National firm Shoosmiths has helped Midland pub group Marston’s draw-up a new agreement that reorganises the way the company works with its tenants.
The law firm and the Wolverhampton pub company worked together to set up the new retail agreement has already been introduced at more than 80 pubs, and will be rolled out to 600 over the next three years.
In a move away from the old tied tenancy model, the agreement is based on a franchise model rather than a lease agreement.
Under tied tenancies almost all the risk is with the tenant. But Marston’s said the risk is now significantly reduced under the new agreement, with the pubco taking on the bulk of the exposure.
A cross-discipline Shoosmiths team comprising specialist franchise partner David Jackson, and real estate partner Vaqas Farooq and associate Cherry Elliott, worked with Marston’s for 18-months to perfect the agreement.
Under it, the licensee – or ‘retailer’ – invests very little up front and gets significant access to the pubco’s support and expertise. The retailer typically earns 20% of turnover to pay themselves and their employees.
Licensees are also left to focus on maximising sales and motivating staff, leaving Marston’s to buy everything centrally, pay other bills, and deal with administration and purchasing price distractions.
Mr Jackson said: “The new agreement has been received positively by tenants, and demonstrates the willingness of Marston’s to meet the challenges facing the industry.
“At the same time it shows Shoosmiths providing advice that goes beyond legal, drawing on both our commercial knowledge and insight, and our understanding of Marston’s.
Ms Elliott added: “Under tied tenancies, retailers’ risks include the decoration, upkeep and insurance of the property itself, plus paying rent.
“Now, though, the property risks have transferred to Marston’s, and the retailer no longer has rent to pay. Pubcos must modernise in response to market conditions and help tenants develop long-term, sustainable businesses. Marston’s has responded with some great innovation.”
Marston’s estates director Iain Jackson said: “Innovation is crucial to our business and the retail agreement has been well received by tenants. It shows our commitment to providing them with opportunities for increased profitability.”
“The deep understanding [Shoosmiths’] team has of our business and the industry has helped make the agreement a success.”