Enterprise Inns
Encyclopedia
Enterprise Inns Plc is a UK
leased
and tenanted pub
company, headquartered in Solihull
, West Midlands
in the United Kingdom
.
in 1991, initially with 368 pubs from Bass. There followed a series of transformational acquisitions, including large estate acquisitions of former Whitbread
pubs from Laurel Pub Company in 2002 and the acquisition of the Unique Pub Company.
They also operate (in most, but not all cases) what is known as a beer-tie. This means that tenants renting public houses from them are under contract to buy beer, ciders, RTD's and other alcoholic drinks from Enterprise Inns only. Under some leases tenants are required to also purchase other products, such as soft drinks, wines and spirits from Enterprise, although this is not as widespread as the beer tie.
newspaper reported how "Enterprise Inns counts cost of bad pub landlords": the recession had forced the pubco to take action against more than 100 "poor quality and underperforming licensees" since last autumn. It is spending £1.4m a month on financial assistance to help those in distress, on top of the £700,000 a month cost of freezing the price of five lager and ale brands. Chief Executive Ted Tuppen told The Guardian: "If people are genuinely struggling and will work with us, we are providing an awful lot of help". The cost of these programmes was however contributing to a slump in profits.
However, on May 13, 2009, a different perspective on the problems of pubcos emerged with the publication of a House of Commons report regarding a monopolies inquiry into pub groups. The report "raises a series of questions about the pub company (pubco) tied pub business model and calls on the Government to act urgently, in particular, to refer the matter to the Competition Commission
. It challenges the pubcos which operate a tie to prove its benefits by giving lessees the choice between a tied or free of tie lease." The report also raises issues regarding the actual conduct of pubcos in dealing
with struggling tenants.
Committee chairman Peter Luff
, MP says: "The report explicitly acknowledges that 'not all the problems of the pub industry come from the tied pub model. It is clear there are many pressures on any retail business ... Nonetheless, our inquiry found alarming evidence indicating there may be serious problems caused by the dominance of the large pub companies.'"
According to an article in Private Eye
, the select committee asked 1,000 publicans for their opinions regarding their experiences working with Britain's largest pubcos, which includes Enterprise Inns. The Eye states that the committee's findings had "at last shed light on an industry in freefall, with 40 pubs closing [in the UK] every week. Pubcos are essentially greedy property companies with a cuddly name – and they own nearly half the country’s pub freeholds."
The Committee commissioned its own independent survey as part of the inquiry, to determine whether the negative evidence it initially received from lessees was typical of feelings in the industry.
The Eye says the committee found that pubco tenants are initially attracted to run pubs by low entry costs, but soon find that making a decent living is very difficult. Tenants' leases oblige them to buy alcoholic drinks from nominated suppliers at up to twice the open-market price. If a struggling tenant leaves, another tenant can be found to replace them. In the years of booming property prices this practice was successful, but is much less so now, as evidenced by the number of pub closures. The Guardian
reported that MPs found an imbalance of power that can amount to "downright bullying" between the big pubcos, such as Enterprise Inns and Punch Taverns
, and their tenants. In 2008, one tenant who felt forced to close the pub he ran with his wife said:
The MPs are said to also want a ban on pubcos selling pub premises with covenants that prevent them being used as pubs in the future. Ted Tuppen explained the need for covenants to the committee by saying there are too many pubs in some areas and Enterprise used restrictive covenants "because, genuinely, we think these are pubs that have lived their life". However, he admitted that 70% of Enterprise sales have such covenants in place.
The select committee was not generally impressed by the pubcos' senior executives, rebuking them for having given "partial" and even "false" evidence to the committee.
The committee recommended that "the tying of beers, other drinks and ancillary products should be severely limited to ensure that competition in the retail market is restored." The Eye notes that select committee chairman Peter Luff "may be looking to right the wrong created by the Thatcher
government’s disastrous "Beer Orders
" of 1989, in which he was involved."
Shortly following the committee's report, CAMRA
issued a 'Super-Complaint' forcing the Office of Fair Trading to investigate this within 90 days. The OFT published its report on 22 October 2009. The report largely cleared the industry of behaving in any way that caused damage to consumers.
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
leased
Leasing
Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax deductible payments....
and tenanted pub
Public house
A public house, informally known as a pub, is a drinking establishment fundamental to the culture of Britain, Ireland, Australia and New Zealand. There are approximately 53,500 public houses in the United Kingdom. This number has been declining every year, so that nearly half of the smaller...
company, headquartered in Solihull
Solihull
Solihull is a town in the West Midlands of England with a population of 94,753. It is a part of the West Midlands conurbation and is located 9 miles southeast of Birmingham city centre...
, West Midlands
West Midlands (county)
The West Midlands is a metropolitan county in western central England with a 2009 estimated population of 2,638,700. It came into existence as a metropolitan county in 1974 after the passage of the Local Government Act 1972, formed from parts of Staffordshire, Worcestershire and Warwickshire. The...
in the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
.
History
Enterprise Inns was founded by Ted TuppenTed Tuppen
Graham Edward Tuppen CBE is the founder of Enterprise Inns, one of the largest public house chains in the United Kingdom.-Career:Trained as a Chartered Accountant with KPMG, Ted Tuppen undertook an MBA at Cranfield School of Management before becoming Managing Director of a private engineering...
in 1991, initially with 368 pubs from Bass. There followed a series of transformational acquisitions, including large estate acquisitions of former Whitbread
Whitbread
Whitbread PLC is a global hotel, coffee shop and restaurant company headquartered in Dunstable, United Kingdom. Its largest division is Premier Inn, which is the largest hotel brand in the UK with around 580 hotels and over 40,000 rooms. Its Costa Coffee chain has around 1,600 stores across 25...
pubs from Laurel Pub Company in 2002 and the acquisition of the Unique Pub Company.
Operations
The pubs are operated by tenants, which means that the company collects rent from individuals who live in and operate the pubs.They also operate (in most, but not all cases) what is known as a beer-tie. This means that tenants renting public houses from them are under contract to buy beer, ciders, RTD's and other alcoholic drinks from Enterprise Inns only. Under some leases tenants are required to also purchase other products, such as soft drinks, wines and spirits from Enterprise, although this is not as widespread as the beer tie.
Reflections on business practice
On May 12, 2009, The GuardianThe Guardian
The Guardian, formerly known as The Manchester Guardian , is a British national daily newspaper in the Berliner format...
newspaper reported how "Enterprise Inns counts cost of bad pub landlords": the recession had forced the pubco to take action against more than 100 "poor quality and underperforming licensees" since last autumn. It is spending £1.4m a month on financial assistance to help those in distress, on top of the £700,000 a month cost of freezing the price of five lager and ale brands. Chief Executive Ted Tuppen told The Guardian: "If people are genuinely struggling and will work with us, we are providing an awful lot of help". The cost of these programmes was however contributing to a slump in profits.
However, on May 13, 2009, a different perspective on the problems of pubcos emerged with the publication of a House of Commons report regarding a monopolies inquiry into pub groups. The report "raises a series of questions about the pub company (pubco) tied pub business model and calls on the Government to act urgently, in particular, to refer the matter to the Competition Commission
Competition Commission
The Competition Commission is a non-departmental public body responsible for investigating mergers, markets and other enquiries related to regulated industries under competition law in the United Kingdom...
. It challenges the pubcos which operate a tie to prove its benefits by giving lessees the choice between a tied or free of tie lease." The report also raises issues regarding the actual conduct of pubcos in dealing
with struggling tenants.
Committee chairman Peter Luff
Peter Luff
Peter James Luff MP is a British Conservative Party politician. He has been the Member of Parliament for Mid Worcestershire since the 1997 general election, and was MP Worcester from 1992 until 1997...
, MP says: "The report explicitly acknowledges that 'not all the problems of the pub industry come from the tied pub model. It is clear there are many pressures on any retail business ... Nonetheless, our inquiry found alarming evidence indicating there may be serious problems caused by the dominance of the large pub companies.'"
According to an article in Private Eye
Private Eye
Private Eye is a fortnightly British satirical and current affairs magazine, edited by Ian Hislop.Since its first publication in 1961, Private Eye has been a prominent critic and lampooner of public figures and entities that it deemed guilty of any of the sins of incompetence, inefficiency,...
, the select committee asked 1,000 publicans for their opinions regarding their experiences working with Britain's largest pubcos, which includes Enterprise Inns. The Eye states that the committee's findings had "at last shed light on an industry in freefall, with 40 pubs closing [in the UK] every week. Pubcos are essentially greedy property companies with a cuddly name – and they own nearly half the country’s pub freeholds."
The Committee commissioned its own independent survey as part of the inquiry, to determine whether the negative evidence it initially received from lessees was typical of feelings in the industry.
"The survey results, printed with the Committee’s evidence, underpinned the Committee’s findings. 64 per cent of lessees did not think their pubco added any value and while a fifth had had a dispute with their pubco, few (18 per cent) were satisfied with the outcome. The Committee was astonished to learn that 67 per cent of the lessees surveyed earned less than £15,000 pa and over 50 per cent of the lessees who had turnover of more than £500,000 pa earned less than £15,000 – a 3 per cent rate of return. The lessees may share the risks with their pubco but they do not appear to share the benefits.
The report therefore concludes that problems which were identified by the Trade and Industry Committee four years ago remain. An imbalance of bargaining power between lessees and pubcos persists and the arrangements for assessing rents remain opaque. Rental assessment should be the basis for negotiation, but incumbent lessees often risk the loss of their home as well as their business if they cannot reach agreement, the report says."
The Eye says the committee found that pubco tenants are initially attracted to run pubs by low entry costs, but soon find that making a decent living is very difficult. Tenants' leases oblige them to buy alcoholic drinks from nominated suppliers at up to twice the open-market price. If a struggling tenant leaves, another tenant can be found to replace them. In the years of booming property prices this practice was successful, but is much less so now, as evidenced by the number of pub closures. The Guardian
The Guardian
The Guardian, formerly known as The Manchester Guardian , is a British national daily newspaper in the Berliner format...
reported that MPs found an imbalance of power that can amount to "downright bullying" between the big pubcos, such as Enterprise Inns and Punch Taverns
Punch Taverns
Punch Taverns plc is the largest pub and bar operator in the United Kingdom, with around 6,800 leased, tenanted and managed pubs. It is headquartered in the traditional brewing centre of Burton upon Trent in Staffordshire...
, and their tenants. In 2008, one tenant who felt forced to close the pub he ran with his wife said:
"We told Enterprise [Inns] we were struggling and needed some help; they didn’t come forward with any. If we were late paying bills we would get threatening phone calls. They could have put a hold on the rent or given us a discount until we managed to get business back up. If we didn’t pay bills on time they wouldn’t deliver the beer and when they did deliver it they would charge us for carriage. Instead of helping us they were making it worse."
The MPs are said to also want a ban on pubcos selling pub premises with covenants that prevent them being used as pubs in the future. Ted Tuppen explained the need for covenants to the committee by saying there are too many pubs in some areas and Enterprise used restrictive covenants "because, genuinely, we think these are pubs that have lived their life". However, he admitted that 70% of Enterprise sales have such covenants in place.
The select committee was not generally impressed by the pubcos' senior executives, rebuking them for having given "partial" and even "false" evidence to the committee.
The committee recommended that "the tying of beers, other drinks and ancillary products should be severely limited to ensure that competition in the retail market is restored." The Eye notes that select committee chairman Peter Luff "may be looking to right the wrong created by the Thatcher
Margaret Thatcher
Margaret Hilda Thatcher, Baroness Thatcher, was Prime Minister of the United Kingdom from 1979 to 1990...
government’s disastrous "Beer Orders
Beer Orders
The Supply of Beer Order 1989 and The Supply of Beer Order 1989, commonly known as the Beer Orders, were Statutory Instruments made by the Secretary of State for Trade and Industry in December 1989.The Orders restricted the number of tied pubs that could be owned by large brewery groups in the...
" of 1989, in which he was involved."
Shortly following the committee's report, CAMRA
Campaign for Real Ale
The Campaign for Real Ale is an independent voluntary consumer organisation based in St Albans, England, whose main aims are promoting real ale, real cider and the traditional British pub...
issued a 'Super-Complaint' forcing the Office of Fair Trading to investigate this within 90 days. The OFT published its report on 22 October 2009. The report largely cleared the industry of behaving in any way that caused damage to consumers.
External links
- Enterprise Inns Plc (official site)
- Enterprise Inns profile from CatererSearch
- Profile of Enterprise Inns Chief Executive Ted Tuppen (Voted most influential man in UK pub industry in 2005)