Exclusive: Host 'turns tables' on Enterprise Inns

An Enterprise Inns tenant claims to have turned the tables on the giant pubco following a sale-and-leaseback deal on his London pub which has seen him buy the freehold of the property.

Entrepreneur Paul Rigby, who still runs the Palmerston in East Dulwich as a tenant, maintains Enterprise is set to lose money as the deal yields less revenue for the company than it pays out. But industry experts insist his assumptions on Enterprise income may be wrong.

Rigby side-stepped Enterprise by buying the pub at auction for £986,000 in October — it was available for him to buy outright for £1.2m. A bizarre situation now sees Enterprise paying Rigby £65,000 per annum in freehold rent — £21,000 more than the £44,000 he pays the company in dry rent.

Beer-tie income​

Rigby claims beer sales at the Palmerston means Enterprise is well short of the sum it needs to bridge the gap.

The Palmerston is turning over 110 to 115 barrels a year — but according to Rigby, the pub needs to sell just over 131 barrels for Enterprise to break even, using his calculations based on £160 per-barrel income for Enterprise.

But industry observers have suggested Enterprise may well be earning a figure in excess of £200 per barrel discount — some claim large tenanted pubcos earn up to £220 per barrel discount.

A total of £200 per barrel off-invoice discount would deliver £23,000 of extra income for Enterprise on current barrelage figures.

Rigby argues that his food and wine sales are set to increase at the expense of beer, reducing Enterprise's beer-tie income further.

"It's a bizarre situation which feels almost as if we have a squatter in our cellar. As we sell less beer and more wine, perhaps the squatter will realise it's time to move on," he suggested.

Flawed assumptions​

Rigby and his business partner Jamie Younger took over the pub in 2004 when Unique was its landlord.

The duo have built up the business steadily over the years, winning numerous food and restaurant awards.

"Enterprise never wanted to sell the pub to us. By creating a situation where we became landlord, we turned the tables," Rigby said.

An Enterprise spokesman said: "Mr Rigby's assessment is based on flawed assumptions. He fails to understand the value-creation differences between outright sale of a pub and a sale-and-leaseback transaction."