RUNNING A PUB A guide to costs for tenants/lessees Published September 2011
Running a pub A guide to costs for tenants/lessees INTRODUCTION Business plans, and the negotiations over leases and tenancies in the UK pub trade should be as well informed as possible. This guide provides valuable new data for tenants and lessees on typical operating costs in the UK pub industry. The report represents the best available data available from BBPA member companies on the costs of running a pub in the tenanted and leased sector of the UK pub market. It is a vital reference tool for anyone thinking of investing in a pub. Existing tenants and lessees will also be able to benchmark their own business, by comparing their own costs against industry norms. The guide shows the average cost of running a pub over a range of pub models based on turnover and business types. It covers a wide range of pubs, from those with little in the way of food sales, to those that are largely food led. The report takes account of the significant variations that exist in the cost base even within those pubs that are broadly in the same category. Such costs are based on the size and location of the pub, the age and state of repair, the operating style and the experience of those in charge. As well as providing average costs, the guide also includes the minimum and maximum typical costs providing a range of scenarios across different types of business. The examples and figures supplied in the survey give an indication of costs that are likely to be incurred in the types of pub businesses described in this guide. Where these figures are to be used in preparing business plans or for other purposes it should be borne in mind that all pubs are unique and that the actual costs incurred will be dependent on the different aims and styles of the business according to the location, the market, and the preferences and skills of the tenant/lessee. Costs do vary across the country and the size of the business as well as its focus will have significant impacts on costs.
BACKGROUND The BBPA guide has been compiled from data supplied by BBPA members for the year ending 31 st December 2010, who own and rent out pubs on short term tenancies (typically three years), or on longer term leases (typically fully repairing leases on 10 20 year terms). The tables have been compiled using data from the pub estates of BBPA members. They represent a composite of individual pub accounts that have been made available to those companies and the experience of those companies across the entirety of their estates. The information is supplied in summary form across five different pub models. While not inclusive of all business models, they are representative of the greater majority of public houses run as either tenancies or leases. Costs are shown on the basis that the pub business is owned and managed by the tenant or leaseholder and that their income is derived from the profit remaining after operating expenses and rent payable is deducted. DIVISIBLE BALANCE Divisible balance is that profit to be made before rent is deducted. It provides an indication of what rent might be asked for by the pub operating company. Rent is typically 50% of the divisible balance but can be and is subject to negotiation on either side of this figure. The divisible balance is also dependent on the margins achieved on the selling price of drinks and food passing through the business. This can be higher or lower, depending on the arrangements offered by the pub operating company, the location and style of the business and the expertise of the tenant/licensee in obtaining the best return. COSTS/INCOME NOT INCLUDED MANAGERS SALARIES: Tenanted and leased pubs do not employ full time managers and therefore such costs are not included. All other staff costs are included in the survey. Staff costs for heavily food led pubs are greater, given the need for specialist expertise and the greater labour input required in running a food led operation. AMUSEMENT MACHINES: Neither gaming machine nor the costs associated with them have been included in the benchmark figures. Not all pubs have them and arrangements differ across companies and estates. ENTERTAINMENTS: The cost of specific entertainments, such as televised sport and live music, are not included, as they are optional to the pub models and can be added to any business plan or rental assessment where relevant.
PUB MODELS Five pub models are illustrated in the report: Rural character (50:50 drink/food) turnover c. 5,000/week Community/wet led (90:10 drink/food) turnover c. 5,000/week Community/wet led (90:10 drink/food) turnover c. 8,000/week Town/country food led pub (30:70 drink/food) turnover c. 10,000/week Circuit bar traditional bar (70:30 drink/food) turnover c. 10,000/week VAT It is important to note that all sales and costs figures are quoted exclusive of VAT. Indicative turnover figures are inclusive of VAT, while sales figures and associated costs are given exclusive of VAT. VAT is currently charged on sales at 20%. The benchmarking figures were compiled from 2010 figures when the VAT was 17.5%.
BBPA GUIDE TO COSTS SECTION 1 DIVISIBLE BALANCE
BBPA GUIDE TO COSTS Summary DIVISIBLE BALANCE Sales, Cost of Sales and Costs are in s exclusive of VAT Please note that the indicative turnovers applied to each of the five pub models include VAT whereas the actual sales and cost figures are quoted exclusive of VAT.
BBPA GUIDE TO COSTS DIVISIBLE BALANCE Summary as Percentages of Sales (Turnover) Indicative turnovers applied to each of the five pub models include VAT whereas the actual sales and cost figures are quoted exclusive of VAT.
RURAL CHARACTER Turnover c. 5,000/week Drink to Food Ratio 50:50 Divisible Balance Note: Minimum/maximum figures are the reported figures for the lowest and highest reported divisible balances (DB) in each category Average figures are the average of all the sales and cost figures of all pubs in the category
COMMUNITY WET LED Turnover c. 5,000/week Drink to Food Ratio 90:10 Divisible Balance Note: Minimum/maximum figures are the reported figures for the lowest and highest reported divisible balances (DB) in each category Average figures are the average of all the sales and cost figures of all pubs in the category
COMMUNITY WET LED Turnover c. 8,000/week Drink to Food Ratio 90:10 Divisible Balance Note: Minimum/maximum figures are the reported figures for the lowest and highest reported divisible balances (DB) in each category Average figures are the average of all the sales and cost figures of all pubs in the category
TOWN/COUNTRY FOOD LED Turnover c. 10,000/week Drink to Food Ratio 30:70 Divisible Balance Note: Minimum/maximum figures are the reported figures for the lowest and highest reported divisible balances (DB) in each category Average figures are the average of all the sales and cost figures of all pubs in the category
CIRCUIT BAR/TRADITIONAL BAR Turnover c. 10,000/week Drink to Food Ratio 70:30 Divisible Balance Note: Minimum/maximum figures are the reported figures for the lowest and highest reported divisible balances (DB) in each category Average figures are the average of all the sales and cost figures of all pubs in the category
BBPA GUIDE TO COSTS SECTION 2 OPERATING COSTS
BBPA GUIDE TO COSTS Summary OPERATING COSTS Sales, Cost of Sales and Costs are in s exclusive of VAT Please note that the indicative turnovers applied to each of the five pub models include VAT whereas the actual sales and cost figures are quoted exclusive of VAT.
BBPA GUIDE TO COSTS OPERATIONAL COSTS Summary as Percentages of Sales (Turnover) Indicative turnovers applied to each of the five pub models include VAT whereas the actual sales and cost figures are quoted exclusive of VAT.
RURAL CHARACTER Turnover c. 5,000/week Drink to Food Ratio 50:50 Operating Costs Note: The sheet above indicates the maximum operating costs alongside the minimum operating costs in this category The average figures are the average of the operating costs of all pubs in this category.
COMMUNITY WET LED Turnover c. 5,000/week Drink to Food Ratio 90:10 Operating Costs Note: The sheet above indicates the maximum operating costs alongside the minimum operating costs in this category The average figures are the average of the operating costs of all pubs in this category.
COMMUNITY WET LED Turnover c. 8,000/week Drink to Food Ratio 90:10 Operating Costs Note: The sheet above indicates the maximum operating costs alongside the minimum operating costs in this category The average figures are the average of the operating costs of all pubs in this category.
TOWN/COUNTRY FOOD LED Turnover c. 10,000/week Drink to Food Ratio 30:70 Operating Costs Note: The sheet above indicates the maximum operating costs alongside the minimum operating costs in this category The average figures are the average of the operating costs of all pubs in this category.
CIRCUIT BAR/TRADITIONAL BAR Turnover c. 10,000/week Drink to Food Ratio 70:30 Operating Costs Note: The sheet above indicates the maximum operating costs alongside the minimum operating costs in this category The average figures are the average of the operating costs of all pubs in this category.
For further information please contact: Dr Martin Rawlings MBE Director, Pub & Leisure British Beer & Pub Association Market Towers 1 Nine Elms Lane London SW8 5NQ 0207 627 9141 mrawlings@beerandpub.com A pdf version of this document can be found at www.beerandpub.com