Licensees need to consider the importance of valuing assets such as social media, websites and databases when buying and selling a property, the Association of Valuers of Licensed Property (AVLP) has warned.
The platforms have become an important part of promoting a pub business. Social media platforms such as Facebook allow businesses to communicate with existing customers and the followers could number thousands. They are also an important channel for targeting potential new customers and can be an essential marketing tool.
The AVLP has raised the question of whether they should be considered as part of a licensed trade business’s assets when selling a property.
Tools
The group says that while these tools are under the control of the existing business owner they are often overlooked during the purchase process. This is despite the fact they may be crucial to the communication of the new ownership and the business going forward.
During the purchase process of a pub lease assignment or freehold, the buyer’s solicitor can arrange for an undertaking to be provided by the seller that he/she will assist in arranging for passwords to be legally transferred. As well as the value of the property or lease in a purchase there is also an element of goodwill of the business. This can include social media accounts, but would still need the undertaking of the solicitor.
However, with a tenancy change, solicitors tend not to be involved and time scales are much shorter. AVLP warns that with a tenancy transfer, the goodwill of the business is not actually owned by the outgoing tenant. The only payment the new tenant agrees is for the tangible assets of the business such as fixtures and fittings and stock.
Value
Darren Holder of BLA Valuers believes that social media and websites are becoming increasingly important tools for promoting businesses, which can be valuable, especially if the database is large or the social media site has a large following. He argues that this whole issue is an area that needs further investigation.
“I do not feel that it is unreasonable that the purchaser should buy this from the vendor, if they so choose and the terms & conditions (T&Cs) allow,” he says.
However, Holder says that this causes problems for valuers because there is no exact formula for calculating a value.
“I have given the purchaser (when acting for them) a general cost-based valuation guide, but advised them to consider what it is worth to them and to make the vendor a private offer,” he says.
Get the asset
He advises licensees that are selling a pub venue to try to secure a deal for these assets. He does not include them in the F&F asset valuation for social media/websites but advises the seller to consider a deal.
“If I was acting for a vendor and they were leaving the site and the website/database was of no use to them in their new venture, I would advise them to try to secure something for it in a private agreement because something is better than nothing,” he says.
Meanwhile, AVLP member, John Keane, of Thomas E Teague, says that while social media accounts are assets of the business there are issues with the T&Cs for sites such as Facebook and Twitter.
Permissions
“Social media accounts are assets, but as far as selling them on is concerned, things are not that simple. Facebook’s T&Cs state that its written permission must be obtained to transfer an account,” says Keane.
“Twitter states that the accounts are non-assignable and Pinterest says that the accounts are non-transferable. It would seem that these companies are happy for people to use the sites for business purposes but are not happy for people to make money out of having an account per se.”
Keane also highlights that pub company and brewery agreements only refer to fixtures & fittings as business assets and have nothing to say about social media.
BDMs
Keane adds: “None of the business development managers that I know have given any thought to this, although they do acknowledge the potential value of social media to a business and do refer to it when arguing about a tenant’s abilities or otherwise at rent review.”
He has called for the industry to address this issue, but warns there could still be problems if it is made a condition of the tenancy because it would still be subject to the social media companies’ T&Cs.
This would “confuse the goodwill of the business with its tangible assets,” he admits. As far as websites are concerned, these do transfer as part of a pub purchase but, again, it is a case of “doing a deal”.
Copyright
He says that the key to this transfer is identification of the owner of the website and often copyright is with the web host/designer.
“As the new pub owner is happy to keep the site going, the web designer is usually happy to waive things through,” he says.
“The value of the site is hard to quantify because different pubs use their sites for different things but, in practice, most sellers are happy to get something for it even if it is only a few hundred pounds.”
Friendly
He warns that much depends on an amicable purchase for an agreement to be made. There is very little that a valuer or an area manager can do other than try to help with a deal.
“I am not aware of any method or valuation techniques having been developed to assess the value of a social media account and in practice a deal is done and the passwords quietly handed over,” says Keane.
“Right now, we’re probably in a situation where there are more questions than answers but, as a group, the AVLP will keep an eye on the subject and seek to provide common sense guidance.”