For those of you that missed Phil’s piece, he conducted research on some pub vacancies in his local area and found the advertised rental values are being based on average takings well beyond the pubs’ recent trading histories.
If these formulae calculations are being repeated up and down the country, pub companies as a whole are assuming hundreds of millions of pounds of additional trade is ready and waiting for “reasonably efficient operators” to unlock by deploying sensible retail standards.
We’d need a few more breweries too, to cope with this sudden increase in demand.
So the question is, who took the fair out of FMT and redefined it as “Fantastic Mythical Target”?
One might think that, if pubcos have their advertised rents on vacant pubs set so far out of line with those pubs’ actual financial performance, they would sit on the websites of the pubcos and their property agents for months with little or no interest from prospective operators. But they don’t.
New licensees are accessories to the FMT conspiracy, taking on pubs with a mixture of egotism and optimism that they will do much better than their predecessors.
It happens in some pubs, of course. The PMA hears some amazing turnaround stories whereby new operators have invested wisely in the right staff, décor and retail offer, marketed their way into the local zeitgeist and attracted a hitherto unsatisfied customer base, quadrupling weekly trade.
But there are many more that don’t achieve such extraordinary heights and bump along the bottom, cursing their fortune and their failure to negotiate harder on rent. It’s difficult to conclude that there isn’t a degree of exploitation in these pubco/tenant relationships.
Of course, it’s not just the pubcos that enjoy the fruits of FMT calculations. As we have reported today and last week, there appear
to be the beginnings of political pressure to review the way pub business rates are calculated.
These are currently determined on a lagging FMT figure based on actual past rents and turnovers. And it has been argued that they are disproportionately burdensome on pubs compared to other small businesses.
It seems everyone wants a bigger piece of a smaller pub pie. And that once the licensee has finished dishing out the slices to the various claimants, he is left with a few crumbs.
If we are to accept that the pub trade is in decline (and I’ll refer to the CGA figures we published on 31 May forecasting a further 5.1% decline in on-trade outlets by 2017), everyone needs to be more realistic about the returns they can demand from Britain’s pub estate before it returns to growth towards the end of the decade, and we can again start talking about FMT in a sensible way.