“Barrel Dregs”, now that we have the Virus.

By | October 8, 2020

It’s a funny old world, everyone is trying to avoid the virus, many young people have no idea they have it, until they get tested, the older people are shaking in their boots because it hits them far harder with totally unknown consequences.

We have for years tried to help people in trouble in business especially with leased businesses like pubs. The Pub Co’s have legally bent the rules of law, running rings round struggling lessees and tenants, being able to throw shed loads of money to get top legal advice, however close to the wind that they might sail, all perfectly legal in a court of law.

My colleague has just called me, the virus has decimated the leisure industry causing untold mayhem, the over valued Pub Co Assets are in serious danger of getting to their true values based on the income that they make for the Pub Co’s. Which has been like open season on gullible, honest people, which far too many people have lost everything since the Pub Co’s started, we have rescued and helped a number, but not enough.

If a freehold pub was turning over £400K, it would fetch as much as £800K, but it would appear no more, one has just been sold for a tad over £400K.

The Pub Co’s are supposedly in a panic, their assets values are supposedly being decimated, since the income has plummeted and we could be looking at negative equity on a lot of these companies, which could be panic selling time.

My old pub is sitting empty, it used to turnover in excess of £500K, thirty years ago, when I ran it, it was sold to Pub Co, not by me, successive lessees have gone belly up.

There could be a massive fire sale of assets in the near future, added to a number of the older executives catching the virus.

You could make more money by buying a freehold, not immediately, but watch the market, the ones with large sites will make superb houses or development sites.

When this virus finally runs out of steam or contagion, is hard to assess, but if there is a fire sale within the Pub Co’s, maybe it will be worth running a pub again.

Interesting times.

Some very good Reasons why you should not take a Pub Commercial Lease.

Commercial Leases favour the Landlord from Day 1, I should know, I let Commercial Leases, but I did remove draconian clauses which would cause serious hardship.

The actions of many Pub Co’s are within the Law as it stands in respect of a Commercial Lease and you need to study the small print in all respects and totally understand it. Your solicitor may well happily say it’s a standard Commercial Lease, without explaining some of the draconian long term responsibilities. The Pub Co’s have the best lawyers, and in some cases be able to throw shedloads of money to them to win a point, which your local solicitor/conveyancer may go white round the gills or run a mile at possible litigation that might endanger his practice.

Your first encounter on buying a Pub Lease, is with a Commercial Agent, sadly their clients are the vendors, you are a possible buyer, but not their client. Their Brochure deals with facts, anything that is not a cast iron fact may possibly be mentioned by the Agents Representative. Sadly I have had far too many tell me the fantastic business potential of the property without any back up figures, since the accounts are often one to three years in arrears and the last incumbent emigrated to Australia at short notice, or retired through ill health and could not be consulted. I have also had one of the largest Commercial Agents pay me compensation for misinformation. So as a safeguard only believe that which is confirmed by the Pub Co selling the lease, in writing and signed by a director.

Your friendly Pub Co, Business Development Manager or another title, is Mr Nice Guy. You’re just the person or people to make a fantastic success out of their superb pub, fortunately the patter sounds terrific. Very little if any is confirmed in writing or it will be after you sign the lease and if you don’t sign quickly there are many more waiting in a queue, which you have first call. Sadly I have dealt with far too many people who failed to get confirmation in writing. One said the Pub Co did a survey at every change, which they did not, he was switched to a new area, the people were left with a very old hole through the wall, which the Pub Co tried to claim had been done recently, any good surveyor could see it had been there for years and totally neglected.

Your Business Plan, would appear to be accepted by every Pub Co selling a lease, so my legal colleagues tell me. Never over estimate the increased business that you will develop by more than 5%, that business has to come from another business and they will do all they can to retain it. Always remember Business in a catchment area is finite, it is not infinite, it can take you two years to develop the business and only if you get it right. The other essential point is, that whatever business a pub/restaurant has at that time, that is it’s Market Share of the finite business in that catchment area. If you over state the potential and do not achieve it, the Pub Co will class you as a Retailer Failure. The Pub Co accepted your Business Plan as totally viable, yet will pull the plug at the first signs of serious cash flow problems. You can also look at all the similar businesses in that catchment area and assume that you will do better, you need to identify every aspect of the catchment area business, good or bad and never be frightened to walk away, regardless of the vendors pressure.

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