Tied pubs - pubs code consultation: workshops with tenants

9. Research findings: Impact of the Scottish Pubs Code on the business

This chapter discusses tenants' views on how the Code will impact on their business and the wider sector. Overall, the new Code was seen as potentially transformative, bringing stability and security to the sector, stemming the churn of tenants, forcing pub-owning companies to act more fairly, encouraging investment and generally raising the status of hospitality and the quality of the people in the business.

In the short term, however, the potential amount of paperwork and red tape required for compliance and the ongoing uncertainty around the provisions of the Code, especially in relation to MRO leases, were a major concern for the operators of multiples.

"Right now it's taking businesses off me with the company removing tenancies."– Pub tenant

For the smaller operators, however, the prospect of MRO leases was seen as the most significant factor in the new Code, with the potential to be transformational for their own businesses and the wider sector. In their view the greater leverage in negotiations with the pub-owning company afforded by the obligation to offer a MRO lease on request should stop the churn of tenants and attract people who genuinely want a long-term career in hospitality. This greater stability in turn would make the banks more amenable to providing finance, which would fuel investment – not least in training staff. One tenant summarised this potential virtuous cycle:

"If we were to get MRO it makes us free of tie and we pay a fair market rent – that would be transformational. Everything becomes a longer term project with larger investment. Banks would be much more amenable towards publicans. Over the last 10 years the banks have tended to shy away from tenants even with some kind of security and one key reason is the vast turnover of tenants over the last 15 years. This will slow down the churn. In 20-30 years there will be more guys like us who have been in the business 20-30 years. That will bring another level to the industry in terms of the experience, investment – making it easier to invest in and keep staff – pay them more, train them more which means it's more likely to become a long-term and lifetime career for them." – Pub tenant

Some tenants also noted that this would benefit customers and the community, as they value stability in their local pub and its staff.

The guest beer agreement also had the potential to bolster businesses and profitability, if done correctly.

"The guest beer will make the business more profitable providing the rent is not affected – which will give a leg up for those new to the business. This increased profitability will also help stop the churn of tenants." – Pub tenant

As noted in the previous chapter on guest beer agreements, these would benefit customers by meeting the increasing interest in and demand for local beers.