Last Friday, I had a meeting with Clive Clinton, Operations Director for Admiral Taverns and Kate Powell, the local Business Development Manager.

We discussed the planned renovations and the business plan that I submitted. They told me that the previous interested party in the Queen Elizabeth was a TV celebrity chef, who had intended to run a cookery school as well as a high quality Gastro Pub / Restaurant.

The refurbishment plans have been costed at £650,000 by Admiral Taverns.

Such a  high level of investment means that the rent required by Admiral Taverns is £60,000 in the first year, rising to £80,000 in the second year. In order for a pub to work financially at such a high rent level Admiral Taverns say it needs to be taking in the region of £10,000+ a week. 

(This ties in with the business plan that I submitted, which shows that on a turnover of £600,000 a year and a rent of £60,000 you would make £14,000 profit, before tax)

Admiral Taverns consider that this is a very big turnover for a county pub and the original proposal had to be specially approved by their main board. It was only because of the involvement of the celebrity chef (They wouldn’t tell me who) that the deal was approved.

Without the involvement of a well know celebrity chef, it is doubtful that the turnover could get to the level required to cover the rent, leaving the pub operating at a loss.

Whilst making a small operating loss might not be the end of the world, Admiral are also looking for a guarantee on the lease. This means that if the pub fails the leasee is still responsible for the payments of £60,000 in year one and £80,000 a year in years 2 to 20.

With a worst case risk of nearly £1.6 Million and a best case reward of just over £1,000 a month, the lease option is a non starter.
(Unless of course you are a celebrity chef !) 

I think that Admiral Taverns are aware that you would have to be slightly insane to take on the Queen Elizabeth at the rent levels they require to carry out their original refurbishment plans. They did say that they had three other potential tenants to interview, but I got the impression they may have been bluffing !

However, they have said that they would now consider selling the freehold. (This is something that previously they have refused to consider)

If they are prepared to take a sensible price, reflecting the current condition of the building, then it may be possible to buy the pub outright and carry out less extensive refurbishment works.

This would make the pub financially viable at a more realistic level of turnover. (Being freehold it would not be tied for the purchase of beers, so you would also need to sell fewer pints to cover the costs)

I will be getting a firm of specialist pub valuers to take a look at the Queen Elizabeth as soon as possible with a view to making an offer to buy the pub outright.

I won’t pay over the odds for it, but if Admiral Taverns are realistic then a deal can be done.

 James Hickman
Elmley Castle

Posted on 03/30/08, 10:53 AM in Village Pub

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