Marmalade, Chorlton, Manchester

[Harters]

Manchester Confidential reports the closure of one of Mrs Harters' favourite South Manchester eateries. Always struck me as doing good business but, hey, what do I know.

[thom]

I was chatting to Mr Quilter over a Hunter's kebab only a week or two ago.

Marmalade did do good business to be fair, and he says as much in that article. What it doesn't do is enough business to make sense of paying the exacting rent and beer prices of pubcos like Punch. Literally two or three times what comprable businesses on the same street would pay.

I think we all know venues in this position and the general feeling in the industry is that the pubcos were constructed on sand; they paid too much for their assets and they charge too much for their services and the slightest dip leaves them vulnerable as their entire business model is fundamentally unsustainable.

To give you an idea using a pub in Glossop. The pub was a small, kind of rum, pint and peanut place. It closed. A couple I know bought it maybe eight years ago for peanuts - maybe £40k or whatever and ran it as a successful community/food pub, and then four years later Punch offered them £440k for it.

The couple I know snapped their hands off and buggered off double-quick into the sunset. The pub closed and then reopened under Punch as a pint and peanut pub, badly run by incompetent tenants. It took about £1,500-£2,000 a week, sometimes less than £1k. It is now , two years later, on it's third set of tenants, and they are still struggling.

Another mate of mine has now offered punch £200k to buy the place outright. They are fairly far down the line of accepting his offer (in a laborious, slack, "left hand doesn't know what the right hand is doing" sort of way). Good business by Punch? I think not.

Sooner or later one of the pubcos will go spectacularly bump (there's been a couple of close calls already) and the estates will be broken up or sold off cheap. Thousands of pubs will be on the market to entrepreneurs and passionate people.

It is only at this point that new independent pubs will flourish and evolve again and the pub industry will return to a sustainable and sensible model.

Above and beyond his "meeja" work I know John has an interesting idea for an all singing all dancing fish and chip shop lined up. Hopefully a more robust model than Tom Aitkins. I wish him luck with it.

Cheers

Thom

[alex james]

Thom has it right on the pubcos.

They are swamped by debt that can only be serviced if a high proportion of their pubs are tenanted at rents that are far too high. The current slow collapse in on-sales will wipe out (and has already wiped out) many tenants with the inescapable consequence that some or all of the pubcos will go bust. The supply of new tenants as financially unastute as John Quilter must now be nil or thereabouts.

They continue in business at the moment because the banks are reluctant to foreclose. If they did, tens of thousands of properties would hit the market simultaneously and asset prices would become almost silly. The alternative is for the banks to swap much of their debt for equity. That again would crystallise enormous losses and the banks are hardly in a position to withstand much more of that. And it would lock them into a business model that obviously does not work.

So both the pubcos and the banks are continuing to attempt to push water uphill. It cannot last and the financial conflagration is imminent. The pubco shareholders will take 100% losses and the banks will be hammered. I really cannot wait for the day. Both parties deserve it for their utter stupidity in assuming that asset prices only go upwards. They do not and that has been the case for thousands of years. The upshot will be plenty of potentially profitable pubs for sale at affordable prices. That will give opportunities to many who have the skills to run good establishments. The result should be a substantial improvement in the pub environment. Meanwhile there will be a slew of financial casualties such as John Quilter with whom I have some sympathy (total from a food angle). Its just that he should have been more careful with his business plan and I am reluctant to sympathise with the financially naive.

[Gary Marshall]

. If they did, tens of thousands of properties would hit the market simultaneously and asset prices would become almost silly.

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which is exactly what happened with the beer orders back in the early 90's that forced all the breweries to sell their pubs which meant that the likes of punch and enterprise could exist in the first place.

[erica graham]

There are a number of very attractive pub sites available locally, and they look fantastic till you read the small pubco print and run for the hills. They get bought, and then go back up for sale within 6 months.

[PhilD]

There are a number of very attractive pub sites available locally, and they look fantastic till you read the small pubco print and run for the hills. They get bought, and then go back up for sale within 6 months.

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...and more to come.