Colin Wellstead of property agent Christie + Co

How to buy a public house

19th April 2007, 12:12pm

By Colin Wellstead, Director and Head of Public Houses and Restaurants, Christie + Co

Before you decide whether to buy a pub you need to think long and hard about whether you are suited to run a public house.

One of the first things to consider is that you will be spending 24 hours a day, seven days a week, or close to, with your partner. I get on very well with my wife but I don't think I could spend 24 hours a day with her! More importantly, I don't think she could with me!

If you have never worked in a pub go and talk to your local friendly publican, let him know what your aspirations are and ask if he will let you work behind his bar for sometime to gain experience.

If you think it is about standing behind a bar serving drinks, taking food orders and generally playing mine host then you have it wrong. There is cleaning and preparation for the day ahead, cellar work, paperwork, staff, legal and a host of other issues which make it a very hard occupation. If you are still reading this, there are also many people who enjoy a very interesting, exciting and worthwhile career running their own pub - it isn't all bad!

Other things to consider is what type of pub do you want to operate? There is no point looking at a country pub if you are a city dweller who really wants to run a wine bar. Conversely, if you have desires for a 'roses round the door' freehouse then don't look at a Rovers Return-type property.

The amount of capital that you have available will also determine, to a very large extent, your entry point into running a pub. If you have limited funds and experience, becoming a manager is often a good stepping stone and lots of managed pub companies are regularly advertising for trainee and assistant managers who then quickly become permanent managers.

There are many tenanted and leased opportunities out there for people with limited capital. In these instances you effectively own the business whilst the brewer/pub company retains the freehold of the property. Ultimately most people's desire is to own a freehouse, the property and business, lock, stock and barrel.

There are four basic ways of operating a public house, each dependant on the amount of funds that you have available.

The first and lowest cost of entry is as a manager of a pub. You need to deposit a security bond and are paid a salary and a bonus, with the profits of the pub accruing to the owner, normally a managed pub company.

The second is a traditional short-term tenancy, normally for one or three years, but often renewable at the end of the period. You purchase the fixtures and fittings plus the stock and glassware, and also need enough cash flow to operate the business.

Despite a massive shift to longer term leases in the last 15 years, there is still a number of traditional tenancies available with the cost of entry generally between £10,000 - £25,000.

The next is a lease, which can either be the assignment of an existing lease or one of the many new leases which have been available, particularly in the last five years.

The assignment of an existing lease normally achieves a premium often between £30,000 and £100,000 including the fixtures and fittings, although we regularly see premiums well in excess of this figure.

If taking a new lease, the ingoing lessee is often required to spend some capital expenditure for a refurbishment scheme in conjunction with the landlord. You also have to pay for the fixtures and fittings. Again, there will often be opportunities within the £30,000 - £100,000 range.

Finally and most people's ultimate desire is to own a freehold freehouse. It is also not uncommon for people to start as a manager and end up owning a freehouse.

The amount of likely funds that you have will ultimately determine your entry point into running, and hopefully owning, a pub.

About the author: Colin Wellstead, Director and Head of Public Houses and Restaurants, can be contacted at Christie + Co on 020 7227 0700 or e-mail colin.wellstead@christie.com

For reference: How to Buy A Business by Andrew St George, published by Christie + Co, is available for sale via www.christie.com at £15.45 (inc VAT and P&P)