The market in public houses and inns, which slumped in the early 1990s has moved up again, so if it is a life that appeals to you, now is a good time to act. You can still pick up a good freehold pub from £200,000 in parts of northern England, East Anglia and Wales. But you won't find much for under £400,000 in the south-east, where a thriving pub in a sought-after village location could set you back up to £1m.
A good freehold trade can bring you a return of between 10% and 20%.
Raising the Cash
Finance is easier to obtain these days, at low interest rates. But the type of loan offered will depend upon the experience of the new owner and the pub's prospects. Speak to a specialist finance broker, bank or accountant.
Several banks and building societies offer commercial property mortgages. Bank of Scotland (0845 300 0403), will lend up to 75% of the purchase price or valuation on a freehold pub, over five to 25 years. Abbey National Business (0800 328 0210) will lend up to 75% of the value, over up to 20 years. Other lenders include Allied Irish, City Bank, Northern Rock and Barclays Bank. A very useful listing of business loan and commercial finance providers is available here.
Buying a Lease
If you can't afford a freehold pub, the next best thing may be a lease on a tied pub, which will cost less. Rents are often low, but you must buy all beer and cider, and sometimes all drinks from the brewer. The value of the lease will depend on the number of years left to run and the profitability of the pub.
Make a Business Plan
You will need a business plan to show to the mortgage lender, brewery or pub management company. Obtain recent accounts (the past three years) from the seller and figures from the brewery, but bear in mind that happy hours could have boosted the figures artificially. Now that happy hours are banned, pay close attention to sales from May 23rd, 2005 onwards.
Find out about business rates, which can be up to £900 a week on some urban pubs. City pubs can cost £400 to £500 a week in rates, falling to £250 a month in the countryside. You may be able to appeal against business rates but it might take 18 months to deal with your claim.
Good location is important. You need to have enough people living nearby who will visit your pub, as well as locals. Take a good look at the area, particularly at the opposition pubs and restaurants. Visit your chosen pub several times to check out the type of custom it attracts and try to determine any potential for improving the business.
Find out if there are any potential problems in the pipeline, such as a bypass scheme, which could affect your business. Talk to the police about the property. The local licensing officer won't tell you anything confidential but they will indicate if the pub frequently comes to their attention.
Make sure the property meets environmental health and fire regulations, and consider likely refurbishment costs. Don't buy a pub if you're thinking about semi-retirement. Running a pub takes hard work and total commitment. Take advice from experts, work behind a bar for a while if you can and take a course.
For most village pubs, food will be the key to success. As well as running a bar, you'll also need to manage the business and have knowledge of licensing law. Having said that, previous experience is not essential - some of the most successful pubs are run by people with no previous experience who simply have a feel for it.
Don't imagine you can simply close down a pub that doesn't make a profit and convert it to make a profit and convert it to residential use. The local authorities may refuse planning approval for change of use, if it is considered part of village life.
Go on a Course
Prospective publicans must have proven knowledge of licensing law, before they will be granted a liquor licence from a magistrate. Most licensing committees now expect new comers to hold the National Certificate for Licensees, a qualification awarded by the British Institute of Innkeeping (BII).
For information about training courses, contact the BII (01276 684449). The BIIAB Level 2 National Certificate in Licensed Retailing covers a lot of information which will be useful, as well as containing the National Certificate for Licensees. Many courses can be completed in under a week and cost from £100 to £300.
Anyone involved in preparing or handling food will be required to hold the Basic Food Hygiene Certificate. Contact the Chartered Institute of Environmental Health (020 7928 6006).
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