Buying a freehold pub

[T&Z2018]

Hi,

Myself and my partner are very much interested in buying our first pub. We have over 30 years 'experience of managing/running pubs between us earning several awards doing so. We know how to run a tight ship cost control/profit conversion wise and also how to drive the top line.

However, the pub which we have seen is quite expensive and after research I believe we would need to raise approx 35-40% deposit to be in with a shout of getting a pub mortgage. We both don’t own any property/equity and savings are not brilliant.

We would need to raise approx £150k deposit. Between us we can probably raise around £30-40k but will still leave us over £100k short.

The pub we are looking at has loads of potential and is currently being run by a couple who are ready to retire. It has been neglected for a few years (sales wise), although been very looked after (building wise).

Any advice would be much appreciated.

Thanks!

 

[Mark T Jones]

Not really sure what you’re hoping for here?

have you factored in the purchase costs over and above the actually price of ghe pub

in addition cash to use whilst you grow the business and potential refurb costs?

most commercial mortgage lenders will want 39% deposit. If you borrow that, they will take loan repayments into account when assessing ability to repay.

you might persuade the lender to defer that sum - im not sure how lenders would treat that.

 

[The Byre]

Pubs usually make bad house conversions and bad premises for other businesses. There are thousands of pubs for sale in the UK and for a very good reason.

 

[estwig]

Pubs usually make bad house conversions and bad premises for other businesses. There are thousands of pubs for sale in the UK and for a very good reason.

Not round here, I've become quite adept at getting planning permission to convert them into flats. Others turn them into corner shops, or meeting halls for religious organisations.

 

[billybob99]

Not round here, I've become quite adept at getting planning permission to convert them into flats. Others turn them into corner shops, or meeting halls for religious organisations.

Local one was bought by Co-op who invested £1m to turn it into a store.

 

[simon field]

Not round here, I've become quite adept at getting planning permission to convert them into flats. Others turn them into corner shops, or meeting halls for religious organisations.

That reminds me - do you need any more of those brown envelopes yet?

 

[tony84]

Others turn them into corner shops,

What if they are not on the corner?

 

[Mr D]

Hi
Myself and my partner are very much interested in buying our first pub. We have over 30 years experience of managing/running pubs between us earning several awards doing so. We know how to run a tight ship cost control/profit conversion wise and also how to drive the top line.
However, the pub which we have seen is quite expensive and after research I believe we would need to raise approx 35-40% deposit to be in with a shout of getting a pub mortgage. We both don’t own any property/equity and savings are not brilliant.
We would need to raise approx £150k deposit. Between us we can probably raise around £30-40k but will still leave us over £100k short.
The pub we are looking at has loads of potential and is currently being run by a couple who are ready to retire. It has been neglected for a few years (sales wise), although been very looked after (building wise).
Any advice would be much appreciated.
Thanks!

Try a cheaper pub. Or work to increase the amount you have to put down.
Any family willing to invest for a period of years ?

 

[estwig]

What if they are not on the corner?

Mosque.

Not my thing, I just do flats.

 

[Chris Ashdown]

What about a joint venture with the current owners or lease it from them with the ability for them to remain in the living quarters

 

[Financial-Modeller]

Is it the type of pub that locals and regular patrons might be able to help fund? IIRC there are collective funding arrangements for partial community ownership of pubs.

 

[tony84]

What about a joint venture with the current owners or lease it from them with the ability for them to remain in the living quarters

That would never work.
You would have the old staff asking them questions.
There would/could also be a concern of are they dipping the stock.
Lastly, having lived in a pub, we had 3 lads one night on the roof with hammers and crow bars (plus other issues) - not worth the risk in general, definitely not worth the risk if you are not benefiting from the income.

 

[Energise Accounting]

With 30 or 40k this will not even get you a decent free of tie lease.

Unless you have other types of security it would pretty much impossible to raise the finance required.

 

[Noah]

Hi,

Myself and my partner are very much interested in buying our first pub. We have over 30 years 'experience of managing/running pubs between us earning several awards doing so. We know how to run a tight ship cost control/profit conversion wise and also how to drive the top line.

There's realism in the responses here, although it may look like negativity.

On the other hand I have seen all types of pubs become successful when the people who run them know what they are doing and commit the hard work to doing it right.

Financially you're not going to be able to afford a freehold. There are independent pubs out there whose owners are happy to lease out at reasonable terms - they don't want to run a pub themselves but they want their pub to continue. I strongly recommend you do not touch any big pubco even with someone else's bargepole; some here will differ, but unless you are - or can pay - a very savvy, skilful, and well-connected negotiator you will be taken to the cleaners - because that is their business model.

 

[LeighW]

Hi,

Myself and my partner are very much interested in buying our first pub. We have over 30 years 'experience of managing/running pubs between us earning several awards doing so. We know how to run a tight ship cost control/profit conversion wise and also how to drive the top line.

However, the pub which we have seen is quite expensive and after research I believe we would need to raise approx 35-40% deposit to be in with a shout of getting a pub mortgage. We both don’t own any property/equity and savings are not brilliant.

Hi,

There are ways of getting finance for your deposit if you are able to generate a good top line. Although top line means nothing to you it does mean something to the brands you are selling. If you put together a convincing pitch you could get listing fees for each beer pump. It's a route I was going to take before gaining an investment from a brewery for my first business that gave me £500k to spend on a tied business in exchange for my soul. Now with an established concept I intend to get back into this idea to strive towards acquiring a freehold to fulfil my dream of turning a profit

I had previously pitched to butchers and beer wholesalers in a bid to get paid upfront for supply deals. I pitched a small beer wholesaler for £50k who although he rejected the offer due to his own lack of funds he did recommend Imbev as they have money to burn and apparently are quite keen to secure individual beer lines in free houses. I never followed this through as this was the point that I got my first pub via the soul selling, and Imbev didn't have many beers that suited my concept anyway. A few of my main suppliers for my untied products pay me upfront to secure a supply deal with me each year. So there's potentially £20k+ to be had there depending on your projected annual sales. I take circa £5k p.a in listing fees but I am tied in beer which is where the biggest listing fees are as that's where all the pub sales are.

Another way is through brand support. I generate thousands of pounds annually from brands for quite basic brand placement etc. eg I have most of my live music paid for by simply writing 'Brought to you by <brand name> it isn't life changing money but money for nothing. I think this idea can be tweaked to generate upfront cash, aim high enough, be cheeky enough and I think you'll get what you're looking for. Displaying their logos in the right places etc., there's probably £10k to be had with that approach. Companies like Jack Daniels and Bacardi have more money than sense.

Another way of getting some of the £100k deposit would be a rewards based crowdfund. if you have 30 successful years in the business I can only imagine you have alot of people who know what you can do to a pub and would love to see you achieve this dream. Giving people Pre-paid vouchers to spend in the new pub eg £50 vouchers for £30 (FOT prices your costs are more than covered, nothing lost), £100 Free entry to live music for a year, if you do live music that is.. costs you £0 (Not actually but you were paying for the bands whether they came or not) they feel like a champion, you get £100 for nothing, Have a cocktail names after a loved one £200 (if thats relevant to your site).. all small amounts but shift enough of each. There are big businesses such as Brewdog built on Crowdfunding. I think The Capital Pub company (Now Metropolitan Pub Group) were built on Crowdfunding before Greene King bought them.

You could also try an equity based crowdfund but I guess like anyone else trying to get their hands on a pub freehold to operate it, you're likely doing this to not have anyone else's fingers in your pie. But still worth a go with an agreed buy-out period so you can regain 100% control in the long term.

These are just my opinions and not based on successful experience of acquiring a freehold by these methods. I'm still on the bottom rung with a pub tenancy with aspirations for progression. I really hope you get it, if you've done 30 years in the game then no doubt you deserve it.

 

[Mark T Jones]

Hi,

There are ways of getting finance for your deposit if you are able to generate a good top line. Although top line means nothing to you it does mean something to the brands you are selling. If you put together a convincing pitch you could get listing fees for each beer pump. It's a route I was going to take before gaining an investment from a brewery for my first business that gave me £500k to spend on a tied business in exchange for my soul. Now with an established concept I intend to get back into this idea to strive towards acquiring a freehold to fulfil my dream of turning a profit

I had previously pitched to butchers and beer wholesalers in a bid to get paid upfront for supply deals. I pitched a small beer wholesaler for £50k who although he rejected the offer due to his own lack of funds he did recommend Imbev as they have money to burn and apparently are quite keen to secure individual beer lines in free houses. I never followed this through as this was the point that I got my first pub via the soul selling, and Imbev didn't have many beers that suited my concept anyway. A few of my main suppliers for my untied products pay me upfront to secure a supply deal with me each year. So there's potentially £20k+ to be had there depending on your projected annual sales. I take circa £5k p.a in listing fees but I am tied in beer which is where the biggest listing fees are as that's where all the pub sales are.

Another way is through brand support. I generate thousands of pounds annually from brands for quite basic brand placement etc. eg I have most of my live music paid for by simply writing 'Brought to you by <brand name> it isn't life changing money but money for nothing. I think this idea can be tweaked to generate upfront cash, aim high enough, be cheeky enough and I think you'll get what you're looking for. Displaying their logos in the right places etc., there's probably £10k to be had with that approach. Companies like Jack Daniels and Bacardi have more money than sense.

Another way of getting some of the £100k deposit would be a rewards based crowdfund. if you have 30 successful years in the business I can only imagine you have alot of people who know what you can do to a pub and would love to see you achieve this dream. Giving people Pre-paid vouchers to spend in the new pub eg £50 vouchers for £30 (FOT prices your costs are more than covered, nothing lost), £100 Free entry to live music for a year, if you do live music that is.. costs you £0 (Not actually but you were paying for the bands whether they came or not) they feel like a champion, you get £100 for nothing, Have a cocktail names after a loved one £200 (if thats relevant to your site).. all small amounts but shift enough of each. There are big businesses such as Brewdog built on Crowdfunding. I think The Capital Pub company (Now Metropolitan Pub Group) were built on Crowdfunding before Greene King bought them.

You could also try an equity based crowdfund but I guess like anyone else trying to get their hands on a pub freehold to operate it, you're likely doing this to not have anyone else's fingers in your pie. But still worth a go with an agreed buy-out period so you can regain 100% control in the long term.

These are just my opinions and not based on successful experience of acquiring a freehold by these methods. I'm still on the bottom rung with a pub tenancy with aspirations for progression. I really hope you get it, if you've done 30 years in the game then no doubt you deserve it.

Some great points for consideration in there

 

[Energise Accounting]

Hi,

There are ways of getting finance for your deposit if you are able to generate a good top line. Although top line means nothing to you it does mean something to the brands you are selling. If you put together a convincing pitch you could get listing fees for each beer pump. It's a route I was going to take before gaining an investment from a brewery for my first business that gave me £500k to spend on a tied business in exchange for my soul. Now with an established concept I intend to get back into this idea to strive towards acquiring a freehold to fulfil my dream of turning a profit

I had previously pitched to butchers and beer wholesalers in a bid to get paid upfront for supply deals. I pitched a small beer wholesaler for £50k who although he rejected the offer due to his own lack of funds he did recommend Imbev as they have money to burn and apparently are quite keen to secure individual beer lines in free houses. I never followed this through as this was the point that I got my first pub via the soul selling, and Imbev didn't have many beers that suited my concept anyway. A few of my main suppliers for my untied products pay me upfront to secure a supply deal with me each year. So there's potentially £20k+ to be had there depending on your projected annual sales. I take circa £5k p.a in listing fees but I am tied in beer which is where the biggest listing fees are as that's where all the pub sales are.

Another way is through brand support. I generate thousands of pounds annually from brands for quite basic brand placement etc. eg I have most of my live music paid for by simply writing 'Brought to you by <brand name> it isn't life changing money but money for nothing. I think this idea can be tweaked to generate upfront cash, aim high enough, be cheeky enough and I think you'll get what you're looking for. Displaying their logos in the right places etc., there's probably £10k to be had with that approach. Companies like Jack Daniels and Bacardi have more money than sense.

Another way of getting some of the £100k deposit would be a rewards based crowdfund. if you have 30 successful years in the business I can only imagine you have alot of people who know what you can do to a pub and would love to see you achieve this dream. Giving people Pre-paid vouchers to spend in the new pub eg £50 vouchers for £30 (FOT prices your costs are more than covered, nothing lost), £100 Free entry to live music for a year, if you do live music that is.. costs you £0 (Not actually but you were paying for the bands whether they came or not) they feel like a champion, you get £100 for nothing, Have a cocktail names after a loved one £200 (if thats relevant to your site).. all small amounts but shift enough of each. There are big businesses such as Brewdog built on Crowdfunding. I think The Capital Pub company (Now Metropolitan Pub Group) were built on Crowdfunding before Greene King bought them.

You could also try an equity based crowdfund but I guess like anyone else trying to get their hands on a pub freehold to operate it, you're likely doing this to not have anyone else's fingers in your pie. But still worth a go with an agreed buy-out period so you can regain 100% control in the long term.

These are just my opinions and not based on successful experience of acquiring a freehold by these methods. I'm still on the bottom rung with a pub tenancy with aspirations for progression. I really hope you get it, if you've done 30 years in the game then no doubt you deserve it.

The type of finance you are describing are known as brewery loans.

This way of financing is not cheap and you will be no better off than a tied agreement.

 

[LeighW]

The type of finance you are describing are known as brewery loans.

This way of financing is not cheap and you will be no better off than a tied agreement.

Hi,

Is it no different to a tie to get listing fees for your beer pumps? If I was to take a listing fee for my free of tie lines (if I had such thing) then it would only be for an agreed period of time until the amount was cleared. I have a tied tenancy business at the moment and the surplus I pay for that is circa £65k p.a above what my free of tie competitors pay for their beer. So in my 4 years of operation that is more than £250k I've paid extra for my beer. If I was in a free of tie position I would only be paying back the loan leaving me free of tie for the rest of my days.
I could be wrong as I've never done such a deal on beer for listing fees but I can't imagine why if someone got £100k investment they would be forever tied to a brewery for that price. I get listing fees for my wine, spirits and even cleaning products in exchange for 1 or 2 year agreements. At the end of that period I make a new choice.
If funding for a freehold deposit can be repaid in 2 years or 10 even at high rates at least there's light at the end of the tunnel. A minimum term 15 year commercial mortgage costs as much in monthly repayments as a proposed rent from any of the big breweries so whatever one needs to do to get free from the trap of paying someone else's mortgage it's got to be done.