Funding The Business

How Much Will It Cost?

As mentioned in the first two chapters, the amount of money that will be needed to acquire your pub depends on whether you decide to take a tenancy, lease, or buy a freehold property. A new tenancy or lease can be obtained for as little as £ 15,000, while freehold pubs can cost up to £ 2 million in some cases. Your options will be largely dependent on the financial resources that you have available. In this chapter, we look at the different ways of obtaining your pub and look at the ingoing costs of each, this being the amount of money you will need to obtain your pub in the first instance, and does not include running costs (as discussed in Chapter 3).

Tenancy

When taking a tenancy, you will be required to purchase the pub’s fixtures and fittings, stock and glassware, and pay a deposit to the brewery or pub company. There will also be fees arising from the transaction and a requirement for working capital. If you have any immediate plans to spend money on new items of equipment or to refurbish your pub, then this must be budgeted for too.

Fixtures And Fittings

Fixtures and fittings are items of furniture, carpets and equipment used in the business. These items are valued by a valuer, who prepares an inventory of them. Fixtures and fittings account for the main ingoing cost of taking a tenancy. Food pubs tend to have higher fixtures and fittings values due to expensive items of kitchen equipment.

Typical capital required: £ 10,000–£ 30,000.

Stock And Glassware

Stock is valued by a stocktaker. This includes any items for resale such as drinks products, snacks, crisps, nuts, and supplies of packaged food. Glasses will also be valued together with any bottle or case deposits, and cellar-dispense gas.

Typical capital required: £ 2,000–£ 5,000.

Brewery Or Pub Company Deposit

A deposit is normally required by the brewery or pub company in order to allow you credit terms on your purchases. A smaller deposit may be accepted for cash with order customers. (Customers who pay for their delivery before they receive their goods.) This deposit gains interest and is paid back to you at the end of the tenancy, plus interest. The brewery or pub company can make deductions from this should you owe them money or leave the premises in a poor state of repair.

Typical capital required: £ 2,500–£ 7,000.

Stocktaking And Fixtures And Fittings Valuation Fees

You should use a stocktaker and a valuer to act on your behalf.

Expect to pay:

Stocktaker’s fees: £ 75–£ 100.
Fees for valuation of fixtures and fittings: £ 400–£ 1,000 (normally based on a percentage of valuation).

Licence Application And Associated Solicitor’s Fee

The cost of using a solicitor to make an application for your licence and licence needs to be budgeted.

Solicitor’s fee and licence costs: £ 300–£ 500.

A solicitor is not normally required in signing a tenancy agreement (except perhaps, to explain the terms of the tenancy to you). In the case of a lease, where the situation is more complex, using a solicitor to deal with the lease transaction on your behalf is advisable.

Training Costs

Many breweries and pub companies require you to attend their in-house training courses prior to taking a pub with them. You will also be required to hold an accredited licensing qualification, which can be obtained via local colleges, training organisations or through your brewery or pub company.

Allow: £ 500–£ 1,000 to cover training expenses.

Working Capital

Though pubs are cash businesses with no delays in customers paying you, it is wise to put aside some working capital to cover day-to-day expenses and any unforeseen eventualities, like equipment breakdown, blocked drains etc.