In this article, we look at how much it costs to run a pub as a ‘tenant’, or as we like to call our publicans, Business Partners. Several publicans choose to undertake a tenancy option as opposed to outright buying a freehold as not only are the ingoing costs considerably cheaper, but there’s also a greater level of control over potential repair costs. Not forgetting of course, all the other added benefits of being a Business Partner, with unrivalled support, access to guidance from our network, and supplier discounts, to name a few.
Rent
When you sign up to a pub tenancy, your main outlay of costs will be the rent payable to the Brewery. This rent could be a set annual figure based on previous trading volumes, planned investment and future potential – this is referred to as a FMT rent, which stands for Fair Maintainable Trade. We will show you exactly how we have calculated the rent for your pub. The rent is not subject to a review and is only adjustable annually in line with RPI (if RPI is negative then your rent will be lowered in line with RPI).
The second type, is an amount that will vary based on your turnover, known as Turnover rent. The turnover rent rates also vary – most breweries charge around 9%, but this figure does vary.
Operating costs
Other costs are covered below, although may not be inclusive:
Don’t forget, that on top of your operating costs, there will also be taxes to pay, including VAT.
You should think about the level of rent and operating costs you’re comfortable with, in addition to the type of pub you feel would suit your personality and your lifestyle.
Turnover and profit
Our pub listings detail the previous drinks trade volumes, along with the current wet/dry split. You’ll also find details on if investment is planned. If a development scheme is scheduled, or if a pub hasn’t been run to its full potential you can of course expect to increase these figures.
A small wet led pub would be expected to have the smallest operating costs, but their turnover will also be smaller. A town centre food-led pub will cost more to run, but turnover should be much greater, along with profit.
Business Partnership costs
Taking on a pub with Hall & Woodhouse is a low-cost way to set up your own business but it does need some investment from you. As well as a returnable deposit of £7,500, you will also need to buy stock and other items and have some working capital to help you run your business.
You will also need to purchase the pubs fixtures and fittings from the previous operator, but we can provide loans to new Business Partners for this, and if you choose to leave your business, you will be able to sell the F&F to the ingoing Business Partner.
Here’s a breakdown of some typical ingoing costs. The working capital requirement does vary, in some pubs we may need you to have up to £25,000. The business rates will also vary, and you’ll always find these listed on the vacancy pages. The cost of the fixtures & fittings may on occasion be less than £50,000, and this purchased back by H&W if you decide to end a tenancy. Typical costs for a medium sized pub:
Next steps
Calculating your costs can seem daunting at first, but by listing out the costs along with estimates, it becomes manageable. We’d always suggest you seek advice from an independent financial advisor, they can help explain taxes and double check your figures if you feel it would be worthwhile. We always list the current year and previous years trade figures on our pub vacancy pages, along with the rent payable, so you’ll be able to see which level of pub may suit you best. If it’s your first pub, it’s a good idea to build up some experience in a smaller pub, before scaling up.