Now Enterprise Inns have set out their strategy following these reforms, and it’s not remotely surprising. They are planning to convert 750-850 of their most profitable sites to direct management, sell off about 1,000 bottom-end pubs and convert another 1,000 to arm’s length commercial leases. The remaining 2,200 pubs will be subject to tied agreements of up to five years, where presumably they will seek to minimise the opportunities for licensees to take up the market rent option (MRO).
As I’ve said before, it’s hard to see why any pubco would be interested in owning pubs run on an MRO basis in the long term. Enterprise are going to transfer a lot more pubs to commercial leases where they no longer have any interest as to whether the business is run as a pub or a supermarket. If any licensee on a tied agreement goes for an MRO, they will not renew his agreement and will probably either transfer the pub to management or sell it off. It’s also very doubtful whether there’s enough liquidity in the market to take up the 1,000 pubs being sold off, and many will surely end up converted to alternative use.
No doubt Punch Taverns will come up with similar plans, and we will end up with yet another Beer Orders style upheaval of the pub trade. Maybe the trade does need a further culling, but it’s hard to see that that was the objective of the campaigners for pubco reform.
And, for those who didn’t get the reference, see here. It’s the classic cautionary tale of being careful what you wish for.