Top ten tips on buying licensed premises
02/11/2009
By Roy Willis, Partner in Commercial Property & Development.
Buying licensed premises requires additional considerations to a typical commercial property acquisition. This 'top ten' list will guide you.
- Research the site - pub companies ('pubcos') are selling off a number of sites. It is unlikely that these are the most profitable operations. So, when taking a pubco lease find out about the pubco itself and its approach to tenants.
- Do your due diligence - pubs are conspicuous properties, many are listed buildings. It is essential that any issues are dealt with before you take over. Find out about the pub's annual accounts and VAT returns.
- Finance - management and control of costs is essential. At which point in the week will you break even?
- Structure the deal - it may be difficult to achieve more than a 50% loan to value. Take advice on the options: buying the freehold, taking a lease (which may be tied) or simply a short tenancy.
- Do your market research - ensure there is a market for the type of operation you wish to run. 'Food destination pubs' are growing while 'town pubs' are in decline.
- Licensing - ensure the 'premises licence' enables you to carry out all the proposed 'licensable activities'. Check the hours. Make sure you have enough 'personal licence' holders.
- It's a business purchase - businesses need a supply chain. Ensure current supply arrangements are transferable or locate alternatives.
- Staff - casual staff may be transferred by virtue of TUPE. Retaining key staff such as a chef may be integral for the business to work.
- Changes on the horizon? It is possible that after May 2010 the European Commission will review beer ties. This EC driven change may affect pub rentals.
- Versatility - take time to carry out careful due diligence, satisfy yourself with the business model and be ready to change plans.