Running a pub - British Beer and Pub...

Running a pub

A guide to costs for tied tenants and lessees 2018

British Beer and Pub Association

2

Contents

Introduction 3

Background and explanatory notes 4

Small community local £4k (turnover per week) 8

Community wet-led £5k 9



Rural character £5k 12

Rural character £8k 13

Town centre pub/bar £10k 14

Town/country food-led £10k 15

Town/country food-led £15k 16

Summary table (£ costs) 17

Summary table (% costs) 20

Annex A – Pub with accommodation template 22

Annex B - useful contacts/links 23

3

Introduction Business plans, and the negotiations over leases and tenancies in the UK pub trade should be as

well-informed as possible. This guide provides the latest data for tenants and lessees on typical

operating costs in the UK pub industry.

This report represents the best available 2017 data from BBPA member companies on the costs of

running a tied pub in the tenanted and leased sector. It is a vital reference tool for anyone running

a tied pub or thinking of doing so.

The guide shows both the average and the range of costs in running a pub over a variety of pub

models based on turnover and business types, including food and wet-led models.

The report takes account of the significant variations that exist in the cost base - even within those

pubs that are broadly in the same category. Such costs are based on the size and location of the

pub, the age and state of repair, the operating style and the experience of those in charge. Costs

will also vary dependent on tenure type (for example repair and insurance obligations).

As well as providing average costs, the guide also includes the minimum and maximum typical costs

providing a range of scenarios across different types of business.

However, we would point out that as input data and sources change each year, the information

should not be used to determine trends from year to year. For example, this year’s guide includes

a new cost lines (pay-TV and live music) for some models. The data should also be used in

conjunction with sources such as the ALMR’s (now UKHospitality) benchmarking survey1 which is

released annually and other pub trade data.

1 See ALMR’s 2017 benchmarking survey: http://www.almr.org.uk/wp-content/uploads/Highlights-of-the-ALMR-Christie-Co-Benchmarking-

Report-2017-web.pdf.

http://www.almr.org.uk/wp-content/uploads/Highlights-of-the-ALMR-Christie-Co-Benchmarking-Report-2017-web.pdf

http://www.almr.org.uk/wp-content/uploads/Highlights-of-the-ALMR-Christie-Co-Benchmarking-Report-2017-web.pdf

4

Background and explanatory notes The BBPA guide has been compiled from data supplied by BBPA members in relation to short term

tenancies (usually 3-5 years) and longer-term leases (the latter tend to be fully repairing and

insuring).

The tables represent a composite of accounts presented to tenants by companies based on their

experience across their entire estate, and individual pub accounts that have been made available to

their pub companies.

The information is supplied in summary form across nine different pub models. While not inclusive

of all business models, they are representative of the vast majority of pubs run as either tenancies

or leases.

Weekly costs are shown on the basis that the pub business is directly operated by the tenant or

leaseholder and that their income is derived from the profit remaining after operating expenses

and rent payable is deducted.

The examples and figures supplied in the survey give an indication of the weekly costs that are

likely to be incurred in the types of pub businesses described in this guide.

Where these figures are to be used in preparing business plans or for other purposes it should be

borne in mind that all pubs are unique and that the actual costs incurred will be dependent on

the different aims and styles of the business according to the location, the market and the skills

of the tenant/lessee.

Costs do vary across the country and the size of the business, as well as its focus, will have

significant impacts on costs. For further information on taking on a pub, please refer to the links

section at the end of this guidance.

5

Pub models Nine pub models are illustrated in the report:

Please note the turnover and split for each model are general guidelines to give an indication of the

focus of each business, and may not exactly relate to each data set presented.

Annex A shows an example of how a licensee may wish to set out an accommodation-focused pub

profit and loss account.

Small community local (c100% drink) turnover c£4,000/week

Community wet-led (c90:10, drink:food) turnover c£5,000/week



Rural character (c50:50, drink:food) turnover c£5,000/week

Rural character (c50:50, drink:food) turnover c£8,000/week

Town/country food-led (c30:70, drink:food) turnover c£10,000/week

Town centre pub/bar (c70:30, drink:food) turnover c£10,000/week

Town/country food-led (c30:70, drink:food) turnover c£15,000/week

6

Excluded costs

Some costs (and income streams) have not been included in the guide:

MANAGERS’ SALARIES: Individual tenanted and leased pubs (the focus of this survey) do not

employ full-time managers and therefore such costs are not included. All other staff costs are

included in the survey. Staff costs for food-led pubs are greater, given the need for specialist

expertise and the greater labour input required in running a food-led operation.

AMUSEMENT MACHINES: Neither the income nor the costs from amusement machines (Category C/fruit machine, Skill with Prize, pool tables etc.) have been included in the main operating cost analysis but are shown below the divisible balance. Please note the average will reflect that different

operating models have varying amounts of machines.

Operating costs per pub model

The main body of the report has been arranged by the average reported operating costs for each

pub category. As previously highlighted, costs exclude managers’ salaries.

Summary tables

At the end of the report, summary tables have been arranged by the maximum and minimum

reported total operating cost for each pub model, as well as the average. This specific pub model is

then divided into individual cost lines based on that particular pub. For some cost lines these of

course may be zero in some instances (e.g. Pay-TV, Live Music). As previously highlighted, costs

exclude managers’ salaries in all models.

Value Added Tax

It is important to note that all figures are quoted exclusive of VAT and any profit related tax such as

Corporation Tax.

Divisible balance

Divisible balance is the profit made before rent is deducted. It provides an indication of what rent

might be asked for by the pub operating company. RICS guidance states that rents can be in a range

of 35%-65% of divisible balance. However, many pub rent settlements are more typically in the

45%-55% of the divisible balance range. All rents can be subject to negotiation by both parties.

The divisible balance is also dependent on the margins achieved on the selling price of drinks and

food passing through the business. This can be higher or lower, depending on the arrangements

offered by the pub operating company, the location and style of the business and the expertise of

the tenant/licensee in obtaining the best return.

7

Small community local c. £4k turnover per week (100% wet)

All figures exclusive of VAT £

Total drinks sales 3,705

Total food sales 107

Total sales 3,812

Cost of drinks 1,811

Cost of food 45

Total cost 1,856

Gross profit 1,957 51.3% Gross profit margin

% cost to turnover

Wages & salaries 518 13.6%

Rates 82 2.2%

Utilities 182 4.8%

Repairs & renewals 65 1.7%

Insurance 39 1.0%

Marketing/Promotion/Telephone 52 1.4%

Consumables 15 0.4%

Waste Disposal/Cleaning/Hygiene 40 1.0%

Professional fees 50 1.3%

Bank charges 19 0.5%

Equipment hire etc 7 0.2%

Interest on capital 20 0.5%

Pay TV (Sky, BT Sport etc.) 69 1.8%

Live music 91 2.4%

Other costs 69 1.8%

Total operating costs 1,318 34.6%

Divisible balance 638 16.7%

Gaming machine income 55

See page 6 for details on excluded costs

8

Community wet-led c£5,000 turnover per week (90:10 drink/food) All figures exclusive of VAT

£



Total sales 4,934


Cost of food 174

Total cost 2,383

Gross profit 2,551 51.7% gross profit margin

% cost to turnover

Wages & salaries 730 14.8%

Rates 156 3.2%

Utilities 229 4.6%


Insurance 54 1.1%


Consumables 12 0.2%







Live music 25 0.5%

Other costs 100 2.0%





9


£



Total sales 7,596


Cost of food 309

Total cost 3,659


% cost to turnover

Wages & salaries 1,300 17.1%

Rates 256 3.4%

Utilities 306 4.0%


Insurance 60 0.8%


Consumables 13 0.2%







Live music 24 0.3%



Divisible balance 1,140 15.0%



10


£


Total food sales 1,436

Total sales 12,630


Cost of food 565

Total cost 6,007


% cost to turnover


Rates 445 3.5%

Utilities 393 3.1%


Insurance 66 0.5%


Consumables 27 0.2%







Live music 61 0.5%






11

Rural character c£5,000 turnover per week (50:50 drink/food) All figures exclusive of VAT

£



Total sales 5,070


Cost of food 966

Total cost 2,197


% cost to turnover


Rates 149 2.9%

Utilities 276 5.4%


Insurance 43 0.9%


Consumables 24 0.5%







Live music - 0.0%

Other costs 45 0.9%





12

Rural character c£8,000 turnover per week (50:50 drink/food) All figures exclusive of VAT

£



Total sales 8,449


Cost of food 1,587

Total cost 3,624


% cost to turnover


Rates 279 3.3%

Utilities 369 4.4%


Insurance 52 0.6%


Consumables 31 0.4%







Live music - 0.0%

Other costs 84 1.0%





13

Town centre pub/bar c£10,000 turnover per week (70:30 drink/food) All figures exclusive of VAT

£



Total sales 9,376


Cost of food 907

Total cost 4,260


% cost to turnover


Rates 323 3.4%

Utilities 355 3.8%


Insurance 61 0.7%


Consumables 16 0.2%







Live music - 0.0%






14

Town/country food-led c£10,000 turnover per week (30:70 drink/food) All figures exclusive of VAT

£



Total sales 9,633


Cost of food 2,151

Total cost 3,842


% cost to turnover


Rates 318 3.3%

Utilities 429 4.5%


Insurance 56 0.6%


Consumables 36 0.4%







Live music - 0.0%

Other costs 89 0.9%





15

Town/country food-led c£15,000 turnover per week (30:70 drink/food) All figures exclusive of VAT

£



Total sales 15,115


Cost of food 3,016

Total cost 5,985


% cost to turnover


Rates 500 3.3%

Utilities 570 3.8%


Insurance 70 0.5%


Consumables 71 0.5%







Live music - 0.0%






16

Summary table (£ costs) All figures exclusive of VAT

COMMUNITY WET-LED

(c100% drink) c£4,000/week

COMMUNITY WET-LED

(c90:10, drink:food) c£5,000/week

COMMUNITY WET-LED


Min OC Max OC Min OC Max OC Min OC Max OC

All figures below ex. VAT

Total Drinks Sales 2,380 4,405 3,882 4,140 5,342 7,749

Total Food Sales 66 43 200 784 754 1,277

Total Sales 2,446 4,448 4,082 4,924 6,095 9,026

Cost of drinks 1,201 2,256 2,023 1,947 2,861 3,785

Cost of food 129 21 80 318 505 492

Total Cost 1,329 2,277 2,103 2,266 3,365 4,277

Gross Profit 1,117 2,171 1,978 2,659 2,730 4,749

Wages & Salaries 141 542 536 911 768 1,601

Rates 28 142 210 74 196 370

Utilities 109 178 99 214 176 214

Repairs & Renewals 87 26 95 62 169 30

Insurance 15 23 21 52 20 15

Marketing/Promotion/Telephone 20 30 30 47 16 134

Consumables 40 34 43 - 30 2

Waste Disposal/Cleaning/Hygiene

12 46 24 43 22 151

Professional fees 28 40 60 57 49 103

Bank charges 39 15 33 27 44 82

Equipment Hire etc 2 18 - 4 30 28

Interest on capital - 29 38 31 - -

Pay TV (Sky, BT Sport etc.) - 92 96 111 232 148

Live Music 105 163 64 148 328 71

Other Costs 73 39 57 83 21 325

Total Operating Costs 700 1,418 1,406 1,863 2,103 3,275

Divisible Balance 417 753 572 796 627 1,473

Gaming machine income - 64 53 62 79 4

17

COMMUNITY WET-LED LOCAL


RURAL CHARACTER (c50:50, drink:food)

c£5,000/week


c£8,000/week



Total Drinks Sales 8,380 13,097 2,500 2,400 4,000 6,344

Total Food Sales 1,000 1,266 2,500 2,750 4,000 4,483

Total Sales 9,380 14,363 5,000 5,150 8,000 10,827

-

Cost of drinks 4,426 5,799 1,125 1,236 1,800 2,973

Cost of food 400 581 1,000 1,100 1,600 1,855

Total Cost 4,826 6,379 2,125 2,336 3,400 4,828

-

Gross Profit 4,554 7,983 2,875 2,814 4,600 5,999

-

Wages & Salaries 1,673 2,801 750 1,346 1,600 2,722

Rates 308 684 125 198 200 386

Utilities 240 328 175 345 280 498

Repairs & Renewals 125 59 80 140 200 115

Insurance 16 17 20 32 40 45

Marketing/Promotion/Telephone 6 112 125 48 200 89

Consumables 38 7 30 34 50 131

Waste Disposal/Cleaning/Hygiene 67 216 60 144 64 93

Professional fees 38 147 55 77 56 63

Bank charges 29 132 65 59 40 71

Equipment Hire etc 19 38 25 10 25 30

Interest on capital 22 - 30 24 40 29

Pay TV (Sky, BT Sport etc.) 302 361 - 69 - 109

Live Music 38 83 - - - -

Other Costs 96 289 - - - -

-

Total Operating Costs 3,019 5,274 1,540 2,526 2,795 4,382

-

Divisible Balance 1,535 2,709 1,335 288 1,805 1,617

Gaming machine income 115 - - - - -

18

TOWN CENTRE PUB/BAR


TOWN/COUNTRY FOOD LED PUB






Total Drinks Sales 5,009

6,793

2,621

3,496

4,385

5,517

Total Food Sales 2,503

2,772

4,941

6,444

6,313

10,398

Total Sales 7,512

9,565

7,562

9,940

10,698

15,914


2,797

1,302

1,510

1,993

2,318

Cost of food 972

1,016

1,838

2,254

2,246

3,495

Total Cost 3,693

3,813

3,140

3,764

4,239

5,813

Gross Profit 3,819

5,752

4,422

6,176

6,459

10,101

Wages & Salaries 1,532

2,235

2,060

2,582

3,112

4,507

Rates 224

365

198

324

268

622

Utilities 267

302

391

464

367

705

Repairs & Renewals 101

142

192

218

230

325

Insurance 13

20

16

76

19

99

Marketing/Promotion/Telephone 64

65

96

196

123

221

Consumables 44

11

31

-

22

-

Waste Disposal/Cleaning/Hygiene 76

120

115

126

236

195

Professional fees 51

98

55

73

91

87

Bank charges 78

72

62

63

104

131

Equipment Hire etc 23

20

-

-

-

-

Interest on capital -

-

-

59

-

103

Pay TV (Sky, BT Sport etc.) 102

439

48

12

58

19

Live Music -

-

-

-

-

-

Other Costs -

-

-

182

-

300

Total Operating Costs 2,574

3,889

3,264

4,376

4,630

7,314

Divisible Balance 1,245

1,863

1,158

1,800

1,830

2,787

Gaming machine income -

-

-

2

-

3

19

Summary table (% costs) All figures exclusive of VAT

COMMUNITY WET-LED

(100% wet) c£4,000/week

COMMUNITY WET-LED


COMMUNITY WET-LED



Wages & Salaries 5.7% 12.2% 13.1% 18.5% 12.6% 17.7%

Rates 1.1% 3.2% 5.1% 1.5% 3.2% 4.1%

Utilities 4.4% 4.0% 2.4% 4.3% 2.9% 2.4%

Repairs & Renewals 3.6% 0.6% 2.3% 1.3% 2.8% 0.3%

Insurance 0.6% 0.5% 0.5% 1.0% 0.3% 0.2%

Marketing/Promotion/Telephone 0.8% 0.7% 0.7% 1.0% 0.3% 1.5%

Consumables 1.7% 0.8% 1.1% 0.0% 0.5% 0.0%

Waste Disposal/Cleaning/Hygiene 0.5% 1.0% 0.6% 0.9% 0.4% 1.7%

Professional fees 1.2% 0.9% 1.5% 1.2% 0.8% 1.1%

Bank charges 1.6% 0.3% 0.8% 0.5% 0.7% 0.9%

Equipment Hire etc 0.1% 0.4% 0.0% 0.1% 0.5% 0.3%

Interest on capital 0.0% 0.6% 0.9% 0.6% 0.0% 0.0%

Pay TV (Sky, BT Sport etc.) 0.0% 2.1% 2.4% 2.2% 3.8% 1.6%

Live Music 4.3% 3.7% 1.6% 3.0% 5.4% 0.8%

Other Costs 3.0% 0.9% 1.4% 1.7% 0.3% 3.6%

Total Operating Costs 28.6% 31.9% 34.4% 37.8% 34.5% 36.3%

20

COMMUNITY WET-LED LOCAL



c£5,000/week


c£8,000/week


Wages & Salaries 17.8% 19.5% 15.0% 26.1% 20.0% 25.1%

Rates 3.3% 4.8% 2.5% 3.8% 2.5% 3.6%

Utilities 2.6% 2.3% 3.5% 6.7% 3.5% 4.6%


Insurance 0.2% 0.1% 0.4% 0.6% 0.5% 0.4%


Consumables 0.4% 0.1% 0.6% 0.7% 0.6% 1.2%



0.3% 0.9% 1.3% 1.1% 0.5% 0.7%




Live Music 0.4% 0.6% 0.0% 0.0% 0.0% 0.0%

Other Costs 1.0% 2.0% 0.0% 0.0% 0.0% 0.0%


TOWN CENTRE PUB/BAR







Wages & Salaries 20.4% 23.4% 27.2% 26.0% 29.1% 28.3%

Rates 3.0% 3.8% 2.6% 3.3% 2.5% 3.9%

Utilities 3.6% 3.2% 5.2% 4.7% 3.4% 4.4%


Insurance 0.2% 0.2% 0.2% 0.8% 0.2% 0.6%


Consumables 0.6% 0.1% 0.4% 0.0% 0.2% 0.0%



1.0% 0.8% 0.8% 0.6% 1.0% 0.8%




Live Music 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Other Costs 0.0% 0.0% 0.0% 1.8% 0.0% 1.9%


21

Annex A Pub with accommodation

Template P&L account £

Total Drinks Sales

Total Food Sales

Total Accomodation/Other Income

Total Sales

Cost of drinks

Cost of food

Cost of Accomodation/Other Income

Total Cost

Gross Profit

gross profit margin

% cost to turnover Wages & Salaries

Rates

Utilities

Repairs & Renewals

Insurance

Marketing/Promotion/Telephone

Consumables

Waste Disposal/Cleaning/Hygiene

Professional fees

Bank charges

Equipment Hire etc

Interest on capital

Pay TV (Sky, BT Sport etc.)

Live Music

Other Costs

Total Operating Costs

Divisible Balance

22

Annex B Useful links British Beer & Pub Association (BBPA)

Pub Governing Body - Codes of practice tenanted/leased/Scotland (voluntary)

British Institute of Innkeeping

UK Hospitality

Pubs Code Adjudicator

For queries relating to this report, please contact:

Paul Oakley

British Beer & Pub Association

Brewers’ Hall

Aldermanbury Square

London EC2V 7HR

020 7627 9133

[email protected]

http://www.beerandpub.com/

http://www.beerandpub.com/

http://www.thepubgoverningbody.co.uk/

http://www.thepubgoverningbody.co.uk/

http://www.bii.org/

http://www.bii.org/

http://www.bha.org.uk/

http://www.bha.org.uk/

http://www.gov.uk/government/organisations/pubs-code-adjudicator

http://www.gov.uk/government/organisations/pubs-code-adjudicator

mailto:[email protected]

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