Given the emergence and growth of so many breweries over the last decade, we find ourselves in a period where a number of them are looking to expand operations by taking on pubs.
Having received a significant number of enquiries recently on this topic, in this issue Malcolm Ireland, head of Leisure & Licensing at Napthens solicitors, provides a brief guide to some of the practicalities to consider:
The people: Make sure you have the right people in your business to make the step from selling predominantly wholesale alcohol, to selling alcohol retail. The two propositions are very different. If retail is new to you it is wise to retain a good, experienced pub manager at the outset. Having somebody capable who can take on some of the responsibility for running a pub will help prevent you from ‘taking your eye off the ball’ with your core business – making beer.
Research: Often a brewery will open their first pub fairly close to the brewery so you may well know the area, but if the pub is trading before you take it over, visit it on numerous occasions, on different days of the week and times of day. Visit other pubs in the area. They will be your competition and it is a good idea to understand their offering and what they are doing to get people through the door.
Take advice: Have professional advisers on hand. That includes a solicitor and an accountant as a minimum. They will be familiar with the processes and common pitfalls and will help to steer you in the right direction. If you don’t feel you can afford professional advice then you should question whether it is the right time to take the financial risk of a new venture.
Plan: Prepare a business plan with a projected cash flow and try to be conservative on the variable costs. For example, it is very difficult to know before starting to trade how many staff you will need on each night of the week. It is better to over-estimate the cost and decide not to take on the site because the numbers don’t add up, than it is to underestimate, take on the site and then find you are losing money. You should focus on what expenses are really justified to attract the market you are aiming for. So, if your aim is to be a ‘beer shrine’ with a good food offering – is the cost of a Sky subscription really necessary at the outset?
Negotiate: Negotiate on everything. For a lot of suppliers the price they suggest at the outset is not the lowest price they are willing to work for. Seemingly small discounts can add up to a significant amount when all the expenses of starting out are added together.
Get funding: Make sure you have properly considered how start-up costs are going to be funded. If you intend to use bank funding then speak to your bank at the start to make sure your expectations are realistic. If you engage with your bank early and properly explain your intentions to them, they can help you to formulate a business plan which is more likely to meet internal credit requirements. You solicitor or accountant can also help you with your plan and you may find that they have relationships with banks which can help make the process smoother.
Be objective: We have seen situations where a brewer has had a sentimental connection to a particular site and a decision to take the site on has been led by that – rather than a justified business case. Remember, this is business and taking on a new pub and getting it wrong can be detrimental to the existing brewery business that you have worked hard to build.
For advice on this or other legal issues affecting your business please contact SIBA Legal Helpline: 0845 6710277
North West law firm Napthens LLP is a SIBA supplier associate and gold standard sponsor. The firm has a team of specialists looking after the legal requirements of clients in the leisure and licensed trade sector, with clients including Daniel Thwaites plc and Sceptre Leisure Ltd.
Napthens manages the SIBA Legal Helpline which offers legal advice and guidance on a wide range of legal issues affecting your business including: general commercial, intellectual property, corporate finance, dispute resolution and litigation, commercial property, licensing, debt recovery and employment law.
Any enquiry through the helpline will receive up to 1 hour of free legal expertise (if further work is require, you’ll be advised of the appropriate charging structure)
Full details of the helpline can be found on the SIBA Members Toolbox