What’s the difference between tenancy, leasehold and freehold pubs?
Tenancies, leaseholds and freeholds are three different types of pubs you can run as a self-employed person. But freehold vs leasehold? Leasehold vs tenancy? What’s the difference? And which is best? Well, each option has its good points. So, let’s take a look at them individually, so that you can understand the difference and decide which kind of pub is best to run, for you.
What is a freehold pub?
Freehold pubs are pubs owned and operated by individuals who run them autonomously, without the support of a brewery or pub company. Because freehold pub landlords (or landladies) are not tied to a company in any way, they get to stock whatever food and drink they like, negotiate their own discounts with suppliers and run their pubs exactly as they want to without anyone observing their methods.
The freedom that comes with running a freehold pub is obviously attractive, but it does come at a price. Buying a freehold pub is very expensive, because it means buying an entire building. And you’ll be responsible for the upkeep of that building in its entirety, from insurances to remodelling to maintenance. You won’t get any training or assistance to help get your licence when you run a freehold pub and will have to undertake that all on your own, too. What’s more, there’ll be no one there to advise you on whether your ideas to make money from your pub are good ones.
One of the main benefits of running a freehold pub is that you’ll own it outright and, if you make a success of it (especially if you ‘flip’ a failing pub), you should be able to sell it for a good profit. It’s a risky strategy to put your life savings into a failing business with no support (how do you sell a pub you’ve failed to rescue yourself?), but it may nevertheless be more attractive than buying a successful pub in a popular location, which is likely to cost a significant amount of money. This option tends to work best for already very successful and experienced pub managers and publicans.
What is a pub tenancy?
Pub tenancies are agreements whereby a Pub Partner will rent a pub from a landlord (generally a brewery or pub company like Marston’s) for a given period (usually around five years, with the chance to extend at the end of the agreed period). The rent usually includes all the fixtures, fittings and glassware, as well as gas, electric and water bills. And some pub companies will offer various levels of ongoing training and support, usually dependent on how much money you put in up front, as well as financing you getting your personal licence.
There tend to be two types of people who choose to become pub tenants. Firstly, those looking to get into running their own pub for the first time, because the investment is a lot lower than putting tens (or hundreds) of thousands of pounds into buying or leasing a pub and if, after the agreement is up, you want to do something else, you can just walk away. Secondly, those entrepreneurs who want to build up a portfolio of pubs so they can make a large income without the huge investment and significant legal paperwork of buying or leasing multiple pubs.
Perceived disadvantages of pub tenancies are the fact that as a tenant, you’re tied into the brewery or pub company’s products so you don’t get to just pick and choose what you sell. However, there are generally varying degrees of freedom on offer to run things in your own way, so that you only take on as much support as you want to. Plus, because you have an experienced team to call on, in many cases you won’t have to worry about things like the costs of repairs or how to do business development review planning, because you’ll get help with all of that. So you’ll be able to focus on the fun part – driving sales and building your business.
To find out more about the three types of agreement on offer at Marston’s, click here.
Looking for something else to read? Check out our article on why former retailers make such great Pub Partners.