There's no one-size-fits-all perspective as far as owning a pub is concerned. Ideally, potential buyers would want to own a pub outright, known as a freehold purchase. Unfortunately, it's not a realistic alternative for everyone, especially with the required significant up-front costs. Nevertheless, apart from the freehold option, there are other options for buying a pub. This article explores the tenancy option for those who want to acquire a pub for sale.
Pub tenancy option
Many breweries, as well as pub companies with a lion's share of pubs across Australia, choose to either lease or rent out pubs to potential buyers. This is where the pub for sale is on a tenancy basis. For the successful applicant, the tenancy agreement will be given to you stipulating the duration for which you are allowed to own and run the pub. Under the tenancy agreement, the buyer, who is the tenant, is expected to pay rent and be accountable for the day-to-day administration of the pub. This may include aspects such as:
- Stock management
- Bookkeeping and accounting
- Handling minor repairs
- Maintaining fittings and fixtures
Advantages of owning a pub through the tenancy option
Smaller start-up expenses
This is mainly the motivating factor for opting for the tenancy option. The start-up expenses are small compared to buying the pub outright. This makes it a cut-rate, low-risk alternative for potential pub investors.
Help and support
A reputed pub company or brewery will offer continuing help and support. Majority of them offer training lessons to help you become a good pub landlord. They also offer advice and respond to all your questions regarding the day-to-day running of the pub. This comes in handy, especially if you're not very experienced in the pub business.
You cannot be kicked out during the spell of your pub tenancy unless you violate statutes of the tenancy agreement. This gives you the job security and a psychological boost knowing that you will be in business for the entire period of the tenancy agreement.
For some pub tenancy agreements, you may be forced into a drinks tie where you only sell the drinks at a price recommended by the brewery or the pub company. Although the drinks tie may mean you cannot go out to look for lower prices, your brewery may give you discounts. Typically, a sales agreement will state a sales target which, when achieved, earns you price reduction on drinks.