Under the new licensing act I was able to secure permission to open longer. Does this increase the value of my business?
Cameron Campbell, Fleurets
Just because a licensee was able to secure longer trading hours, it doesn't mean that trade or turnover has seen an uplift as a result. And it is trade, or the potential to trade, which can have a positive bearing on how much a prospective purchaser is willing to pay.
Presumably the premises will fall into one of three categories:
- Extended hours were granted and increased trade has exceeded the additional costs related to longer opening hours, leading to improved net profits. In these cases the value will almost always increase.
- Extended hours were granted but the premises continue to trade under the old 11-11 regime. The premises might now appeal to a broader range of prospective purchasers who might see potential to increase trade by operating to the new permitted hours. The greater your appeal in a market, the greater the likelihood you can achieve a higher selling price.
- Premises that took the option to simply renew their "grandfather rights". Nothing ventured, nothing gained or lost. As before, the market will dictate the sale price of your premises, usually based on the profitability of the premises.
In the case of the third example, there will be purchasers looking at pubs which still operate 11-11 as prime sites for trading longer. In some cases, I'm sure, operators will be looking at the decisions made on other properties by the local authority and will take a view on their chances of purchasing a premises and subsequently securing longer hours.
A final point that can impact on property prices is the hours granted to the competition in the venue's locality. Potential purchasers will research this information and take a view on the value accordingly.
www.fleurets.com
Lisa Sharkey, Poppleston Allen
The question of property value based on operating hours is one best left for the valuer. However, I do believe that premises located in areas subject to "cumulative-impact policies" which have longer hours are likely to be more attractive to a potential purchaser. Councils which have adopted such policies will inadvertently push up property values.
A great many people simply applied for the same hours as they had under the previous act. In some cases, individuals took the decision that, given what initially appeared to be an arduous series of hoops to jump through to apply to extend their hours, they would stick with what they had.
It may be that a number of operators will take the view that other operators in their area with longer permitted hours are benefiting from extra trade, and they will want to take positive steps to win a portion of this additional business. The good news for them is that it's not too late to do so. Those who stayed with their existing hours can apply for their licences to be varied by their local authority and should, hopefully, be able to rely upon the precedent set.
We are acting for a number of clients who, since the new act came into force, have decided to apply for an extension of hours or for additional activities, such as entertainment. Whether this is aimed at gaining a trading advantage or with the thought that their property might be worth more should they be successful, we're not sure, but the fact remains that the opportunity exists to do so.
www.popall.co.uk
Chris Lane, Kingston Smith
Increased opening hours give you the opportunity to increase the value of your business, but this is not guaranteed. The value of any business is based on its opportunity and ability to make profits. Whether you actually increase your profits as a result of the additional opening hours will depend on your precise business model, the location, and the ability to attract new customers.
There will be additional costs of trading for a longer period, and it is essential to evaluate whether you are actually making any additional contribution to the profit of the business in that extra period. Do not forget that there will be greater "wear and tear" on the business assets, which means that they will not last as long before they need to be replaced or refreshed. Another important issue to consider is if the longer opening hours change your brand or reputation. Any negative comments or adverse local press will certainly have a detrimental effect on the value of the business regardless of any improved trading results.
In some businesses the extra customer footfall in the additional hour compared to the marginal cost of opening longer will vary from day to day. In these circumstances you need to monitor the situation constantly in case you are actually losing money, which would, of course, have a detrimental effect on the value of the business. If the business attracts new customers, or existing customers spend more as a direct result of the increased opening hours, then the value of the business will increase.
Businesses that have always opened late might see their profits squeezed as customers are attracted to other establishments that have recently extended their opening hours.
www.kingstonsmith.co.uk
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