Whilst the tied lease model of pub ownership has its critics, there are thousands of people who have been able to enter the trade using this format and to grow hugely successful businesses, moving on to much bigger things. With very little capital needed, tied and free of tie leasehold pubs offer the opportunity for passionate people to build spectacular businesses, that would be virtually impossible to do in many other types of business.
With the feel good factor returning in most parts of the UK, the Chancellor easing the burden on the industry with the duty freeze and trading performance reported by most of the pubcos on the up, there has never been a better time to consider getting into the pub trade. Whilst freehold prices maybe prohibitive in some areas, many people with limited capital are seeing the huge benefits that a leasehold pub can offer. For as little as £30,000 and a good degree of hard work, an individual can transform their life.
There are many benefits the lease/ tenancy model provides, other than purely economic return, which shouldn't be overlooked
To start with how about...
- A Home (There is no place like it)
- A Job (For you, your partner and probably your kids/ parents)
- A Way of Life (In the heart of the community)
The key to success for most is going in to it with your eyes wide open and doing the right deal at the outset. One of the main considerations when searching for a pub leasehold is whether the lease is tied or free of tie.
A tied lease binds the tenant to buying some or all of its wet products from the landlord company at rates higher than could be achieved from the freetrade. In return for the tie the landlord will charge a lower rent and offer additional business support services. Each agreement will vary in terms of discount levels and the extent of the tie. Many are limited to beers and ciders only. For tenancies the landlord often retains responsibility for external repairs.
Free of tie agreements allow you to purchase your products from anywhere you choose to at market rates. As a result rents are invariably higher and almost always put the responsibility for all repairs on the tenant. You will also be on your own having no fall back business support available from your landlord.
Essentially, the choice comes down to personal preference, experience and often operational choice. New entrants might prefer the support offered by the pubco landlord, whereas operators intent on building a chain might consider the ability to build buying power offered by the free of tie lease. In many cases it will come down to the choice of units that are available and many pub and restaurant multiple operators are taking advantage of the low cost of entry and wide choice of units that tied leases can offer.
The life of a publican is not for everybody. It requires hard work, long hours and dedication. It is not a 9-5 job. You are however your own boss, you don't answer to anyone (your partner and the tax man excepted) and you are directly responsible for your own rewards.
What offers better value for £30,000 - a car and a holiday or a home, a job and a way of life?
Don't pre judge leasehold pubs. Judge each opportunity on its merits, take professional advice, get all the facts and you will make the right decision. It could be your first step towards a new life.