I want to turn a drink-led pub into a food-led pub. What are the warning signs to look for when taking on the lease of an existing pub?
Hugh Caven, Wallbrook Finance
Before taking on any brewery lease you should take legal advice on the terms and conditions and ask for a layman's translation. If the lease is a fully repairing and insuring agreement it's well worth the money to have the building fully surveyed, particularly if you intend to knock it about.
Most landlords would be delighted to have their premises updated, but be sure your clientele will be equally pleased. Unless you're trying to attract a completely new customer base, regulars are generally against change. And don't forget that most of your ingoing premium is based on existing business and its profitability, thus you have bought goodwill.
As you're about to completely change the structure of the business you'll have to prepare a very convincing business plan to present to the landlord. At the moment the brewer will be enjoying a rent and almost certainly benefiting from the existing purchasing agreements. Depending on the agreement within the lease they may have strong concerns over the likely swing from beer sales to wine and the impact this will have on them.
Within your development plans you should also budget for outside areas to offer your customers the option of alfresco dining should they wish to smoke after the impending ban.
The ideal unit is one that's currently closed, so you'd have low ingoing costs, if any, and you'd be starting with a clean sheet. You might even be able to negotiate a low-start rent, or a rent-free period.
Brian Hardie, Howes Percival
Areas to watch when taking on a new tenancy include the lease, planning and licensing.
The lease
- Check the clause that deals with the use of premises to determine whether the sale of food is allowed and ensure that there are no other clauses restricting the sale of food.
- If alterations to the property are required, you may need to get the landlord's consent.
- Remarketing your pub as a food-led business will almost certainly impact on the beer volumes. Check any minimum purchase obligations for beer in the lease, as failure to do so can incur financial penalties.
Planning permission
- Ascertain that there are no restrictions, eg, permitted trading hours, ventilation requirements.
- If alterations are to be made, you may need to obtain planning permission and/or building regulation approval.
- If a variation on the premises licence has been made, ensure planning permission is granted.
Licensing
- Be aware of any limitations on the premises licence, particularly if hot food or drink will be served between 11pm and 5am, and give consideration as to where food may be served.
- It's possible that the previous premises licence holder merely converted his existing justices' liquor licence, which would not allow for late-night refreshment and prevent any live music and dancing taking place at private functions such as wedding receptions.
- If you're planning to serve food outside, you'll need the outside area included within the premises plan.
The obvious conclusion is to discuss your marketing plans with your business development manager so that your landlord is fully in the picture.
Andy Tudor, Fleurets
Of all the changes in the pub trade over recent years, arguably the most notable has been the prevalence and importance of food. Conventional wisdom suggests this growth will continue, but this doesn't mean every licensee should blindly go down the food route. Before doing so there are numerous issues to be considered.
First, do the pub's customers, whether existing or potential, want a food offering, and if so, to what degree? There's little point giving over half the pub to gain a 10% increase in turnover from food if in the process you lose 20% of wet sales. Is the building suitable? Is the kitchen big enough? Where will you get the staff? What investment will be required in new equipment, extraction, training, and upgrading toilets? How will you comply with health and safety requirements? At which sector will you pitch your offering? How will you price it? How will you market it?
If you're buying a brewery or pub company lease you'll often need landlord's approval both of your business plan and your proposed changes to the building. It's their responsibility to protect their pubs and their beer sales and there will be cases where consent to substantially change a pub's character will be withheld.
Of course there will be many more instances where a brewery or a pub company will actively support the introduction of a powerful food offering. They're wise enough to know that food-led pubs will remain a key part of our industry, and if food sales are as strong as you hope, then wet sales will look after themselves.
