It’s always a people thing

It is not just business relationships in Britain’s tenanted and leased pub market that are under strain at the moment. It was interesting to see this week that Burger King is being sued in the United States by franchisees over soft drinks contracts. The US dispute centres on a claim that funding from manufacturers originally directed to franchisees is now being diverted to BK’s corporate advertising budget in an alleged breach of a legal agreement. It only goes to show that tensions can bubble over in any business arrangement - especially when times become tougher and cash gets even tighter. The obvious difference here is that the American case is about using the law to enforce an agreement, while the UK example is all about appealing to politicians to try to change one. Trusting MPs to fix anything would seem a dangerous ploy, and last week’s Parliamentary report from the Business and Enterprise Committee, for all its criticism of the big pubcos over the way they treat their lessees and tenants, still only passes the buck onto the Competition Commission. The committee called on the Government to look urgently at the bargaining power between pubcos and lessees, but admitted that more analysis of the market was required. I have been writing about the “tie”, particularly in the context of European block exemptions, for the best part of 30 years. There’s no other facet of the leisure market that’s come under so much scrutiny, and yet it remains alive, if not always in rude health. My guess is that when all this is done, the beer tie will still survive. That is not to say that how it is applied and enforced doesn’t need attention and probably a serious overhaul. But is it really the system that is the cause of current industry problems? Perhaps the most important conclusion that can be drawn from the BEC report is that people are the real issue. The committee had critical words for all sides, noting that its inquiry had been complicated by the “lack of agreement among witnesses on almost every point”. Its main targets, however, were the major pubcos, their bosses and their front-line contact with lessees, through business development managers A lack of transparency was a major concern, with the MPs judging that the oral evidence given by senior executives from Punch and Enterprise had included “assertions which, on investigation, proved to give a partial picture.” Worse than that, was the committee’s findings that the performance of business development managers (BDMs) varied across the industry from excellent to dire, with too many offering lessees little or no support, and some who actually bullied and intimidated. It added that there was evidence to suggest this culture was not limited to BDMs but could reach further up companies. Whether or not hard evidence of bullying can be sustained, the mere fact that accusations of something so serious are commonplace should set alarm bells ringing. It hardly smacks of enlightened management, and even if not widespread it can only further damage the reputations of the pubcos. There are those that have likened the current situation to pre-Beer Orders days, with the market now being dominated by a few big lease companies rather than a handful of big brewers. What it also suggests is that old “beerage” attitudes and practices which should have been dispatched years ago still survive in sections of the market. A pubco executive admitted the other day that better training and recruitment would be the keys to the future of the leased system. But that’s hardly a new story. What seems to be needed it a change in culture – not to mention some tougher hiring and firing criteria. More transparency and openness would be a good start. As The Economist magazine observed this week “to develop any future policy that might let pubs and publicans flourish it seems the biggest deficit is good data: on tied tenancies, how rents are fixed and terminated, how beer is priced and just how far discounts benefit the customer”. Disputes will occur, and as the United States demonstrates the franchise system is no panacea, but we can’t go on running off to Government every time someone has a grievance. People have got to change their approach and culture, if not they may need to be changed themselves.