Build your portfolio

May 14, 2019
Some think signing a deal with a family brewer means entering into an outdated operation – but that’s mostunlikely to be the case.
Taking on a pub lease or tenancy can be a daunting prospect for any existing or potential publican. The raft of agreements on the market are varied, but family brewers often offer something a little different to the major pubcos.
Brewers have been running the tie since the 19th century and are still operating this traditional tenancy model. The majority of their agreements are tenancies, which have a shorter agreement time than leases, with all property responsibilities remaining with the brewer.
While many might think that partnering with a family brewer could mean signing on with an old-fashioned operation – that is not necessarily the case because many have moved with the times and are at the forefront of innovation.
So what are the positives and potential pitfalls of taking on a pub with a family brewer?
The majority of family brewers are members of the Independent Family Brewers of Britain (IFBB). There are 29 members that boast 4,500 years of brewing between them, brew 450 different beers every year and have 3,238 pubs across the country. According to the IFBB, around 3,000 tenants operate under this beer tie.
IFBB chairman Rick Bailey, who is also CEO of Thwaites, says regional family brewers tend to have strong relationships with their tenants.
“Generally, we know all of our tenants and build solid relationships with all of them – some have been with the same family brewer for generations, some of ours for up to 50 years through a number of members of the same family,” he says.
“The heritage, longevity and family values that are core to the family brewers give people the confidence and reassurance to take a long-term approach to their business, knowing they are with a supportive, sustainable and attractive business partner.”
While family brewers have suffered from negative perceptions, often being accused of being old fashioned, Bailey says that they have the benefit of not being overburdened with layers of management.
“The straightforward ability to quickly reach high up into the management and ownership of the business makes for fast and agile decision making, which is a huge advantage,” he says.
“Many of the family brewers are actually very dynamic businesses, which is borne out by the huge array of retail concepts that you will find within our membership and also in the development of their beers in response to a changing market.”
He adds there are “countless examples” of family brewers winning industry awards.
“Not a sign of backward businesses – if old fashioned means straightforward, experienced and reliable – the family brewers have it in spades,” Bailey says.
He argues that family brewers are innovating in the sector and have the “vision and patience” to make very large investments and try new things.
It’s about a partnership
He highlights many examples of brewers being ahead of the competition – such as being among the first businesses to get behind the new wave of English lagers like Korev and Frontier to putting burger shacks in pub gardens and recognising the trend towards offering premium bedrooms.
Family brewer Palmers has been at the forefront of innovation being winners of
The Publican Awards’ Best Tenanted/Leased company (under 500 sites) for two years in a row. The Bridport, Dorset-based, family brewer, that is 225 years old this year, won the top accolade for its innovative tenancy agreement and level of support.
“The way our model works is all turnover-related, which gives a good foundation for a partnership rather than a landlord-tenant kind of relationship,” says Jim Jones, tenanted trade director.
“And everyone knows when we go into a meeting all involved are meeting for the same cause. There is a vested interest in doing what is right for them and the pub because, if it works, everyone sees the benefit.”
He says that the tenancy agreement it offers gives licensees a low-cost entry into the market, meaning that publicans can use their funds to focus on driving sales, fixtures and fittings and marketing. Property upkeep is up to the brewer, so taking the pressure off the licensee.
“Regional brewers like us take a long-term approach to everything, from people to property, and we invest really well in it all,” explains Jones.
“Because everything is freehold and it has been in our ownership for a long time, it means that we are able to invest heavily, without having a short-term ROI that you would have to aim for in a large pubco.”
Jones says that the pluses of being with a family brewer can also mean that they have the ability to act quickly to benefit the businesses.
“I was in a pub last week, standing in the kitchen, which has a bay window overlooking the beach. I got talking to the licensee and said wouldn’t it be great if we opened those windows and sold ice cream?” he says.
“I now have contractors going on-site to install an ice cream parlour in their kitchen.”
On the criticism that brewers are seen as old fashioned, Jones warns that people need to recognise the difference between ‘traditional’ and ‘old fashioned’.
“We have really strong family values, great heritage and most importantly a people culture you can’t buy,” Jones adds.
Strong, long-term relationships and heritage is the strategy for West Country-based Wadworth, which has been brewing beer since 1875.
“We are in business for the long term and that is how we work with our business partners; investing with them for long-term success and seeking to help build a bright future together,” says Chris Wellham CEO of Wadworth Brewery. “Last year, we invested in excess of £5.4m in our estate and we continue to focus on improving our pubs for our customers to enjoy.”
As a small, independent family business, it has had the same pubs in its portfolio for years. “Many of our business partners and pub managers have operated pubs with us for many years and so we know them personally. We believe it is vital to get to know our business partners and their businesses thoroughly,” he says.
“As one of 29 family brewers, we know from research nine out of 10 tenants would take another agreement with a family brewer.”
He calls the view that family brewers are ‘old fashioned’ as a ‘stereotype’.
Forward thinking and innovative
“It is far from the truth that family brewers are old fashioned. In fact, being small means we can be quite fleet of foot, forward thinking, innovative and agile,” he says.
“With real experience and heritage behind us we can blend the old with the new and use our experience and history to a real ad-vantage. We also understand our customer base and our pubs really well. That’s a powerful base to build a long-term business with long-term returns.”
Henley-on-Thames-based Brakspear ar-gues that old fashioned ‘isn’t all bad’.
“We’re proud to have been brewing and running pubs for more than 200 years, and to have so many beautiful, historic buildings within our estate,” says Brakspear chief executive Tom Davies.
“Our thinking, though, is far from old fashioned. We know the pub market is fast-changing and we adapt to embrace new technology back and front-of-house, to make sure our tenants have the edge.”
Family brewers can offer a wider range of support and Davies says that Brakspear offers “tailored support” rather than a “one-size-fits-all” approach. “We think our way of doing things leads to longer term, more stable agreements and the proof is the many long-serving tenants in our pubs: in the past few months, three tenant couples with a combined total of 60 years with Brakspear renewed their agreements with us. We must be doing something right.”
Forward thinking and innovative
Charles Wells now has fifth generation family at the helm of its company. Commercial director Peter Wells says that while he takes “great pride” in its heritage, still promoting the same values as founder Charles Wells to this day, the company continues to evolve.
“Long term needn’t mean conservative; with a £13m new brewery complex arriving in 2019, we’re ensuring our continued relevance in Britain’s ever-evolving brewing community,” Wells says.
“This new brewery will allow us to meet the changing tastes of the nation’s beer drinkers, by developing a new range of beers in a smaller, more artisanal brewing environment than our previous facility.”
He agrees with Jones that family brewers have long-term investment as a priority, but maintains that they can also offer tenants real flexibility.
“We’re a family brewer and we view our pub partners as an extension of this, so it’s important that we devote resources into ensuring their growth and development,” he says.
This is a view supported by Thwaites director of pubs and brewing Andrew Buchanan. “At Thwaites, we refer to our tenants as customers because we recognise
they have a choice who to partner with and we are privileged that they have chosen to partner with us,” he says.
“We invest time and effort into developing a relationship with them before they become a partner and we provide extensive support services that are tailored to their individual needs, rather than a one-size-fits-all corporate approach, which you might get with a larger company.”
Appealing to the new wave
Thwaites also works hard to develop a relationship with its tenants, including a very active online community where tenants can have discussions, share their views, highlight best practice and ask questions.
“We believe our relationships with people start before the tenancy even begins, which is why we have such a healthy talent bank. Recently, we successfully agreed a tenancy with someone who had been in our talent bank for three years. They were still keen to work with us after that time because of the ongoing relationship we build with people,” he says.
Chris Chapman associate director and head of business partnerships at Hall & Woodhouse agrees relationships are crucial.
“We have seen year-on-year growth in applications and we believe that our family-owned business model appeals to the new wave of independent operators looking for a more bespoke support package,” he says.
Many licensees are attracted to the tenancy agreement with the company as there is no open-market rent review on renewals.
“The rent our business partners sign up to will be the rent that they pay for the duration of time they are in the public house (with the expectation of annual RPI inflationary increases or decreases),” he says.
“We are a values-led company – we win together and lose together – this means both sides have to bring something to the table.”
There are definitely benefits to working with the right family brewer – the heritage, long-term approach and ability to move quickly to keep the premises in tip top
condition. But there are a number of pitfalls. Not all family brewers are forward-thinking and any potential licensees need to do their homework.
Not the right approach for all
Davey Co managing director Paul Davey agrees that family brewers tend to be a little “more user friendly” as they are interested in keeping the quality of their estate in top condition. But he says that while the family brewers can provide a stronger level of support they can also be very commercially minded.
“They are very commercial and they are also more mindful of not wanting to see and support failure,” he says.
Another issue is that the family brewer level of support is not always the right approach for every operator. He says it could be seen as “interference” to a competent operator who prefers a lighter touch.
There is also the issue of the tenancy term, which can range from 18 months and three years.
While the tenant does not have the property repairing options and only has to invest in the F&F they only have the benefit of the trade while at the site.
“They could go into a site that is doing OK and triple turnover but they are not building any value for themselves to sell on,” he says.
“All they are doing is having the benefit of the trade for as long as they are tenants. Yes, they don’t have liabilities, but they don’t have benefit to build value for themselves.”
Fleurets director and head of pubs Simon Hall says that the tenancy is a better route for someone coming into the market, as they don’t have to worry about assignment prices.
“You miss out on the opportunity to get a capital gain on assignment,” he agrees. However, there are benefits as the longer-term approach can also mean lower and softer rents as well as a more supportive environment.
But there are downsides as some can be “stuck in their ways”.
“They can have unusual ways of doing things and sometimes illogical decision making and idiosyncratic behaviours, which can be difficult,” he warns. “But in the past 10 to 20 years, a lot of them have come a long way.”
Family brewers can definitely offer something different from the major pub companies and, as well as offering tenancy and lease agreements, they brew good-quality beer that they sell in their pubs and, in many cases, offer to free trade.
6 steps to starting out
1 Assess your skills
New licensees have to take a Pre-Entry Awareness test that covers a range of useful topics
2 Build your Skills
Local colleges run general accountancy and bookkeeping courses, but try to focus on those specifically for the licensed sector if you can
3 Your priorities
If margins are tight, it’s important to work out the areas in need of attention, specifically looking at what changes you can make to save money
4 Grow your business
Those looking to kick their business up a notch, but don’t have the resources to do so, can access a wide range of funding
5 Be transparent
Lenders will want assurances that their money is going to be safely invested and will yield returns. Be open and honest
6 More than one source
Shop around. Don’t just go to your bank, ask the likes of the local authority or even go to a broker
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