The Pub Game...

[AshDM]

Hey all,

A family friend of mine (known for 10+ years) is selling the lease on his pub.

He is selling a 10 year lease for 65K (+leftover stock and furnishings).
The brewery take 35K a year.
Stock can only be bought from the brewery.

There are 10 beds which can be rented for £75pw
There is a 3am license.
There is a clause in the contract stating that all money made through machines go to leaseholder.

The pub makes roughly 50k-70k a year.

I am viewing the accounts soon, I am wondering what I should look out for, I am new to running a business, I have the capital to invest but I am still quite hesitant as it does sound too good to be true.

To anyone who knows this industry well, what should I look out for? any advice would be great.

Thank you,

Ash

 

[Scalloway]

My first question is have you ever worked in a pub?
Do you feel that you could clear up the pub after it shut at 3 am then be there to receive deliveries at 8am?
How good are you at handling awkward customers and staff?
Can you resist the temptation to sit and drink with your mates?
Do you have experience of keeping and understanding the accounts for a business?

 

[AshDM]

My first question is have you ever worked in a pub?
Do you feel that you could clear up the pub after it shut at 3 am then be there to receive deliveries at 8am?
How good are you at handling awkward customers and staff?
Can you resist the temptation to sit and drink with your mates?
Do you have experience of keeping and understanding the accounts for a business?

Nope never worked in a pub/bar before, but the guy selling said he will mentor me for the first 6 months and teach me the ins and outs.

I believe I can handle awkward situations...
I barely drink myself, not a big drinker so thats not a problem.

Yes I do understand accounts - using a ltd company etc and I also have an accountant on standby.

 

[Scalloway]

The next question is have you prepared a business plan? Tenanted pub are notorious for going bust so you have to have your financials, marketing etc well worked out.

 

[patientlady]

Hi Ash
Where do we start?
Search on this website and you will find many threads on the subject
How long has your friend had the pub up for sale? Is it wet/food led, tourist area?
Who are the landlords? Enterprise, Punch, Greene King?
Have you been on The Morning Advertiser website yet?

Please please tread carefully before investing even £1000 in a pub! There are 52 pubs per week closing, 9 years ago 5 pubs per week closing...
The lease you have described is a bad deal, and also sounds like it is a full repairing lease. There are very few pubs making that sort of money, most just taking around £2500 per week. The electricity alone running a pub per week starts at £250pw for a small pub without any letting rooms.

BTW The brewery/pub company will welcome you with open arms and as soon as they hear you have £65000 to invest they may approach you and offer you a 'better opportunity' for you to invest your money in. The con is that they lead you on, for you to invest your £65000 in one of there busted pubs rather than you give it to your friend. In the mean time your friend goes bust and they look for another 'mug' to invest there money in that one! The word 'mug' is used in the trade not my wording!!!

Please look into this very carefully and I have said this many times, the pub trade is one of the easiest to get into and by far the hardest to get out of!

Offer to manage it for him for a minimum of six months first before parting with any money.
Sorry to sound so depressing but I have seen too many landlords lose far too much money, marriages and there homes over the past few years to sit back and see someone else make the same mistakes...

 

[AshDM]

Hi Ash
Where do we start?
Search on this website and you will find many threads on the subject
How long has your friend had the pub up for sale? Is it wet/food led, tourist area?
Who are the landlords? Enterprise, Punch, Greene King?
Have you been on The Morning Advertiser website yet?

Please please tread carefully before investing even £1000 in a pub! There are 52 pubs per week closing, 9 years ago 5 pubs per week closing...
The lease you have described is a bad deal, and also sounds like it is a full repairing lease. There are very few pubs making that sort of money, most just taking around £2500 per week. The electricity alone running a pub per week starts at £250pw for a small pub without any letting rooms.

BTW The brewery/pub company will welcome you with open arms and as soon as they hear you have £65000 to invest they may approach you and offer you a 'better opportunity' for you to invest your money in. The con is that they lead you on, for you to invest your £65000 in one of there busted pubs rather than you give it to your friend. In the mean time your friend goes bust and they look for another 'mug' to invest there money in that one! The word 'mug' is used in the trade not my wording!!!

Please look into this very carefully and I have said this many times, the pub trade is one of the easiest to get into and by far the hardest to get out of!

Offer to manage it for him for a minimum of six months first before parting with any money.
Sorry to sound so depressing but I have seen too many landlords lose far too much money, marriages and there homes over the past few years to sit back and see someone else make the same mistakes...

My friend owns around 10 pubs and hes looking to offload one, he has a lot of experience in the field and he is helping me a lot.

He hasn't had it for sale for long, he has approached me first.

Not sure who the landlords are we are only early in discussions.

He doesn't serve any food in the pubs he owns, he has said it's too much to handle, purely drink/machines/pool table here.

The lease is 35K, the rest from rooms covers that still profiting 1k.

I have just graduated from university, I would prefer to run a business than work for someone else - There is no risk in that sense, nobody is dependant on my income except me.

I am treading very carefully - a lot of of pubs are closing, that seems to be the general consensus, but this deal seems like it could make me good money, after a year leaving it for staff to manage while I venture somewhere else.

We have gone over the basics of business rates, electric/gas, average stock, turnover and revenue streams.

At the moment it looks healthy, but I must consider it very carefully.

 

[Scalloway]

after a year leaving it for staff to manage while I venture somewhere else.

You really need to know what is going on if you do that. It is very easy for staff to rip you off if you are not there.

 

[mconridge]

Wouldn't touch a pub with a barge pole! Long, long hours with little reward, a Market place which is only going one way, really not something I'd recommend getting involved in unless you have a significant passion for it.

 

[patientlady]

Hi Ash
Further I would ask, if your friend has ten pubs and looking to offload one of them, why that one? Surely its not because he is making good profit

 

[businessfunding]

A lot of very valid points & questions above

Presumably with a 3 AM licence this is in a town centre? What is the nearby competition? What is the calibre of drinker in the town?

Town centre pubs have the second highest failure rate (after suburban ones)

Pool tables are magnets for trouble (quote one licensee - they don't just cause fights, they arm the opponents)

I don't share the view that it is impossible to run a successful pub, but I must say that with no experience in either business or pubs, it is hard to see what you can bring here (or indeed where you ill raise £65K)

Sorry to be negative but you really need to think this one through.