Tenancy, Leasehold or Freehold - What's The Best Option For Running A Pub?

9 May 2016
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If you are considering entering into running a pub as a business, you may be wondering how you would go about running one.  Here's a helpful basic overview of the options available. There are three primary ways of running a pub:  through a freehold, leasehold or a tenancy.

Pub freeholds

For maximum flexibility and freedom, you would look to buy a pub on a freehold basis.  In this case you would own the pub, just as you would if it was a residential property.  This option means that you have total control in how the pub is managed and run, and you will receive more of the total turnover, as you won't have to pay rent to a pub company or brewery.

Freehold pubs tend to be sited out of town; most pubs in town centres and cities are owned by pub companies and breweries.  This means that catching passing trade can be a problem, and the pub may struggle to remain profitable, especially in times of recession, unless there is already a strong and loyal local customer base.

Pub leasehold

In the case of leasehold, you would actually buy the pub.  You could either buy it outright from the outgoing leaseholder or for a specified period of time (usually between 10 and 20 years) from a brewery or pub company.  This type of leasehold is generally non-assignable, meaning that you can leave after two years if you want to.

If you have bought the pub from a brewery or pub company and subsequently wish to sell it, you must have their agreement, and the potential purchaser must fit their specific acceptance criteria before the sale can go ahead.

Pub tenancy

In the case of a pub tenancy, you would not own the pub, but instead you would rent it from the brewery or pub company on a rolling contract. 

This rental period is generally for three years, and at the end of the agreement, a rent review would take place.  You could then either agree to the rent review terms, or give prior notice to quit if you wanted out.  When your tenancy comes to an end, the incoming tenant takes over ownership of any remaining liquor and assets and pays you for them.

This kind of arrangement gives you the flexibility to move on when you want to.  On the flipside, your continued tenancy could be dependent on your performance.  If you fail to make consistent profits, the pub company or brewery may choose not to renew your tenancy arrangement.

Running a pub can be a very exciting and enjoyable way of making a living.  Use the information given above to help you to decide what purchase or rental option would suit you best, before you take the plunge.