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Industry background: Economics of pub ownership
From the perspective of the operating company, the underlying pub industry trends and dynamics generally affect all pubs in the same way. However, the economics of owning and operating managed pubs are different from those of leased and tenanted pubs.
Managed estates typically have higher fixed operating costs at both the pub level and head office level. The owner typically takes all the revenue generated by the pub but also takes all the risk on revenue.
Leased and tenanted estates typically have lower fixed costs both at a pub operating level and head office level. The owner plays no direct managerial role in the running of the pubs in a leased and tenanted estate as the licensee has full responsibility for the day to day operations. Over the short term, the owner has lower risk to its revenues in owning a leased and tenanted estate, compared to a managed estate, because the retailer is obliged to pay the negotiated rent. However, in exchange for assuming the obligation to pay rent, the licensee retains all remaining profit in the business after paying rent and other expenses. |
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