Two key players leading self regulation in the tenanted pub sector have told MPs that recent changes have improved the lot of the licensee, but they admitted that further work is needed.
BII chief executive Neil Robertson and consultant Phil Dixon responded to criticism and probing questions from MPs during today’s hearing of the Business, Innovation & Skills Committee, which is investigating how the trade has responded to criticism leveled at it from its predecessor.
A key criticism was the failure to publish on-line the level of discounts against rents available on pubco agreements, a recommendation of BISC’s predecessor.
Robertson said: “We looked at it and found in practice that would be very difficult.”
Dixon added that one company three years ago had 48 different agreements in its estate, and listing them all “would be an impossible ask.”
BISC chairman Adrian Bailey said: “What concerns me is this previous committee made a recommendation and you’ve ignored it.”
Brian Binley MP said publishing the level of discounts against rents is “not beyond the wit of man” and added: “I would have thought you would have taken this recommendation more seriously and I’m disappointed.”
Robertson conceded: “We can take another look at it. There may be ways of doing it [better].”
Binley added: “Our point was there isn’t enough real information to people when they take initial decision to sink their money into a new business.”
Dixon stressed that there’s more transparency now after the new updated pubco codes of practice dictated that shadow profit and loss account must be provided for prospective tenants.
But Binley said that in “a number of cases” he has seen at his surgery these figures are what pubcos “feel it is, not what the average tenant might expect”.
Robertson argued that tenants are better informed when they take on pubs because of the Pre-entry Awareness Training course (PEAT) that must be taken by would-be licensees. Eighty five per cent, around 2,500, of those taking on pubs since October have taken PEAT - those that haven’t are experienced operators, Robertson said.
When asked by MPs, Robertson said “a few people” have said they find it hard to achieve fair maintainable trade (FMT).
This figure is supposed to be the amount a reasonably competent operator would take, but Robertson said there’s a “question mark” over how quickly tenants can be expected to reach that level of competency. He also said there was a “degree of optimism” in the shadow profit and loss figures.
Dixon went further, labelling FMT a “fantastic mythical target”. However, he argued that safeguard for new struggling tenants do exist through cooling off periods, currently six months for Punch and Enterprise licensees.
When asked if the past 12 months had seen an increase in discounts offered to tenants, Robertson said the main complaint the BII receives is from established licensees annoyed that newcomers are getting better discounts.
“If we are saying are more discounts available, I suspect the answer is yes. Are there more evenly distributed across the industry? That would been harder to say.”
Dixon said there are “inconsistencies in the estates”. “The solution is they need to pass on more of their profitability to the tenants.”
Robertson agreed that pubcos have embraced the new codes of practice, although he said some smaller companies “found it difficult to respond” to the requests. Dixon said there was a “bit of reluctance” among pubcos about giving details of profits “but we got there in the end”.
Dixon said he hoped to have Trust Inns involved in the process soon but said Wellington, a free-of-tie leased operator, has told its property managers not to speak to the BII.
When asked if the major pubcos are going beyond the de minis requirements of the code, Robertson agreed but said: “There’s scope for them to go far further.”
He criticised the “overly muscular” approach of some pubcos. For example, by “premature” use of debt collection and “overly rigorous” monitoring of tie compliance.
He said he’d be making recommendations around these areas for the review of the codes by BIIBAS.
He also questioned whether there could be “stronger provision for mediation”, and said having scope to be more proactive around policing codes “would undoubtedly strengthen the scheme”.
As for BDMs, Robertson said: “There are some very good ones, and some that perhaps need to move on, and some that have to be trained.”
Dixon said there’s “no evidence of any lip service to these codes”, pointing out that Enterprise made sure every licensee has been sent one and signed for it. However, he admitted that some family brewers were “going through the motions”.
However, he said he’d like to encourage pubcos to work within the spirit as well as the letter of the code. He gave the example of an Admiral tenant who he believed was not treated with “courtesy”, although there was no code breach. Admiral MD Kevin Georgel wrote a letter of apology and included £1,000 as a good will gesture.
“You may not have breached any code but has your BDM acted in a courteous, professional manner? That’s where we need to go," said Dixon.
When questioned about whether the sanctions available under the code - being stripped of BIIBAS accreditation and being thrown out of the British Beer & Pub Association - was a suitable deterrent, Robertson was adamant it would be.
“We would be recommending people not to work with that landlord. I think there would be a commercial disadvantage.”
Robertson rejected the idea that the BII should be able to issue fines for code breaches, saying it’s not appropriate as part of a self regulatory system. Dixon said tenants would prefer to have their debts waved than their landlord fined.
Simon Kirby MP raised the idea of a statutory ombudsman, but Robertson said it’s “not for us”, stressing that the action taken had been “good self regulation”.
“I don’t think you could find somebody who could do self regulation in the industry better.” He said BII wasn’t independent of the industry but he promised “energy” and “impartiality” in investigating complaints.
Although he said it’s not legally enforceable in itself, Robertson said the codes could have legal repercussions elsewhere. For example, breaches could be used as part of misrepresentation legislation. He was also cool on the prospect of having codes written into leases, saying it would “crystalise” some aspects but others would be lost.
Meanwhile, Dixon said the Pub Independent Rent Review Scheme (PIRRS) is the “fairest system that tenants have had to have their rents settled that there’s ever been”. He pointed to the fixed costs of the scheme and the fact the tenant picks the valuer.
Eight PIRRS cases have been completed and another four are being processed.
Dixon said it works for pubcos too - Marston’s told him that PIRRS resolved a dispute in three hours that had dated back one year.
The next hearing is due on 7 July, featuring senior pubco figures and critics from the Independent Pub Confederation.
