What costs involved with running a pub?

EricGuys · Mar 24, 2023

I'm looking at a pub which is grade II listed and closed due to COVID.

Leasehold is £150k and annual rent £50k.

I've never run premises based business before but have the capital to invest, just wondering if £50k rent is what other pub owners would expect to pay?

Other revenue streams include overnight lodgings, so the £4k a month rent sounds reasonable, turnover will likely be from the lodgings, bevvy sales etc.

What other costs are associated generally with premises based business rental?

Scalloway · Mar 24, 2023

Your firsdt costs would be a lawyer to look at the lease and a surveyor to report on the condition of the property.

BubbaWY · Mar 24, 2023

EricGuys said:
I'm looking at a pub which is grade II listed and closed due to COVID.

Leasehold is £150k and annual rent £50k.

I've never run premises based business before but have the capital to invest, just wondering if £50k rent is what other pub owners would expect to pay?

Other revenue streams include overnight lodgings, so the £4k a month rent sounds reasonable, turnover will likely be from the lodgings, bevvy sales etc.

What other costs are associated generally with premises based business rental?

Id firstly be asking for some historical trading figures. The rent sounds very high so needs some good trading figures to back it up. Also, how long is the leasehold for?

A pub usually works on a gross profit of around 50%. So just to pay your rent, you would have to sell £8k a month without taking into account other overheads.

Costs for a pub will be bar purchases, wages (bar staff, chef (if it does food), cleaners), utilities, rates/water/insurance, upkeep of the building, entertainment, professional fees (accountant, etc), telephone/broadband, licences (music, etc), bank charges, sundries (cleaning products, till rolls, etc).

But I come back to my first point. Without any numbers to back up the leasehold and rent figures, it sounds far too risky.

Mark T Jones · Mar 24, 2023

The good news is that this is the right time to be asking questions - before you sign anything.

I'd be asking lots more questions, and speaking to a number of local publicans before committing. (You can absolutely guarantee they will moan a lot, it's just a case of how relevant to you their moans are)

Just a few thoughts:

- I wouldn't expect to pay a premium on a closed pub. (Covid 'ended' over a year ago).

- The rent is dependent on a number of factors including historic figures (which will presumably be rather vague in this context) - what others pay is unlikely to be relevant.

- Is it a Pubco Lease? If so, you need to be looking at far more than the rent. Actually, you need to be looking at every aspect - and seeking legal advice whoever the lease is with.

- You should be able to get a pub-specific projection template which will guide on on specific cost bases, however key ones will be:

Rent / Rates
Utilities
Staff
Insurance
Consumables
Ongoing maintenance

Not forgetting the afore-mentioned legal & professional prior to signing.

Whilst I'm not one to should about industries 'dying', hospitality is undoubtedly having a tough time - if you don't have a very clear, researched plan I'd stay well away.

EricGuys · Mar 24, 2023

Thanks for the feedback I will ask some more questions. It's quite a small town and since it closed from covid, the workers actually transferred to the only other pub in the village. May not actually be viable then, but from the public perspective, the premises is actually well reputed. It has accomodation, tent pitching garden and restaurant space,

But despite these revenue streams , as posters have said the fact that staff wages etc will come on top of this, it does sound like a poor investment at immediate glance.

Will find out more.

Rightbiz listing rightbiz.co.uk/buy_business/for_sale/280291_devon.html

Amazingly enough it's gone down to £30k rent, I'm sure it was 50k last week...

pentel · Mar 24, 2023

From the sales particulars: There is a schedule of dilapidations (available on request), and incoming tenants will be expected to commit to complete these works to The Duchy’s satisfaction, within two years of the lease commencing,

Huge red flag.

If I was to be vaguely interested ( which I am not) I would be starting negotiations from a "no premium" (the £150,000 mentioned) and a substantial rent free period to bring this long closed property up to scratch.

The rent is £30k in the heading... and £50k in the details,,,,

BubbaWY · Mar 24, 2023

Its free of tie - good
car park - good
looks ready to reopen immediately - good
Google ratings 4.5 out of 5 from 934 reviews - good
Last review was 8 months ago so its not been closed too long - good
75 pitch camping field and 10 pitch touring field - good
Function room - good
Not a big village but attracts a lot of walkers - good

It sounds a very seasonable pub, so you would need to be super busy in summer to offset against a quieter winter.

A concern though is that the village is prety much in the middle of nowhere, so finding staff could be a big headache.

Mark T Jones · Mar 24, 2023

I love the fact that the prison features large in the write-up - perhaps there's an angle there?

But seriously, start by reading the trade press, particularly The Caterer and The Morning Advertiser to see what is going on. (They are relentlessly negative, but do give a feel for the challenges you will face.

Most newbie publicans go in full of energy & ideas but are bereft of strategy (or market research) so generally just lurch from one thing to the next.

If you really feel that running a pub is for you then you need to be very clear on

Who your target customer is
How to recruit/train/retain quality staff (particularly chefs)
How you are going to define your pub.

BubbaWY · Mar 24, 2023

By chance I was talking to the owner of one of my village locals last night. It looks more than half the size of the pub you are looking at and gas and electric are currently crippling him. Its an established business, does very well both food and wet sales but his gas and electric is £4k a quarter. Thats another £2,666 in sales a month you would need to be taking before covering other overheads and taking a wage.

thetiger2015 · Mar 24, 2023

Do you have any experience at all in this type of industry? If not, I'd recommend investing your money in something else, where you have a the knowledge and passion.

I was also quite taken by the romance of a pub near us a few years ago, it was perfect. Beer garden, huge car park, a field that could have been used for glamping...ideas upon ideas...but the numbers didn't work, that's why it was closed in the first place. It's owned by an experienced distribution company now, who own several other venues. They didn't do the glamping idea, which means it was probably too costly anyway.

The utilities, as mentioned above, are a HUGE risk right now. Don't be suckered in and be careful with your money.

ecommerce84 · Mar 24, 2023

The pub certainly has a lot of potential. - It’s a pub, restaurant, rooms, event space, wedding venue and caravan site all rolled into one.

The previous owners had it from 2003 - 2021 so they must have been making money for most of that period to keep it going so long. I’m not sold on the Covid excuse though - it appears they closed in June 2021. The summer of 2021 was one of the busiest ever for domestic tourism - pubs were packed and anywhere offering accommodation was booked up, often charging more than they ever had. So it should have been a profitable time for them, although they would have obviously been hit harder in the previous year.

I’d echo the above advice that the £150,000 premium should be subject to heavy negotiation.

As you’ve mentioned you have no experience in the sector you should definitely look to employ a General Manager who does.

And make sure you have enough capital - a few hundred thousand isn’t going to cut it - the business will require substantial investment to ‘reboot’ it, the dilapidations will need to be sorted and it’s possible that you may not make a profit for 4 or 5 years.

Newchodge · Mar 24, 2023

How can there be a review from 8 months ago if it was closed due to Covid. Why did it not reopen after Covid - when did it actually cease tgrading and what was the reason?

Assume that everything the sellers tell you is a lie, unless they prove it is true; even then check the proof.

Socio South West · Mar 24, 2023

pentel said:
From the sales particulars: There is a schedule of dilapidations (available on request), and incoming tenants will be expected to commit to complete these works to The Duchy’s satisfaction, within two years of the lease commencing,

Huge red flag.

Even bigger red flag - Duchy of Cornwall..... Not long changed hands... but will still be run by a bunch of nestletripes of the aristocracy who all have big chips on their shoulders because their older brothers got the estates and the titles and they got packed off to Cirencester or Reading to learn estate management. You should expect to be limited to higher spec building work from the Duchy's 'pet' builders. I am actually surprised they aren't going for a freehold sale with restrictive clauses on this one.

The key to making a success of this business will be to pack 'em in the campsite for the summer season, offer good cheap grub for campers with screaming kids.... keep the bunkhouse cheap clean and cheerful for the odd college/walking group trip and get good half board packages in place for them.

In the winter get what you can - although a good Sunday carvery as an outing from Plymouth is a useful draw.

If you think its about running a pub, my advice would be to look elsewhere.

PaulThompson · Mar 24, 2023

EricGuys said:
I'm looking at a pub which is grade II listed and closed due to COVID.

Leasehold is £150k and annual rent £50k.

I've never run premises based business before but have the capital to invest, just wondering if £50k rent is what other pub owners would expect to pay?

Other revenue streams include overnight lodgings, so the £4k a month rent sounds reasonable, turnover will likely be from the lodgings, bevvy sales etc.

What other costs are associated generally with premises based business rental?

Having funded pubs since 1997 there are some HUGE red flags here!

There is no way a closed pub is worth £150k - try £1,500! You are buying the right to pay rent @ £50k per annum for what???
Rent wants to be around 15% - 18% of turnover... no turnover, no rent! I'd suggest you go in on £0 premium and a stepped rent to build up the trade before you start to pay rent
Get a specialist licensed trade accountant (google ALTA) to help with the business plan, they know their stuff and deal with pubs that are being closed down! That way you can avoid the pitfalls
Read ALL the above comments, get on the pub groups on Facebook and take lots of advice, the pub game is hard and it's an easy way for someone to make £150k from someone foolish enough to offer it!
Best of luck! Having your own business is incredibly rewarding and get it right, you'll be set for life!

Hope that's not too negative, if you have £150k in cash (and let's face it, nobody is going to finance this) then buy a freehold pub, with figures for £400k!

Paul

Paul Kelly ICHYB · Mar 27, 2023

@EricGuys Whilst it does look like an interesting business proposition, I would say unless you have the funds to employ someone who understands the business, don't go near it unless you have direct experience.

The roads are littered with people who thought running a pub was a good idea and had no idea of what they were letting themselves in for.

In my experience, where people have no knowledge, experience or interest in the business, they almost certainly all fail, sadly, in a big way, when it comes to F&B.

I wish you luck, but be careful.

EricGuys · Mar 27, 2023

Thanks for the replies, having received an information pack, further interest is on hold as they currently have a potential tennant.
Will be interested to see over the next few weeks if the listing gets taken down...

kulture · Mar 27, 2023

EricGuys said:
Thanks for the replies, having received an information pack, further interest is on hold as they currently have a potential tennant.
Will be interested to see over the next few weeks if the listing gets taken down...

LOL, they always have a "potential tennant"

EricGuys · Mar 27, 2023

kulture said:
LOL, they always have a "potential tennant"

Lol always, but in this case they sent me an info back and advised no further viewings at present. Maybe I'll hear back in 2 weeks for a "once in a lifetime" deal

Lisa Thomas · Mar 28, 2023

I didn't read any replies.

I just wanted to say my advice is don't do it. Especially as you say you have no experience. I am constantly dealing with pubs that have to go bust. I had one only last week and that was an owner with years worth of experience.

With no experience you will have to hire someone experienced to be Manager and that cost will eat up what little profit you might be able to make.

Paul Kelly ICHYB · Mar 28, 2023

Lisa Thomas said:
I am constantly dealing with pubs that have to go bust. I had one only last week and that was an owner with years worth of experience.

Yup, even more professional advice!

IanSuth · Mar 28, 2023

What costs involved with running a pub?

From the few i know who went down this route the costs were, their capital, health and in more than one case marriage

Porky · Mar 29, 2023

Tough one for sure, never owned a pub myself but two of my relations have, plus son of a friend of mine and all lost a small fortune on them and would NEVER go there again. The freehold route sounds like best option to me but I would avoid like the plague frankly. Issues not limited to:-
Staffing being unreliable and you being hands on all the time
Kitchen staff don't turn up and you are left having to step in, fatal to rely on one other party such as a chef as notorious for downing tools when pressure on.
Burning the candle at both ends long hours can result in you being exhausted, up early to take in beer deliveries, late nights to build and support customers. I was told they didn't realise how much of strain that is over period.
Not good if you like holidays or will likely want to start a family within first 5 years.
All about food sales really, unless you look for wet sales via of these micro pubs that are springing up everywhere from converted small disused shops.
Wish you well with it anyhow if you are giving it a go - good luck

HFE Signs · Mar 29, 2023

My advice would be to very carefully study the past 5yrs accounts, drill down into marketing and sales promotion, factor in the new energy costs and staff costs and then decide if its viable with your fresh ideas

Duke Fame · Mar 29, 2023

Lisa Thomas said:
I didn't read any replies.

I just wanted to say my advice is don't do it. Especially as you say you have no experience. I am constantly dealing with pubs that have to go bust. I had one only last week and that was an owner with years worth of experience.

With no experience you will have to hire someone experienced to be Manager and that cost will eat up what little profit you might be able to make.

I'd agree with the above, if you were interested in getting into the pub game, go and work in one for the Summer & winter, get to learn everything you can and if it's still for you, buy one then, this opportunity may have gone but there will be others (most likely this one again).

Mark T Jones · Mar 29, 2023

Duke Fame said:
this opportunity may have gone but there will be others (most likely this one again).

'Tis true. One thing there will never be a shortage of is leasehold pub 'opportunities'.

Lisa Thomas · Mar 29, 2023

Duke Fame said:
I'd agree with the above, if you were interested in getting into the pub game, go and work in one for the Summer & winter, get to learn everything you can and if it's still for you, buy one then, this opportunity may have gone but there will be others (most likely this one again).

Good suggestion, Duke. Experience is key.

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What costs involved with running a pub?

What costs involved with running a pub?​

What costs involved with running a pub?