I would like to own and run my own pub. I've worked behind a bar and have soem funds, but probably not enough to buy a freehold. What ould be the best way of getting into the trade?
Paul Thompson, Acorn Commercial Finance
First things to sort are probably training and a personal licence. Some British Institute of Innkeeping courses go beyond the legal minima and teach about running a business, profits, pricing, etc, which are vital if you have never been self-employed.
Then, count up your pennies. Brokers need to know exactly what you can lay your hands on. Make sure you account for all the costs involved in buying a business right from the start.
You say not freehold, I guess that is down to having insufficient funds to buy a freehold. You would need about £60,000 in either cash or security to get hold of a freehold pub for about £200,000, which is pretty much the bottom of the market at the moment.
If you go for a lease, then, depending on funds, you could buy a trading lease. The advantage is that you are buying someone else's goodwill and, therefore, a pub that is already profitable. The disadvantage is: you have to pay for it. You can borrow money for this but it has to be a good business. Your deposit should be a minimum of about £30,000 to buy a £50,000 lease.
You can buy a nil-premium lease from the pub companies, but you have no idea of the trade and whether or not you will be able to pay the rent.
The other option is a tenancy. For this there is no finance available, but you can get them fairly cheap and, if it all goes wrong, you can walk away. However, when you do leave, you will get back only the value of the fixtures and fittings - nothing for your goodwill.
The most important thing is to get good advice early. Make sure your broker is a member of the National Association of Commercial Finance Brokers. Membership is voluntary, but it has a strong code of conduct.
www.acorn-loans.com
Colin Wellstead, Christie & Co
There are four basic ways of operating a public house, each dependent on the amount of funds that you have available.
The first, with the lowest cost of entry, is as a manager of a pub. You need to deposit a security bond and are paid a salary and a bonus, with the profits of the pub accruing to the owner, normally a managed pub company.
Second is a traditional short-term tenancy, normally for one or three years, but often renewable at the end of the period. You purchase the fixtures and fittings plus the stock and glassware, and also need enough cash-flow to operate the business.
Despite a massive shift to longer-term leases in the past 15 years, there are still a number of traditional tenancies available, with the cost of entry generally £10,000-£25,000.
The third option is a lease, which can either be the assignment of an existing lease or one of the many new leases.
The assignment of an existing lease normally achieves a premium, often between £30,000 and £100,000 including the fixtures and fittings, although we regularly see bigger premiums.
If taking a new lease, the ingoing lessee is often required to spend some capital for a refurbishment scheme in conjunction with the landlord. You also have to pay for the fixtures and fittings. Again, there will often be opportunities within the £30,000-£100,000 range.
Finally, and most people's ultimate desire, is to own a freehold free house. It is also not uncommon for people to start as a manager and end up owning a free house.
You have been unspecific on the amount of funds you are likely to have, but this will ultimately determine your entry point into running, and hopefully owning, a pub.
www.christie.com
Rod Taylor, Barclays
Owning and operating your own pub can be highly rewarding and immensely enjoyable. But by the same token, being in business "for your own account" can be pretty lonely; is almost always challenging; and demands long hours, because you need to be all things to all men: sales and marketing, operations, finance, etc.
Being a natural "mein host" is desirable, but not essential. So, depending on your past experience, it may be that funding proves to be only one of several hurdles that you need to overcome.
With that in mind, I suggest that a useful first step towards working out if this is truly the life for you would be to approach one of the larger pub companies that operate tenanted estates with a view to taking on one of their pubs.
You might ask, "Will they be interested in me?" and the answer is that we do not know, but as these large pub estates have to find hundreds of new tenants each year, they are extremely sophisticated in assessing talent. Presuming you pass their initial assessment, this will lead to an extensive training programme in all areas necessary to run a successful pub.
You will still need cash for fixtures and fittings, but if you have the latent ability to take the first step along the path of running your own business, learning by other people's mistakes will help you avoid the same pitfalls.
You could try to go it alone, but I'd suggest a big, experienced partner would provide your best chance of success. Who might be a suitable "big brother"? Well, a couple of obvious candidates are Punch Taverns and Greene King. Both have excellent websites, and an evening reading what they have to say will be time well spent.
www.barclays.com
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