Tied pubs - pubs code consultation: workshops with tenants

Appendix A: Workshop discussion guide

Introductions (5 - 10 mins)

• Welcome to the session
• Introduction by moderator to group and explanation of Market Research Society Code of Conduct.

Describe background to the research:

The overarching aim of this research is to get your views and opinions on the key elements of the proposed Scottish Pubs Code, what it should cover, and how it might impact your business.

• Zoom/Teams: The discussion will be recorded – so I don't have to take notes. It will only be used for the purposes of this research project. Check permissions for this.
• Anonymous – do not attach names. Pull all findings together and report it back on a group basis.
• Explanation of rules of engagement of discussion - take part
  • not a test
  • no right or wrong answers
  • just interested in your own views
• Reassure: only share what you are comfortable sharing
• Reiterate GDPR rules if required: Withdraw at any time, only share what you are comfortable with

Background warm-up

• Where are you based?
• Tell me about your pub/pubs:
  • Who owns it (pub-owning company)?
  • How long have you been a tenant?
  • Describe your business and clientele – location, when you're busiest, the type of customers you rely on
• What are your future plans regarding your pub tenancy?

Views on the Scottish Pub Code (10 mins)

Current relationship with pub-owning company

• Tell me about your relationship with the company that owns your pub
  • Probe on positives and negatives
  • How is your relationship governed?
• If you had any queries about any aspect your relationship with the company, where would you go for help and guidance? Why? Spontaneous then probe
  • Pub Sector- Scotland: Code of Practice
  • The company itself
  • Other publicans
  • Representative body e.g. Scottish Licensed Trade Association or Scottish Beer and Pub Association

Initial thoughts

Just thinking first about the material provided before the workshop on the new Scottish Pubs Code.

• What did you think about it overall?
• Tell me how you think it will impact your relationship with the company that owns your pub? Probe for positives and negatives

Market Rent Only (MRO) leases (35 mins)

A key part of the proposed Code is to require the pub owning company to offer the tenant a MRO lease if they request it, subject to certain exceptions. Share slide below on MRO lease

Market Rent Only lease

The Code will require the pub-owning company to offer the tenant a MRO lease if they request it, subject to certain exceptions. The MRO lease offer must comply with the following:

a) The tenant will only pay the market rent for the lease, to be determined jointly between the tenant and pub-owning company (if they cannot agree, the SG are exploring whether the Adjudicator can appoint an Independent Rent Assessor to decide the market rent)

b) There will be no product or service ties included in the lease other than insurance - so for example no requirement to sell specific beers or other alcoholic drinks

c) The legislation assumes the MRO offer should usually be made by varying the terms of the existing tenancy agreement rather than a completely new lease, and it should be varied only enough to make it an MRO lease (comment: this is likely to be an area where people have different views – it could alternatively be made by a new lease – might be useful to find out views on this and find out what would be preferable.

The Code may also specify a time limit on how long the negotiation of a MRO lease should take.

• What is your overall view on MRO leases?
• Is an MRO lease something you would consider requesting? Probe: Why/why not?
• What would be the benefits and drawbacks of MRO leases?
• What concerns would you have about requesting an MRO lease? Probe:
  • Why?
  • How could the Code address those concerns – what information or reassurance would you be looking for in the Code?

Exceptions

In some circumstances the Code may exempt pub owning companies from the obligation to offer a MRO lease if requested by the tenant.

• What exemptions, if any, should there be to pub owning companies' obligation to offer an MRO lease? Spontaneous
• How might a MRO lease affect you and your business? Spontaneous

A key exception may be after the pub owning company has made a significant investment in the pub.

• Tell me what you think about this in principle – does it seem fair to you that a MRO lease might not be appropriate after significant investment by the company? PROBE: Why/why not?

• How would you define a 'substantial investment'? Probe:
  • Certain types of work?
  • Above a certain value? If asked, explain that current thinking regarding 'substantial investment' is value of £35k and above or 1.5 times the annual rent
• What kind of investment or work would you consider not substantial i.e. that shouldn't exclude a tenant from requesting a MRO lease? Probe:
  • Why/why not?
  • What about routine maintenance? Probe for differing views on different types of maintenance
  • How would you define routine maintenance?
  • Following a substantial investment, how long do you think a pub tenant should be excluded from requesting a MRO lease? Spontaneous then probe:
  • Does 5 years sound reasonable? Why/why not?
• What are the tenants' thoughts on MRO being exempted for uninvested sites, at the start of tenancies?
• Should very short tenancies be exempted from the requirement to offer a MRO lease on request? Probe:
  • Why/why not?
  • What minimum tenancy length would seem reasonable? Why?
• Should tenants be prevented from requesting a MRO lease for a period after making a request? Probe:
  • Why/why not?
  • If so, what might the time period be?
• Imagine you wanted to request a MRO lease. What information would you want to be provided to you before making any decision? Probe:
  • What else?
  • What information is most important? What is less so?
• Note: if time is short this is lower priority. What would you see as unreasonable terms for a MRO lease? Probe: For example:
  • Onerous stocking requirements Probe for examples: What kind of stocking requirements would put you off?
  • Very long leases, or short term leases? Probe: What would the minimum acceptable length of lease be for you? What about the maximum acceptable length?
  • Onerous payment terms? Probe for examples (possibly large deposits, quick turnaround to deal with dilapidations)
• What do you think the Code should specify as a timescale or time limit for negotiating a MRO, either to reach an agreement or if no agreement reached to refer to the new Adjudicator and rent assessor? Spontaneous then probe:
  • Does 3 months sound like a reasonable timescale? Why/why not?

Guest beer agreements (20 mins)

The Code will require pub owning companies to allow pubs to stock at least one guest beer of the tenant's choosing. Share slide below

Guest beer agreements

The Code will require pub-owning companies to allow tenants to enter into a guest beer agreement, whereby the tenant can sell at least one guest beer of their choosing regardless of the producer. The tenant will be able to change the chosen beer as often as they wish without incurring any penalties. Some conditions and parameters might be applied to this as part of the legislation

• What are your general views on this?
• Are you able to stock guest beers of your choosing at the moment? Probe:
  • Is it something you do?
  • How does the arrangement work?
  • How is it governed?
  • What works well/not so well about current arrangement?
• How important is it to you that this provision is in the Code?
• What information about this provision do you think should be in the Code?
• What type of guest beer would you likely select? Probe:
  • What factors influence your decision?
  • Would you have a preference for a local beer from a smaller brewery? Why/why not?
  • Should guest beer be focused on beers from smaller or local breweries?
• Would it be important for you to source guest beer directly from suppliers rather than from your pub-owning company?
• What benefits/drawbacks can you see of guest beer agreements?
• Are there any practical issues that would need to be considered?
  • Probe with respondents based on islands: What particular practical issues may affect you due to being based on an island?
• How do you think this might affect your rent? Probe: Why?
• Would this also impact on Flow Monitoring Equipment?

Arbitration (15 mins)

Note: if time is short, this section is lower priority

Arbitration

Under the new Code, there will be an arbitration process for dealing with disputes between tenants and pub owning companies. The Scottish
Pubs Code Adjudicator will act as arbitrator. A dispute can be brought by either the tenant or the pub owning company. Prior to approaching the Adjudicator regarding the dispute, the tenant must first have notified the pub owning company of the alleged failure to follow the Code. Using

Under the new Code, there will be an arbitration process for dealing with disputes between tenants and pub owning companies. Share slide below

• Would you consider using such an arbitration process?
• What concerns might you have about it? Probe: Why?
• Have you been in a situation in the past where arbitration might have helped?
• Does your pub company already have a dispute resolution procedure?
  • If so, do you have views on how effective this is?
• What kind of disputes do you think might be best resolved by moving to arbitration?
• Are there any limits on arbitration i.e. any situations/types of dispute where it might not be suitable?
• Has everyone heard about the Pub Independent Conciliation and Arbitration Service? Probe:
  • What are your views on it – strengths/weaknesses?
  • Have you used it before – what happened?

Thinking about how the Arbitration process might be set out in the Code:

• What would you need to know about the process before using it?
• What would reassure you and increase your trust in arbitration?
• What obligations would you expect to be placed on:
  • The pub-owning company?
  • The Adjudicator?

Scope of the new Scottish Pub Code (15 mins)

Hopefully you had a chance to read through the Scottish Beer & Pub Association's voluntary Code of Practice before the workshop. Let's use this as a starting point for thinking about what the new Scottish Pub Code could cover. Bear in mind that the voluntary Code is regarded as covering the minimum requirements governing the operation of tied pubs in Scotland, so as we discuss this please also think about what you think the voluntary Code doesn't cover or equally anything that isn't necessary. Also please be aware that the wider content of the new Code is something for Ministers to agree – it could end up being very limited or quite wide ranging.

• Before agreeing to take part in the workshop, were you aware of the Scottish Beer & Pub Association's voluntary Code of Practice? Probe if yes:
  • What do you think of it overall? Probe on strengths and weaknesses
  • Is the company that owns your pub a signatory to the Code, or do they explicitly follow it?
  • Have you used the voluntary Code or had recourse to it before? Probe: What for?
  • If used before – how helpful did you find it and why?
• Tell me how comprehensive you feel the voluntary Code is.

This is a summary of the things covered by the voluntary Code of Practice. Hopefully you had a chance to have a look at this prior to the workshop.

• Overall, what should the Code cover? Spontaneous then share slide below for reference and probe:
  • Role of Business Development Managers
  • Rent assessments
  • Rent reviews
  • Agreement renewal
  • Interaction with landlord
  • Amusement machines – supply and operation
  • Use of flow monitoring equipment
  • Complaints procedure
  • Surrender/end of tenancy

What should the new Scottish Pubs Code cover?

The current voluntary Code of Practice in Scotland covers the following:

Letting of premises

Role of Business Development Managers

Rent assessments

Rent reviews

Agreement renewal

Interaction with landlord

Amusement machines – supply and operation

Use of flow monitoring equipment

Complaints procedure

Surrender/end of tenancy

What should the new Scottish Pubs Code cover?

The current voluntary Code of Practice in Scotland covers the following:

Letting of premises

Role of Business Development Managers

Rent assessments

Rent reviews

Agreement renewal

Interaction with landlord

Amusement machines – supply and operation

Use of flow monitoring equipment

Complaints procedure

Surrender/end of tenancy

What should the new Scottish Pubs Code cover?

Let's look at these in more detail. Share summary slides for any topics raised by tenants on screen for reference and aid to discussion – stress these are not meant to be comprehensive. Skip over topics not mentioned. For each discussed, probe on what the obligations on the pub-owning company should be.

Possible impact of the Code on your business (10 mins)

• What impact could a future code have on your business and customers?
• What impact might it have on your relationship with the pub owning company?
• Do you think it might have a greater impact on certain types of tenants? Why? Probe for impacts based on:
  • Rural/island areas
  • Age
  • Sex
  • Ethnicity
  • Disability
  • Socio-economic groups
• Tell me what impacts you think the Code might have on:
  • Your customers
  • Your local community

Wrap up (5 mins)

• Thinking back over the discussion, what two or three things would you like to feed back to the Scottish Government about the Code and its development?
• What aspects of your relationship with the pub-owning company are you most keen to see covered in the Code?
• In what ways should it differ from or improve upon the existing voluntary Code?
• Any other thoughts?

Thank and close