The pub industry remains a mainstay of the UK economy. Around 50,000 pubs operate across the UK, employing more than 330,000 people and generating around £15bn in turnover. The public house also serves an important social hub for communities, particularly in an increasingly atomised age. The bedrock of TV soaps and frequently prominent in literature and music, the British boozer is culturally vital too.
But if the pub retains a strong hold on the national psyche, it has nevertheless changed dramatically in recent decades.
One of the most profound changes is the growing importance of food. Eighty percent of pubs now has a food menui and the traditional working-class boozer, where food means crisps, nuts and maybe a few hastily made cheese rolls, is a dying breed.
Until the early 90s many pubs were split into two sections: the lounge area, which tended to be populated by families, and the bar or snug, where – mostly – men drank and smoked. But the bar-lounge division has largely disappeared and smokers are accustomed to decamping to beer gardens sometimes equipped with outdoor heaters.
The 2007 smoking ban has arguably accelerated the change in customer demographics. Often upmarket gastro pubs, many properties make much of their money on Saturday and Sunday afternoons serving meals to families.
It’s a great time to be a publican if you’re a beer aficionado. The number of breweries has exploded in the last 15 years, Carling, Fosters and Tetley’s now augmented by a panoply of British ales, continental lagers and New World Wines.
While cheap supermarket booze, rising costs and – some argue – the smoking ban have combined to put many pubs out of business, it’s still a lucrative trade when the location, marketing and product mix is judged right.
Some pubs, often in recently gentrified areas, fail to adapt to changing demographics around them. Eking out an existence, they do not meet the more sophisticated needs of the modern consumer and fail to replenish their dwindling band of ageing customers.
You can often secure such properties at bargain prices. By expanding the drinks range and overhauling or introducing a menu a forward-thinking publican can transform these failing pubs into thriving operations.
Peter Sheehy is the owner of the Sekforde Arms in Clerkenwell, East London. A landlord at eight pubs in 15 years – “from country pubs to inner-city pubs” – he knows a thing or two about the industry.
He kindly gives anyone who wants to buy a pub the lowdown on different routes into the industry.
"As a tenant you rent the pub for an agreed rent,” he says, “normally on a three-year rolling contract so that every three years you have a rent review. You agree the review with the brewery or pubco [a chain of pubs].
“The notice period to leave is usually three months, but can also be six months,” he continues.
"When the notice period ends the incoming person or brewery buys the liquor and the fixtures and fittings from you.”
A leasehold, meanwhile, generally lasts for either 10 or 20 years. "You purchase a lease from an outgoing leaseholder or a pubco or brewery for a new lease. They’re normally non-assignable for the first two years.”
This means you can extricate yourself from the lease after just two years should you change your mind about the viability of the pub in question or about running a pub at all.
However, finding a buyer is complicated slightly by the need for consent from a third party. “The brewery or pubco must agree to the incoming person,” explains Sheehy. “They can’t prevent a sale for any arbitrary reason, but it has to meet right and proper person criteria."
Buy a freehold, which gives you outright ownership of the building and business, and you can generally borrow between 50% and 70% of the purchase price because the premises serve as adequate security.
Freehold publicans also usually enjoy greater freedom. Invariably ‘free of tie’, they can source beer, wines and other supplies from whomever they choose, rather than being tied to a single brewery or pubco.
The downside? “Freeholds unfortunately are the most likely to fail,” argues Sheehy, “because often, the reason they are still freeholds is because they’re not in great positions. Freeholds tend to be in the countryside – and that’s where most pub closures have come from in the last few years."
The final, rarest ownership model is the pub franchise option. "Halfway between being a manager and a leaseholder, it’s for a fixed length of time, say five years,” says Sheehy. As a franchisee you – in theory – get more support and a rigid but proven formula to follow. However: “You can’t sell it to anyone else – you sell it back to the franchisor,” notes Sheehy.
Moreover, he adds: "The company installs their own tills in and sends in their own auditors so they know exactly how much you are making. With other types of pub ownership you can keep it secret."