Get pub licensees to stay longer

Amid all the noise that surrounds the tenanted pubco world, sometimes it's worth focusing on fundamentals. If people are happy and making reasonable money they stick around longer.

JD Wetherspoon managers have an average length of service of eight years. On the staff of the Morning Advertiser, average length of service is just over six years.

When average length of stay starts to drop it's not a good sign.

Pub tenants and lessees have been staying for shorter periods of times in their pubs in recent times. One mid-sized regional brewer and pub landlord reports the average length-of-tenure figure has dropped to three years and eight months this year from four years and one month last year.

This means that the churn rate is higher than 25%, with more than one in four having to be replaced each year. This figure compares well with one large tenanted operator whose churn rate is nearing 40%.

It's hard to give a precise figure for how long a licensee should remain in any given pub. But in the 1990s tenants of the Bass Lease Company stayed for an average of around seven years.

Within the Mitchells & Butlers 90-strong franchise estate (where lessees take an industry-best average of £13,500 a week per pub and have no RPI rent increases between five-year reviews), a startling 90% of licensees are still in place seven years after the division was launched.

The current decline in the length of stay of licensees within tenanted pub estates sends a fairly obvious and alarming message to companies. When length of stay starts to draw out again, it will be an indication that more licensees have been selected properly, trained to the right degree and are finding it worth their while to stick around.

Look at this from the customer's point of view. If the right person is running his local, the customer wants the licensee to stick around indefinitely. If his local pub is seeing a change of personnel with increasing frequency, visiting it feels like a kind of lottery.

The irony is that the current recession (reducing prospects outside of the industry), the collapse of the assignment market and the sheer volume of support being pumped in by the major tenanted pub companies means that length of tenure should increase this year.

Any self-respecting tenanted pub company should set itself a target of having an average length of tenure of six to seven years. Reaching that target, within say three years at the outside, will have meant it has taken all the right steps in terms of disposals, creating greater transparency and effective support. If six to seven years becomes the average length of stay of pub tenants and lessees, much of the current controversy is likely to melt away.