Economics of running a pub
Discussion
Near a mate's house is a pub that's always been trouble, he's a regular at the pub. 3 landlords in the last year - last one hopped it with the takings so it's closed for now. The 2 before couldn't handle the trouble element.
They're advertising for a landlord and he's interested in doing it. Deal is you get 18.5% of turnover but have to pay staff out of that the brewery pay all running costs and provide the stock but they want £2k as a deposit, he's got the £2k. The pub has never had an issue with volume of trade, it's packed to the doors at weekends and does a steady trade in the week. The trouble is the problem. There's a big social housing estate nearby which provides the bulk of trade, long term benefit claimants/petty criminals/low earning workers etc - low disposable income but high % of income spent in the pub. There's nice middle/upper class homes close by in the other direction but there's another pub 1/2 mile away which attracts the "nice" crowd. Presumably there's no viable route to getting these people in as they wouldn't mix well the current clientele.
Police frequently called out so assume plod wouldn't be thrilled to see the place running again, some poor sod got stabbed there last year. Mate's an ex para who's well known in the pub and locally as not a guy to mess with so he figures he can deal with the trouble element and be left with a decent business. He has zero experience of the pub trade other than as a customer but the brewery isn't asking for experience, he's arranged an interview for next week.
The pub doesn't do food and has no kitchen so food wouldn't be an option without investment. There's 3 decent takeaways in spitting distance so at present when a guy gets hungry half way through the evening he gets a takeaway and a few cans and goes home. Obviously the pub have lost him for the night so there's potentially money being left on the table there
Can't see this making sense but have no experience of running pubs so might be totally wrong. Anyone with experience of the pub trade think this is any way viable on 18.5%?
They're advertising for a landlord and he's interested in doing it. Deal is you get 18.5% of turnover but have to pay staff out of that the brewery pay all running costs and provide the stock but they want £2k as a deposit, he's got the £2k. The pub has never had an issue with volume of trade, it's packed to the doors at weekends and does a steady trade in the week. The trouble is the problem. There's a big social housing estate nearby which provides the bulk of trade, long term benefit claimants/petty criminals/low earning workers etc - low disposable income but high % of income spent in the pub. There's nice middle/upper class homes close by in the other direction but there's another pub 1/2 mile away which attracts the "nice" crowd. Presumably there's no viable route to getting these people in as they wouldn't mix well the current clientele.
Police frequently called out so assume plod wouldn't be thrilled to see the place running again, some poor sod got stabbed there last year. Mate's an ex para who's well known in the pub and locally as not a guy to mess with so he figures he can deal with the trouble element and be left with a decent business. He has zero experience of the pub trade other than as a customer but the brewery isn't asking for experience, he's arranged an interview for next week.
The pub doesn't do food and has no kitchen so food wouldn't be an option without investment. There's 3 decent takeaways in spitting distance so at present when a guy gets hungry half way through the evening he gets a takeaway and a few cans and goes home. Obviously the pub have lost him for the night so there's potentially money being left on the table there
Can't see this making sense but have no experience of running pubs so might be totally wrong. Anyone with experience of the pub trade think this is any way viable on 18.5%?
The obvious first question is 18.5% of....what?
Need to know the exact figures. For the grief and having to pay the staff out of that, I'd say it needs a huge turnover to make that worth the effort.
It it turns over £5k a week (and I'd say that was doing well) then he's getting £925 out of which he needs to pay staff and himself. That doesn't seem a lot.
Need to know the exact figures. For the grief and having to pay the staff out of that, I'd say it needs a huge turnover to make that worth the effort.
It it turns over £5k a week (and I'd say that was doing well) then he's getting £925 out of which he needs to pay staff and himself. That doesn't seem a lot.
Jordie Barretts sock said:
The obvious first question is 18.5% of....what?
Need to know the exact figures. For the grief and having to pay the staff out of that, I'd say it needs a huge turnover to make that worth the effort.
It it turns over £5k a week (and I'd say that was doing well) then he's getting £925 out of which he needs to pay staff and himself. That doesn't seem a lot.
That's what I thought. Need to know the exact figures. For the grief and having to pay the staff out of that, I'd say it needs a huge turnover to make that worth the effort.
It it turns over £5k a week (and I'd say that was doing well) then he's getting £925 out of which he needs to pay staff and himself. That doesn't seem a lot.
A significant % of the patrons are unemployed so he'd need to be open all afternoon, can't see that being any way viable for 1 guy without staff. Even on £10k/week paying a barmaid can't see it working.
His approach seems to be I'm well experienced in pubs from this side of the bar and can handle the trouble. The fact they brewery aren't asking for experience suggests they realise an experienced pub manager wouldn't touch it.
HIAO said:
Wait a little while to see if the brewery become a bit more concerned about having a manager, counter offer at 30% of turnover, and no deposit and that the brewery pays for the door staff.
Negotiate for control over pricing, product, and opening hours.
This is good advice. Door staff are expensive believe me. And the council might insist on them at the weekend. Negotiate for control over pricing, product, and opening hours.
Your mate might be wise to have a conversation with the brewery just so they know he’s interested, see if he can get hold of last years accounts to see what the turnover is then say nah and wait.
It would have to be a very busy pub to be operating at 19% Wages/Turnover. Check whether they are talking Gross of VAT or Nett though. Nett 20-30% including a manager’s salary might be a rule of thumb. Various reasons for this - Minimum wage, Pensions, NIC etc. The rougher the pub, the more staff needed and harder to recruit.
So not a good deal on the face of it. Why have the previous managers left and the most recent one legged it with the takings? I’d strongly suspect some form of protection racket/local family with threats/intimidation. Brewery will know, whether they will fess up is another matter. Police/Licensing board will also know.
Say it’s taking £10K Nett. 65% GP, Brewery is going to be taking £6500 and paying Heat & Light, Rates, Water, etc. They also benefit from the sale of their beer. Much better deal for them on the face of it. They also completely control everything about the pub - fixtures, fittings etc.
I’d be asking very searching questions and proposing a base salary for your friend of whatever he expects - £30K? Then a 50/50 profit share. Otherwise walk away. If he takes it on, he ought to be prepared for a tough 6-12 months to clear out the trouble.
So not a good deal on the face of it. Why have the previous managers left and the most recent one legged it with the takings? I’d strongly suspect some form of protection racket/local family with threats/intimidation. Brewery will know, whether they will fess up is another matter. Police/Licensing board will also know.
Say it’s taking £10K Nett. 65% GP, Brewery is going to be taking £6500 and paying Heat & Light, Rates, Water, etc. They also benefit from the sale of their beer. Much better deal for them on the face of it. They also completely control everything about the pub - fixtures, fittings etc.
I’d be asking very searching questions and proposing a base salary for your friend of whatever he expects - £30K? Then a 50/50 profit share. Otherwise walk away. If he takes it on, he ought to be prepared for a tough 6-12 months to clear out the trouble.
Thankyou4calling said:
Realistically the only hope for this venture is if a TV company film it as a reality show.
It’ll not end well.
I'd be expecting a bonus payment scheme from the programme makers incentivising 'drama'; the chef throwing wobblers, the pub's electrics fusing immediately before a wedding reception, the OP getting caught with the barmaid cleaning his lines in the cellar, the Thruttock's Old Stinker going off in the barrel and putting all the regulars in ICU needing new kidneys, etc. It’ll not end well.
Leithen said:
It would have to be a very busy pub to be operating at 19% Wages/Turnover. Check whether they are talking Gross of VAT or Nett though. Nett 20-30% including a manager’s salary might be a rule of thumb. Various reasons for this - Minimum wage, Pensions, NIC etc. The rougher the pub, the more staff needed and harder to recruit.
So not a good deal on the face of it. Why have the previous managers left and the most recent one legged it with the takings? I’d strongly suspect some form of protection racket/local family with threats/intimidation. Brewery will know, whether they will fess up is another matter. Police/Licensing board will also know.
Say it’s taking £10K Nett. 65% GP, Brewery is going to be taking £6500 and paying Heat & Light, Rates, Water, etc. They also benefit from the sale of their beer. Much better deal for them on the face of it. They also completely control everything about the pub - fixtures, fittings etc.
I’d be asking very searching questions and proposing a base salary for your friend of whatever he expects - £30K? Then a 50/50 profit share. Otherwise walk away. If he takes it on, he ought to be prepared for a tough 6-12 months to clear out the trouble.
Op this is a great post..So not a good deal on the face of it. Why have the previous managers left and the most recent one legged it with the takings? I’d strongly suspect some form of protection racket/local family with threats/intimidation. Brewery will know, whether they will fess up is another matter. Police/Licensing board will also know.
Say it’s taking £10K Nett. 65% GP, Brewery is going to be taking £6500 and paying Heat & Light, Rates, Water, etc. They also benefit from the sale of their beer. Much better deal for them on the face of it. They also completely control everything about the pub - fixtures, fittings etc.
I’d be asking very searching questions and proposing a base salary for your friend of whatever he expects - £30K? Then a 50/50 profit share. Otherwise walk away. If he takes it on, he ought to be prepared for a tough 6-12 months to clear out the trouble.
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