Pub Accounts

[Jaykay]

Without getting into the specifics, 60% GP sounds really high. If it is a free house and they buy clever, they may be able to do that but if it is tied, 50% is more normal. Get them to really check those numbers!

 

[David Griffiths]

It isnt that high for a free house. Most pubs are tied to one of the property investment companies that insist that not only extract maximum rent but also screw the tenants by insisting that beers wines and spirits are purchased from them.

My local, also a client, could buy a small keg of lager £50 cheaper on the open market than the landlords were charging. That drove them out of business, and there's now a manager in there while the landlords look for another victim

I know of another example of a pair of pubs rented from the same landlords where the gross margin is 10% lower in one due entirely to the higher prices paid for beers

And in the OPs case, given that he's talking about crockery and cutlery, there is clearly a catering element which will drive the percentage upwards

Even some workingmen's (or should that be workingperson's?) clubs get close to 50%

 

[KidsBeeHappy]

Don't forget wastage.

 

[elaine@cheapaccounting]

Ullage - I love that word.

 

[KidsBeeHappy]

Even some workingmen's (or should that be workingperson's?) clubs get close to 50%

From my experience of accouting for clubs - the other 50% gets nicked!!

 

[badgers_r_us]

This is a very interesting thread, and on eye opener. We are moving back to the UK from Australia and considering buying a freehold pub. We'd have about 650k cash to spend (no borrowings), however, would I be better off buying a house for 250k in Cornwall and putting 400k into property at 6% yield (24k PA) and me and my wife get part time jobs for 10k PA each? This would give us an income of about 45k a year and only entail working 2 or three days a week each. I'd only consider doing the pub thing if it was to give us a net return of at least $60k.

Some of the information I have researched says you should expect a 20% - 30% return for a well run pub. Most pubs around the $600k mark have a turnover in the region of 250 - 300k. We were banking on a net profit of about 60k. Sounds like this is not achievable, or at least unlikely.

 

[patientlady]

This is a very interesting thread, and on eye opener. We are moving back to the UK from Australia and considering buying a freehold pub. We'd have about 650k cash to spend (no borrowings), however, would I be better off buying a house for 250k in Cornwall and putting 400k into property at 6% yield (24k PA) and me and my wife get part time jobs for 10k PA each? This would give us an income of about 45k a year and only entail working 2 or three days a week each. I'd only consider doing the pub thing if it was to give us a net return of at least $60k.

Some of the information I have researched says you should expect a 20% - 30% return for a well run pub. Most pubs around the $600k mark have a turnover in the region of 250 - 300k. We were banking on a net profit of about 60k. Sounds like this is not achievable, or at least unlikely.

Hi badgers r us
I think maybe you have answered your own questions!
If you go down the freehold route and that really is the only way to make any money in this business then freehold pubs are good value at the moment especially if you do not need to raise finance. There are many on the market. However it is a very full time comittment. Pubs with rooms make the best returns, maybe in Cornwall! good luck...

 

[David Griffiths]

Where to start?

There are so many variables, and you'd have to research each pub individually. When you say a 20-30% yield, do you mean on capital invested or net profit on turnover? If it's on capital, I think that you will struggle.

You also refer to a well run pub - have you ever run one before? Do you mean to run it yourself or put in a manager? If the latter, then imo £300k turnover is way too low to do this. I ask this because you refer to only wanting to work 2-3 days a week later in the post. Running your own pub is more like working 8 days a week

The variables include the gross profit rate - it will be higher with food, but you'll have to employ a chef, and keep him/her. It will also be higher in some parts of the country than others.

Then costs will vary widely, with the biggest cost being wages, and that of course depends how much you want to do yourself.

How stable is the turnover? What competition is there, drinking and eating? What is the catchment area?

Yes there is money to be made running a pub, particularly if you are free of ties from the brewers or rapacious landlords. But there are more and more going out of business every week. It doesn't take much to tip the balance - upset the current locals and they up sticks to the next pub, serve a bad meal, or a slow meal, and 30 people hear about it.

If you've never run a pub, think long and hard before investing your life savings, and remember that many landlords say that a pub gave them the two happiest days of their lives - the day they opened it and the day they closed it.

 

[badgers_r_us]

Thanks for your replies.

Both my wife and I have a good deal of experience in the hospitality industry (bar management, hotels etc), however, we have not run a pub and what I do not know is the financial aspects of running one. Specifically what GP (before wages) one could reasonably expect. We were hoping that we would be able to hire at least one or two full-time equivalent bar staff and an assistant manager and leave us a wage that represented a good return on our efforts and investment. We do not mind doing the hard work, but we would hope to have enough in the kitty to at least have a weekend off a month and perhaps one night during the week together. Sounds like that is an unrealistic expectation and it just would not be worth it to work 24X7 for little more than we could get investing our money and topping up with a bit of part time work.

It's interesting to hear about the state of pubs in the UK. We left about 20 years ago and really have no idea about where it's at, but it seems to be difficult for independents. It's difficult to get an objective view relying only on the Net for info. Some spruik it as a thriving industry (and I'm sure with vested interests), some say they are struggling (but they may not be good at it).

At this point it was really just a notion and I was under the impression that it would be low-risk given we would be cash buyers, but that would appear not to be the case.

Thanks again for your advice.

 

[patientlady]

Yes things have changed dramatically in the last 20 years in the pub trade - you will not believe it when you return. Have you found The Morning Advertiser forum, this may help a little, although most on there are fully tied into the three major pub co's that have evolved in the last 10 years.

 

[stbs]

I dont know what area this pub is in, but very few, if any of the pubs in our area are making any money at the moment :|

 

[Simonhatfield]

Did your friends end up buying this pub?

Little shocked about GP figures people believe pubs make. I opened a Free of Tie Bar and Nightclub in March (I'm 26) and we are currently achieving a 68.9% GP, yet when we did our Business Plan our accountant told us we would be lucky to achieve 50%. You do have to shop around for the best deals, I go to all the local Cash and Carrys as well as using some of the mainstream wholesalers. We also don't sell any food.

That said, overheads are huge! PPL and PRS together cost us £8000 p/a our rent is high, despite concessions we negotiated, rates, door supervisors etc.

We are on target to turn over at our y/e around £300 000 with a Net Loss of around £10 000. That said, at our current trading pattern over a 12 month trading period we would make a Net Profit of around £30 000 - not really such a great return but for us it is still early days.

Somebody raised a valid point about fridges/glasswashes etc. Our working capital is constantly eaten by replacing things, our Cellar Cooling broke down and is currently being replaced £4000, Fridges break frequently and at £500 a pop they aren't cheap, our toilet pumps both broke two weeks ago, and new ones cost us £5000.

Running pubs is a hard game, in all honesty I don't regret it, but my Salary is £15 000 p/a for which I work on average around an 80 hour week - I could get far more working as a General Manager for Weatherspoons with less hours!

NEVER assume free labour, we allocated 14% of our turnover to staffing, and this has worked out about right!

Hope this helps.

Simon