ranging package of positive actions to be implemented by all our member companies. We did this because we believe that an equitable settlement of these issues is important for the whole sector.

"We would like to thank those parties who have worked with us to reach this agreement that is in the interests of the whole trade. We trust we can all now move on, and turn our attention and focus to the vital mission of supporting our licensees and pubs through what is a turbulent, difficult, and uncertain economic environment."