Should you Buy a Pub?
If you are looking to buy a pub, there are a number of different questions you need to ask yourself. At Restaurant Property, our highly experienced team have a wealth of knowledge in this area – and have been instructed on plenty of pub properties across London – from large chains to independents.
If you are considering pub ownership, there are a number of core factors to consider, for example: whether you are ready to take on the cause of pub ownership, location, the running arrangement (leased house, tenancy, free house etc.), and the agency you choose to help you locate the right spot. Below, we discuss each in turn.
A cause for the community
It’s true that the number of pubs keeps declining year on year, but as we recently wrote, it might be that the direction of change is about to be reversed for the better, with closures slowing from 27 to 21 per week. This is clearly significant.
This could be a sign that thanks to craft beer, dining and other factors, the pub industry is turning back around, making it a great cause to fight for. In addition, consider the fact that in the last year alone, the Government has granted over 1,500 UK pubs as ACVs – Assets of Community Value. This means that property investors cannot buy a pub to convert it into housing.
So far, only around 70 of the pubs given ACV status have been taken into community ownership, but this could be a viable option if your favourite local pub is facing closure.
Concept meets location
In London, up and coming areas in London’s Zone 2 and 3, such as Dalston, Stoke Newington, Brixton, Tottenham and Peckham should be key targets for prospective pub buyers or renters.
Looking at recent entrants to the Michelin Eating Out in Pubs Guide, the Marksman in Hackney is a perfect example of what can be done if the right property is matched with the right concept, the right chef and the right attitude. Winning the Michelin Pub of the Year Award, the Marksman was a relatively average pub before being relaunched by chefs Tom Harris and Jon Rotheram, both alumni of Michelin starred St John restaurant in Clerkenwell.
Capital and lifestyle are really the key motivating factors here to help you decide whether lease house, free house or tenancy is the right way to run your pub.
Lease: A lease is best suited to those with a little bit more experience or those who have great support from their property agent. The majority of leases are 10 to 25 years and returns on investment can be achieved. Prices in London currently range from around £50,000 and go up to £100,000 or even £150,000 depending on demand.
Free House: This the best option if you’re really confident in the pub trade. You’ll take all of the responsibility of owning the pub – from choosing suppliers to buying fixtures: everything.
Tenancy: This is perhaps the best option for those with little experience or who are looking to learn from experience. Most tenancies last 3 years, and you are able to get in, enjoy operations but have no real long-term ramifications. The trade-off is that you are obliged to buy beer and related products from the landlord.
The impact of Pubs Code
This statutory code regulates the relationship between tied pub tenants and the large pub-owning businesses which rent the pubs to them and sell them tied products (such as beer).
What the newly introduced code does is give the tenant the right to request an MRO assessment (a reassessment of the terms) either on renewal of their lease agreement, or at the next rent review – which should be no longer than 5 years.
The new code came into force on 21st July 2016 and applies to all businesses owning 500 or more tied pubs in England and Wales. This should help those new pub owners choosing a leasehold option belonging to one of the large pubcos, and ultimately make the pub industry more competitive, putting power back in the hands of landlords.
The right support
We are proud of our record in supporting a broad range of investors and pub owners to make their next purchase. Property sales is at the core of our business and our team is absolutely dedicated to achieving the best results for our clients.
In a highly competitive market, we can provide you with a tailor-made solution that draws on our network of exclusive contacts and partners from across the industry.
Whether you are a first-time pub buyer or are looking to expand or move your operations to somewhere with more potential, get in touch with a member of our experienced team today.< Back