Punch Taverns Watch

[Dadaist]

Punch Taverns are nowthe UK's largest pub chain and we know that they are a significant owner of pubs in Portobello.

This thread is designed to monitor their local activities and clarify how they relate to Portobello.

Punch Links :

http://www.punchpubs.co.uk/Punch/Punch+ ... by+county/

----------------------------------------------------------------------------------

So far - we know they own the Tides Inn, Figgate Whins and Utopia Beach Life - any others?

We can also go into the detail of Punch's business model in terms of how their franchise / license works, and what this means for a potential licensee.

Hopefully those Punch staff who have contributed to the forum before will help us by clarifying, pointing out our inaccuracies, countering any allegations and answering for their activities if judged questionable!

[Porty]

Excellent idea. Lets try and keep it objective and fair. If we can achieve that then it ought to help Punch and their franchisees and prospective franchisees deliver a good offer to the community.

Shoud the Pop Inn and the Abercorn (Indego) be included. Are they punch outlets?

Lets get a list.

[Dadaist]

Thanks Porty. If you can, can you do a search for the (long and informative) posting you made about franchises and licences with respect to agents mis-informing potential tenants about how much they would make etc?

I can't remember which thread it was in

[Porty]

will do.

[Jackson Priest]

Vacant pubs. Pop Inn included:

http://www.punchpubs.co.uk/Punch/Punch+ ... by+county/

[Dadaist]

As I said, hopefully either of the Punch employees who have posted here beforehand will come back and consult with us.

My first question for Punch is the following :

Supposing I was a Punch tenant and my pub caught fire, would my license payments still be due when the pub was closed and being refurbished?

[Porty]

well done JP.

I notice the Pop Inn no longer has £232,000 required as Capital. Maybe it was too rich?

When I looked at the franchised opportunities offered by Punch, there are a number of ways used to express an outlet's potential and past trading record.

There are also a number of caveats that don't fill me with confidence. I worry that a prospective franchisee who is excited by the potential of having "their own" pub may overlook the signifigance of these caveats.

They are as follows:
Misrepresentation Act- These particulars shall not form part of any offer or contract and no guarantee is given as to the condition of this property or the accuracy of its description. An intending lessee or tenant is not to rely on any representation made in these particulars and must satisfy themselves as to their own investigations before entering into contract.

THE PROPERTY MISDESCRIPTIONS ACT 1991
The mention of any appliances and/or services within these sales particulars does not imply they are in full and efficient working order.
All measurements, areas and distances are approximate only.

*Please note that Punch Taverns give no assurances or warranty, either expressed or implied, so far as the previous trade is concerned and any prospective tenants must rely on their own advice and opinion as to the trading potential of this property.

In particular the bit in bold doesn't strike me that the knowledgable and experienced partner is taking much responsibility.

[kings roader]

Heard today that Punch have sold the Pop In. I beleive that it is not likely to reopen as a pub !!

[Poppy]

Heard today that Punch have sold the Pop In. I beleive that it is not likely to reopen as a pub !!

Oh, that 'll explain why I saw a van being filled with the table and chairs from there on Friday!

[teddygirl]

Glad to see you are remaining vigilant Poppy.

[Poppy]

Glad to see you are remaining vigilant Poppy.

[Zargonian]

The end of Utopia on the Beach?
I liked that pub.....I've hear rumours about why it was shut down.
Anyone got facts?

[Novastar]

I think I'm jinxed. First my local shuts down (The Bridge), so I go to Bacchus. Which shuts down. So I went to Mac's on Great Junction Street. Which has shut down. Used to pop into Victoria's on Leith Walk which is shut down. and used to go into Utopia/Old Pier which has (guess what) closed down.

Anyone notice a theme with me and Punch owned pubs?

Where should I visit next (currently the Forester's isn't Punch owned so that won't count)?

[Porty]

Were these all punch taverns?

[Novastar]

Yep

Didn't realise till I took a look at that site.

Worried they may have bought the Forries and I don't know.

[Porty]

Worried they may have bought the Forries and I don't know.

Nah, that's Caledonian, kevin Doyle's company who own the Orm as well.

What a graveyard punch taverns appears to be!!!!

[Epykat]

There appears to be some movement on the Figgate front though. Can't wait..........Apparently they want Dutch canopies and hanging baskets.

[Zargonian]

Yep

Didn't realise till I took a look at that site.

Worried they may have bought the Forries and I don't know.

I've already told you who owns the Forries Nova-empty-heid:

Mr. Kevin Doyle.....but you wont know who he is, cos you're not from sunny Porty.
He owns quite a few big boozers in Edinburgh.

[MrsMc]

Yep

Didn't realise till I took a look at that site.

Worried they may have bought the Forries and I don't know.

I've already told you who owns the Forries Nova-empty-heid:

Mr. Kevin Doyle.....but you wont know who he is, cos you're not from sunny Porty.
He owns quite a few big boozers in Edinburgh.

Was Kevin Doyle a hibs casual in the 80's?

Used to work for caledonian-heritable - not bad company to work for.

[Zargonian]

Yep

Didn't realise till I took a look at that site.

Worried they may have bought the Forries and I don't know.

I've already told you who owns the Forries Nova-empty-heid:

Mr. Kevin Doyle.....but you wont know who he is, cos you're not from sunny Porty.
He owns quite a few big boozers in Edinburgh.

Was Kevin Doyle a hibs casual in the 80's?

Possibly.........don't want to ask him.
I like my knees too much


Used to work for caledonian-heritable - not bad company to work for.

[Dadaist]

Porty's defnitive text on franchising - preserved here :

I thought that you thought that franchising in general wasn't ideal?

Franchising can work, Mcdonalds have proved it. However, it is very, very difficult to get the balance right between Franchiser and Franchisee. Having had two experiences of being a franchisee, one with a well-intentioned, blue-chip, multinational company and the other with a company run by a chancer that was only interested in selling franchises. I would not choose the franchsing route again.

Obviously theirs works - why do some/a lot of franchises fail?

The list of reasons why a franchise may fail is infinite. The question is probably best answered by looking at why McD's works? I could wax lyrical but to be succinct:

1) They take a long-term view. They genuinely want their franchisees to make money and they have a formula that will insure that they will make money. For example: if a franchisee is working hard and meeting standards but is failing because their turnover to rent ratio is out. Mcd's will step in and subsidise the rent. They realise that if the franchise or site is there for 30 or 40 or 50 years a hit in profits for them is worth it.

A franchisee never makes the whole investment in a McD restaurant. It is a genuine partnership. McD usually take most of the risk in the project a 60/40 split.

2) They are very, very careful about who they select as Franchisee's. Either you have to have worked for the company for a very long time and they know you inside out or you have to invest £200,000, which must be unencumbered. In the latter case your money is not good enough on its own. You must undergo 6 to 8 months working unpaid in a restaurant. You learn about the business and they learn about you.

3) I met a major McD dude once in formal situation and we chatted about being a McD franchisee. I asked if one could get lucky and get rich from one McD franchise. He replied "It is possible but McDonalds don't do lucky" In other words he was saying our formula is refined, you won't lose but you won't win big.

I know you get bad franchises - and I don't mean in an anti-capitalist way (we won't go there, it's xmas) but in terms of the agents misleading the potential franchisee as to how much their earnings will be.

This is one of the main issues in Franchising. Franchise owners employ third parties to sell their franchises. There is no accountability. Often a franchisee fee is small, maybe £7500 to £50,000. if it all goes wrong it is unlikely that the loser will sue or will even have grounds for suing. The franchise sellers never meet disgruntled franchisees, never divulge sales or cost figures, franchises are sold on homgoenous business plans that bear little or no relation to the franchise that is being sold.

It is not just agents that do this, it is a deliberate policy of some franchise owners.

Example (any resemblance is purely coincidental)

Company P buys a public house in portobello. They buy it on the strength of the turnover, which they know historically speaking is £300,000. They pay £300,000 for the pub. They know their business well and believe they can pay a manager, staff and rent (interest on the £300,000) etc and make a £40k profit. In the example above the annual rent could be calculated at about £20,000 per annum. Which represents the cost of borrowing the £300k to buy the pub.

They also believe that if they spend £200,000 doing the place up, they could increase the turnover by £200,000 and increase profit by £50,000 to £90,000. So what do they do? Do they take the risk themselves?

No, they advertise for a franchisee. Promising support and discounted beer prices and perhaps a bit of brand recognition. It is a very good deal for them. They immediately save a managers salary. A condition of awarding the franchise is that the franchisee puts up the £200,000 improvement costs. So he is burdened by the borrowing cost of that £200,000, which will be about £14,000 per annum. Company P benefits from the improvements and anticipation sets the rental value for a pub turning over £500,000 not £300,000. So rent increases from £20,000 to say £40,000. This is usually done before advertising the franchise.

The franchise holder moves in, Company P now have a new pub, are making £20,000 profit on rent and saving perhaps £25,000 on a managers salary. Before any increase in turnover, they have a refurbished pub and are making a bigger profit BEFORE the profit they make on selling goods to the franchisee. They could be making £85-90K when they were previoulsy only making £40k.

What's in it for the franchisee?

Company P tell the franchsee that he can expect turnover of £500,000 or perhaps even more. The franchsee works out that he can make a £70,000 profit, which seems like a good return on his £200,000 investment and a reward for the time he will have to devote to it.

Company P do not guarantee the £500k turnover, make much of their expertise but simultaneously advise him to do his own research. If sales do reach £500,000 then the franchisee could make money, he could pay the cost of his borrowing, keep the managers salary and keep the margin that the company allow him on the stock that they sell him. Company P will likely make 50 -70% more money than they would have done had they developed the pub themselves and have taken no risk whatsoever. It is less risky to keep a pub closed, whilst they find a franchsiee, than to risk their own money. If Company P are really unscrupulous they will even take a profit on the £200k refurbishment cost.

The problem will arise if the anticipated rise in turnover does not materialise. The franchisee will find himself on little more than a managers salary (maybe even worse) having invested hugely and having bought a pup from people who knew a lot more about the business than he did. When he find himself in trouble, they will remind him that they offered no guarantee and encouraged him to do his own research. Eventually he will run up a credit tab with company P and they will tear up his franchise agreement.

It would not be difficult to become a franchisee for Company P. All you need is the money, no criminal record and be over 21.

I thought that you thought that franchising in general wasn't ideal?

Franchising can work, Mcdonalds have proved it. However, it is very, very difficult to get the balance right between Franchiser and Franchisee. Having had two experiences of being a franchisee, one with a well-intentioned, blue-chip, multinational company and the other with a company run by a chancer that was only interested in selling franchises. I would not choose the franchsing route again.

Obviously theirs works - why do some/a lot of franchises fail?

The list of reasons why a franchise may fail is infinite. The question is probably best answered by looking at why McD's works? I could wax lyrical but to be succinct:

1) They take a long-term view. They genuinely want their franchisees to make money and they have a formula that will insure that they will make money. For example: if a franchisee is working hard and meeting standards but is failing because their turnover to rent ratio is out. Mcd's will step in and subsidise the rent. They realise that if the franchise or site is there for 30 or 40 or 50 years a hit in profits for them is worth it.

A franchisee never makes the whole investment in a McD restaurant. It is a genuine partnership. McD usually take most of the risk in the project a 60/40 split.

2) They are very, very careful about who they select as Franchisee's. Either you have to have worked for the company for a very long time and they know you inside out or you have to invest £200,000, which must be unencumbered. In the latter case your money is not good enough on its own. You must undergo 6 to 8 months working unpaid in a restaurant. You learn about the business and they learn about you.

3) I met a major McD dude once in formal situation and we chatted about being a McD franchisee. I asked if one could get lucky and get rich from one McD franchise. He replied "It is possible but McDonalds don't do lucky" In other words he was saying our formula is refined, you won't lose but you won't win big.

I know you get bad franchises - and I don't mean in an anti-capitalist way (we won't go there, it's xmas) but in terms of the agents misleading the potential franchisee as to how much their earnings will be.

This is one of the main issues in Franchising. Franchise owners employ third parties to sell their franchises. There is no accountability. Often a franchisee fee is small, maybe £7500 to £50,000. if it all goes wrong it is unlikely that the loser will sue or will even have grounds for suing. The franchise sellers never meet disgruntled franchisees, never divulge sales or cost figures, franchises are sold on homgoenous business plans that bear little or no relation to the franchise that is being sold.

It is not just agents that do this, it is a deliberate policy of some franchise owners.

Example (any resemblance is purely coincidental)

Company P buys a public house in portobello. They buy it on the strength of the turnover, which they know historically speaking is £300,000. They pay £300,000 for the pub. They know their business well and believe they can pay a manager, staff and rent (interest on the £300,000) etc and make a £40k profit. In the example above the annual rent could be calculated at about £20,000 per annum. Which represents the cost of borrowing the £300k to buy the pub.

They also believe that if they spend £200,000 doing the place up, they could increase the turnover by £200,000 and increase profit by £50,000 to £90,000. So what do they do? Do they take the risk themselves?

No, they advertise for a franchisee. Promising support and discounted beer prices and perhaps a bit of brand recognition. It is a very good deal for them. They immediately save a managers salary. A condition of awarding the franchise is that the franchisee puts up the £200,000 improvement costs. So he is burdened by the borrowing cost of that £200,000, which will be about £14,000 per annum. Company P benefits from the improvements and anticipation sets the rental value for a pub turning over £500,000 not £300,000. So rent increases from £20,000 to say £40,000. This is usually done before advertising the franchise.

The franchise holder moves in, Company P now have a new pub, are making £20,000 profit on rent and saving perhaps £25,000 on a managers salary. Before any increase in turnover, they have a refurbished pub and are making a bigger profit BEFORE the profit they make on selling goods to the franchisee. They could be making £85-90K when they were previoulsy only making £40k.

What's in it for the franchisee?

Company P tell the franchsee that he can expect turnover of £500,000 or perhaps even more. The franchsee works out that he can make a £70,000 profit, which seems like a good return on his £200,000 investment and a reward for the time he will have to devote to it.

Company P do not guarantee the £500k turnover, make much of their expertise but simultaneously advise him to do his own research. If sales do reach £500,000 then the franchisee could make money, he could pay the cost of his borrowing, keep the managers salary and keep the margin that the company allow him on the stock that they sell him. Company P will likely make 50 -70% more money than they would have done had they developed the pub themselves and have taken no risk whatsoever. It is less risky to keep a pub closed, whilst they find a franchsiee, than to risk their own money. If Company P are really unscrupulous they will even take a profit on the £200k refurbishment cost.

The problem will arise if the anticipated rise in turnover does not materialise. The franchisee will find himself on little more than a managers salary (maybe even worse) having invested hugely and having bought a pup from people who knew a lot more about the business than he did. When he find himself in trouble, they will remind him that they offered no guarantee and encouraged him to do his own research. Eventually he will run up a credit tab with company P and they will tear up his franchise agreement.

It would not be difficult to become a franchisee for Company P. All you need is the money, no criminal record and be over 21.

Thanks P for typing this in. Maybe we can get Punch or McCrow to respond one day!

[Pal of Porty]

Another big bone of contention with many franchised organisations is the ongoing royalty payments paid by the franchisee to the franchisor. They are usually made as a %age of sales.

At the time of business start-up, most people do not mind paying an initial sum for the franchise - they obviously think that the business is a good idea and has a suitable model to follow.

However, once the franchisee has been running the business for say a year and learnt the ropes, many begin to question why they are paying the royalties because the Franchisor is not doing anying, or not doing enough, to help them. Examples could be the fanchisor not investing in promised marketing or developing much needed new products etc etc.

Royalties are then perceived as not giving value for their precious money and resentment begins to creep into the relationship - most definitely not good for business success.

[Brian McCrow]

Many franchises run very successfully for both parties and the consumer and have done so for many years.

As in any business you need to check every aspect of the offer before becoming a Franchisee. It is a quick start way of running your own business and getting it up to speed more quickly than you can on your own. You also get ongoing business support, which can be very useful in developing your management and business skills.

Not every franchise business is good or suitable for everyone.

Caveat Emptor

[Porty]

Many franchises run very successfully for both parties and the consumer and have done so for many years.

One of my lawyers is among the leading franchise lawyers in Scotland and has been involved in Franchising for 20 years. He says that he has never encountered a franchise system that makes money for both the franchisor and the franchisee for anything other than a short period of time. With Mcd's being the notable exception. He said this prior to the Subway invasion, whom I believe are also succesful.

What examples are you thinking of Brian?

[Dadaist]

...and while you're back with us Brian, can you give us a status update (including all proper accounts) of the community/conglomerate consultation committee you constructed?

[ali]

..........................................community/conglomerate consultation committee you constructed?

Cor! Classic alliteration!!!!

[Brian McCrow]

Check this out:

http://www.whichfranchise.com/

http://www.whichfranchise.com/news_temp ... icleID=534

The British Franchise Association had the following winners:

Gold Countrywide Grounds Maintenance
Silver Mitchells & Butler
Bronze Snap on Tools

A recent report by them said that 95% of UK franchisees were operating profitably.

Some interesting franchises are:

Post Office - think this might be one of the oldest
Scottish & Newcastle
Bang & Olufsen
Clarks Shoes
Domino's Pizzas
Wimpy
Prontaprint
O'Briens Irish Sandwich Bars

Most car dealers operate on a franchise basis as do Petrol pumps.

I could go on but I won't

[Dadaist]

A recent report by them said that 95% of UK franchisees were operating profitably.

I think this is the Achilles Heel - especialy for those unfortunates who have been told they will make more than they do and the consequences that has. I have heard some horror stories, but sharp practise does not seem to register on your radar, does it?

I could go on but I won't

Oh go on.

[Dadaist]

Also, Brian, on a much more basic level - is there any chance you could go back and respond to any of Porty's points about Punch, or respond to my repeated requests for a status update on your Figgate Franchise Fan Forum which you brewed up for us last year but have not mentioned since?

I appreciate you can quote propaganda from the British Franchise Association website - but we are past the preamble stage now.

[Porty]

Brian McCrow wrote:

The British Franchise Association had the following winners:

The British Franchise Association is 3 guys who had the idea of holding exhibitions for franchise sellers looking to attract buyers. They are effectively high tariff landlords whose livilhood depends on franchise sellers. Its is a cloak of presumed authenticity but a self-interest group who gave themselves an official sounding name. Quite a good idea but they are neither official nor a regulated body.

Brian McCrow wrote:

A recent report by them said that 95% of UK franchisees were operating profitably.

Not this old one. Can you find this report anywhere? I saw it way back when and the mantra is often repeated but the actual report is nowehere to be seen. I believe the report actually said that of all franchises, (meaning outlets run by franchisees) that have been in business for 5 years or more, 95% are runing profitably.

Guess what happened to the ones that didn't make it to 5 years? A franchise seller could have sold 100 franchises 5 years ago and all but one had gone out of business and the above statement could be true.

Brian, nice list of "interesting" franchises, what does that mean? And are you sure that post office has always been a franchise? I once applied and was awarded the Portobello Sub-Post office agency, a quite seperate legal entity from a franchise. Before I commited I took a long hard look at the contract and a look at the churn rate in post offices around the UK. Churn being those that are selling up because they are struggling. I backed out and I was right to do so. There are some succesful outlets of course but the odds are stacked in the PO favour, it is not an equitable contract and it was a monopoly.

The fact that a franchise or agency type organisation has been around for a long time does not mean that the majority of its franchisees or agents are profitable. It is quite possible, indeed quite common for the franchise seller do be doing quite nicely by selling and reselling the same unsuccesful franchises over and over again. Utopia Beach Life, is a living or rather dead, example of this.

Franchising is an unregulated business and the quicker it becomes so the better. I believe Franchising is regulated in the US which is one reason why they tend to be more succeesful but by no means the majority of them.

Edited bits.

[Pal of Porty]

You also get ongoing business support, which can be very useful in developing your management and business skills.

That was the whole point I was making - the theory is excellent but the practice is often very lacking and leads to a significant breakdown in the relationship and hence poorer business performance.

..... And as for the BFA, in my experience they are a small, self appointed team with only their own self interest at heart. I reported a Franchisor to them who, in my opinion, was selling franchises in such a misleading fashion it almost bordered on criminal. He had 42 Franchisees throughout the UK and was squeezing as many as he could possibly squeeze into ever decreasing territories of operation to maximise his purchase fees but reduce individual franchise income. He was endorsed by the BFA but they did not even want to know - even when I presented his business plan (which was so grounded in fantasy that it could have been written by Walt Disney).

I have never been so unimpressed with an organistion in my life and they most certainly do not know very much about Franchising.

[Sandra]

Was reading my boss's SLTN and came across a wonderful artist's impression of a possibly revamped "Figgate" with cream frontage and hanging baskets outside

Ideal for first time applicant or local operator cap req £34k

[Porty]

According to Soupy Utopia Beach Life/The Place is up for lease again. Will this be the fourth time in two years?

[SoupDragon]

Think it might be Porty,
The most recent names its been run under ( I think ) were Lobster Pot, The Pier, Utopia by the beach ( there is or was another Utopia in Easter Road) and the Place.
When we moved in it was the Flying Dutchman, something else I think, ? Beachcombers, Ruthvens then cant remember the other names. Sure there were more.

There used to also be the Marine Bar opposite, then the Seabeach along the Prom, the Proms bar, The Hamilton Lodge oh and the Bluebell in the High Street all gone now. The Pop Inn and Figgate Whins have been shut for ages and the Coach Inn up Baileyfield Road is now a party place.
Are we all becoming teetotal ?

[Dadaist]

Down Leith there used to be a place called Dizzie Lizzie's which was on my street growing up. Recently it got Punch'd, had the "opportunity" sign up for a while, got refurb'd, and is now an "opportunity" again.

Dunno how long the new Punch landlord lasted. A year maybe.

Punch senior management read these threads so maybe they can tell us.