Pubs are selling for as little as £1 – a third of the price of an average pint.
Amid an inauspicious economic climate, some sellers are divesting themselves of assets for the nominal sum of 100 pence to hasten their exit.
Adam Wyn-Smith of Humberstones, a business brokerage with two such premises for sale on BusinessesForSale.com, explains the reasoning behind the sale of a centuries-old public house in Leicestershire:
“The clients are committed to move and they want to effect a quick sale, so they’re not looking for a premium for goodwill or the lease, just for fixtures and fittings.”
Someone can acquire a pub without having to pay a premium for the lease and goodwill, but they're still getting a thriving business
Adam Wyn-Smith, business transfer agent
No premium
The other pub on the Birmingham-based broker’s books is a coaching inn in Warwickshire with four letting rooms.
“This is a brand new lease from a pub company. Someone can acquire it without having to pay a premium for the lease and goodwill, but they’re still getting a thriving business.”
The Pubshop Ltd is negotiating the sale of a pub for £1, and still has another one available through BusinessesForSale.com. The company’s trade adviser, Keith Gordon, explains why the suburban Birmingham pub is going so cheaply.
“The pub management company are unable to make a high enough return on their investment and when you take into account head office costs, etc, and paying for a manager, it does not make it as profitable as other opportunities.
“This business is not big enough for managed houses, but it should have a hands-on operator who can exploit the profit potential for themselves.”
However, Gordon admits the headline price doesn’t tell the whole story and has inevitably attracted some naive buyers.
“There’s been strong interest in these pubs, but it often comes from people who believe they can walk in for a pound. Although the lease could be a pound, there are other ingoing costs such as solicitors’ fees, security bond, stock, working capital, etc.
“As with any new business venture there are always associated start-up costs. But even with these start-up costs, this is still a cheap business that also provides a home.”
The cost of these bargain basement pubs “varies depending on the outlet,” says Wyn-Smith. “Fixtures and fittings can be anything from £5k upwards, and of course you pay rent on an ongoing basis.”
Gordon says that, depending on whether the bond has to be paid up front or can be partly deferred, he estimates that, together with stock and solicitors’ costs, “you could be in for anything between £8k to £20k”.
Either way, it’s small change to buy your own business.
Burdens
But beware: the low prices betray a malaise in the pub trade, which has been assailed by myriad problems in recent years.
“The three biggest problems are high rents, the smoking ban and regular price increases,” says Gordon, “while the government burdens the licensee with more rules and regulations: health and safety, employee rights, etc.
“And there is the huge tax on alcohol, which is on an annual accumulator forever now. The effect on supermarkets is minimal.
“People now drink a lot more at home.”
Now, to compound matters, we’re in the worst recession potentially since the 1930s.
Six pubs are closing every day in Britain, according to the British Beer and Pub Association, a rate 20 times faster than three years ago.
However, Gordon suggests that “a lot of them could be two village pubs next door to one another, out of the way.”
