The Pubs Code regulates tied pub agreements, to ensure a fair business relationship between tied pub tenants and the six largest tied pub-owning businesses. The Pubs Code was introduced by Parliament to address unfairness to tenants in the tied relationship.
The Pubs Code applies to tied tenancies, leases and licenses, and this includes pub franchise agreements. In broad terms, for the Code to apply, these agreements must require the alcohol to be sold at the pub to be supplied via the pub company.
The pub trade is an innovative industry and there are a developing variety of agreements available in the market to operators who wish to partner with a pub company in their business.
The PCA has received enquiries relating to the status of certain types of profit or turnover share agreements which may have increased in popularity in the market since the introduction of the Pubs Code. These may have some, but not all, of the features of pub franchise agreements and can be known in the trade as operator, manchise or hybrid agreements. The PCA has been considering how the Pubs Code may apply to such agreements.
The PCA is minded to the view that some of these profit or turnover share agreements may fall within the relevant definition of what constitutes a tied pub for the purposes of the Pubs Code.
However, given no rent is payable in relation to these agreements, it is hard to see how most of the provisions of the Pubs Code could apply, such as the right to an analysed and evidenced rent proposal and the right to access a Market Rent Only option at rent review. There is presently no exemption from any of the Pubs Code regulations, as there is for franchise agreements, that could apply to these types of agreements.
The PCA does not at present consider it appropriate to require compliance in respect of any of these types of agreements which may fall under the Pubs Code and will not be taking action to regulate them. The PCA will continue to keep the matter under review. This does not affect the ongoing regulation of Pubs Code franchise agreements.
The PCA understands that such operator, manchise or hybrid agreements typically represent lower commercial risk for the operator than a traditional tenancy or lease – for example, the pub company is responsible for repairs and utilities. The PCA is not currently aware of evidence showing significant harm to operators from these types of agreements. Information about the operation of these agreements would be welcomed and the PCA can be contacted on office@pubscodeadjudicator.gov.uk
Views regarding the operation of the Pubs Code can be raised as part of the government’s forthcoming Statutory Review of the Pubs Code, which will take place after 31 March 2025.
