pub with 4000 weekly takings advice needed

M

Ms.Bond

Guest
Hi all,
My partners stepfather owns a pub in a rural town. The town has a population of approx 2000. He has approached us to take on the lease. The current management take in between 4000 and 5000 a week. I am trying to figure out potential profit. This is what i have so far. 400pw lease. 420 staff (mostly ourselves and my father who wants little payment just wants to keep busy while retired) 200pw for heat and electric. 80pw for sky tv and 300 pw for entertainment. That is about 1400. Now obv I am leaving out some very important things like stock and tax kind of essential! Does anybody have any knowledge on what a pub with 4000 turnover would spend on stock a week and subsequently tax? Also have no info yet on insurance costs? What kind of profit could I expect? I am assuming there are more costs prob about 1500 worth that I haven't included above. Any help or advice really appreciated. My partner has experience working in but not running a pub
 

44brendan

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2,538
Are you an experienced publican? If not I would step away from this proposal. Rural pubs are all losing clientelle and money. It's a very tough business it is likely that you will work all hours to apy everyone else but yourself.
Working in a pub is different. As a paid employee you get your wage irrespective of the success of the business. I would strongly advise you against this proposal.
 

callybags

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869
You should look for the last years accounts of the business and have a good accountant go over then for you.

The first thing that occurs to me is the "wages" of €420 per week. This is little more than one person working for the minimum wage. Not possible to run a pub like that, no matter how small.
 

elcato

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Ask him why he hasn't offered the current management the lease ? If he is the current management ask him why he is giving it up ?
 
M

Ms.Bond

Guest
Hi thanks for your feedback as I am not by any stretch an experienced publican
The owner(stepfather) never ran the pub himself. He always leased it out. He recieves the lease from the pub andnd also the attached Chinese and hairdresser.
The current lease is nearly up and the current holders have not said they do not want renew.
He would prefer for it to be in the family so approached us,.up until now college and other commitments would have ruled us out.
On the wages the breakdown is a little less unrealistic I hope. My dad will work the day shift for the week for 200euro(six hours.a day) my brother will do two nights for fifty each. The pub already has two ladies who work one shift each for 60 a shift. That leaved the weekend for me and my partner we would not take a wage for now, course we know it is going to be hard work all week. We both have jobs so it is not something we would take on lightly. But would be nice to have a family pub. Hope that clarifies a llittle. Also we are going into it with no debt,.our house has no mortgage and the stepfather is giving us money(not a loan) for initial expenses. Please keep the advice coming and really would be great if someone could give a rough breakdown of costs from the 4000, maybe someone has experience that is similar. Thanks again
 
M

Ms.Bond

Guest
DB74 thread very interesting reading. I don't think its totally unreasonable to
consider the offer. The pub are getting this turnover now 4000 is the minimum often 4500 sometimes 5000, its a drinking town and a big gaa pub. I'm just wondering how to estimate stock and tax costs, would like to give it serious thought esp as no big initial outlay
 

44brendan

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You seem determined to give this a go and credit to you for that. Given that the owner is anxious to keep this in the family, is he prepared to give you a break period in advance of any lease in order to set up the business? If not, I would be wary.
Also make sure that you get some good advice from an experienced publican before committing to this business (ideally not in the same town).
T/O is not your key concern. Gross margin is the big issue. I.e. there is a much lower margin on core pints/spirits in rural than city pubs. Food can significantly increase margin and T/O. The main costs a pub has is wages. Other than this, heat/lighting etc is relatively low. I would strongly advise you to talk to a publican before making a commitment.
 

wbbs

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Can't give you any advice on the financial side but you say it would be nice to have a family pub, why? I can't think of a worse way to spend my weekends if I had a full time job, there would want to be serious potential to make a lot of money to make it worth my while. Don't know what future plans yourself and your partner have re children etc but as someone who was brought up in a similar business I think it has a detrimental effect on family life.
 

smeharg

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There are a few things that strike me.

Firstly, look at all your costs and work out what gross margin you need to cover those costs, ie breakeven. Your gross margin should work out at about 66% of sales - preferable higher. But as another poster pointed out margins are strained in rural pubs. Pints for €3.50 come to mind - knock of VAT and wastage and it doesn't leave much to cover overheads. Work out the number of drinks you need to sell each week just to breakeven - that could be a real eye opener.

Look at the price of the lease and compare it to other similar pub leases in the area or towns of a similar size. I've heard of pubs being let for much less than this. Are there any other pubs in the town that are closed up? You say your stepfather is going to "give" you money for start-up costs - why? Because he knows there's no way he'll get the place let otherwise?

Regardless of anything the current lease holders are packing it in - why would they do that if it is profitable? You need to know.

You haven't mentioned rates.

Your going to pay your father €200 to work 6hrs a day for 5 days. That works out at €6.66 per hour - less than the minimum wage, which is illegal even if he agrees to it. You'll also have to give him holidays which will cost you in cover staff while he's away.

You and your partner are leaving the running of the pub to other people during the week. How will you make sure everything is done correctly in your absence? Don't rely on trust - plenty of people in business have been ripped off by family members and people they trust. The odd free drink to friends can soon eat into your profits. I'd have a stock-taker in every week to keep tabs on things (about another €150 a go).

Who's going to work tirelessly, during the week, to get people in the door?

wbbs is right - there is more to this than the financial side. Quality of life plays an equally important role in the decision. What do you do if you want to go away on holiday?
 
M

Ms.Bond

Guest
Thanks everyone def a lot of things we haven't thought of yet.
Feel like I should clear something up as seem to have put across the wrong impression of his stepfather, the owner. He genuinely is of the view that there is profit to be made and thinks along the lines that sure my lad might aswell be making it when the pub is there for him made. Also I know that there is cheaper leases but the lease is a contribution to the mortgage and te pub will eventually be handed over to my partner. Another issue is believe it or not the current lease holders do not wish to leave, they have been told that the pub was bought for his kids and he wouldnt renew the lease if they showed interest. Any one have any more info on expenses?
 
M

Ms.Bond

Guest
Thanks everyone def a lot of things we haven't thought of yet.
Feel like I should clear something up as seem to have put across the wrong impression of his stepfather, the owner. He genuinely is of the view that there is profit to be made and thinks along the lines that sure my lad might aswell be making it when the pub is there for him made. Also I know that there is cheaper leases but the lease is a contribution to the mortgage and te pub will eventually be handed over to my partner. Another issue is believe it or not the current lease holders do not wish to leave, they have been told that the pub was bought for his kids and he wouldnt renew the lease if they showed interest. Any one have any more info on expenses?
 

simplyjoe

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According to my calculations you will have €650 left over after the figures you have quoted are taken into account. This is before you have paid for rates, PRSI, holiday pay, cleaning, pest control, repairs, replacement of consumables (glasses etc,) legal fees, imro, PPI, tv, advertising, accountant, licence fee, insurance, security, etc. Sorry - run a mile. I know. I represent these type of clients all the time. They all last two or three years. I also owned a successful pub. Very tough, dirty, stressful, tiring job. Only do it if you can make substantial money from it. I can assure you will regret the day you take it on.

See also below
Previously posted Feb 2011
Best of luck but..... I have advised/acted for a lot of tenants in this industry. The classic mistakes made are:

Not seeing accounts of the previous enterprise.
Decision made on a hunch - no proper business plan or projections done.
Tenants always assume that they can improve the trade but rarely do.
Good employees often make poor bosses.
Tenants mistake being busy with making profit.
Tenants often pay too much for wages, stock, or other expenses.
Tenants lose interest after a year.
Sorry but when becoming boss many tenants drink too much - entertaining customers or staff after hours.
Tenants pay too high rent.
Books are not properly kept and the tax man is owed a lot of money.
Speak to an experienced accountant before committing to anything. I have often been asked to act for tenants after they have committed to the lease. Often too late and its just damage limitation.
 

RichInSpirit

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865
I know a rural pub in a smaller village than yours, that was leased by a former barmaid who is still running it successfully years after taking on the lease.

If the local drinking population doesn't have to drive to the pub , you might be onto a winner.

Go for it !
 

PaddyBloggit

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3,425
If the local drinking population doesn't have to drive to the pub , you might be onto a winner.
.... The operative word being 'might'!

Why not run the pub for your stepfather rather than taking over the lease?

The elephant in the room is his. By helping him to run it you'll get a feel for the business without having the noose of a lease around your necks initially.

Going with the previous advice given above (excluding the post above mine) ... the advice is to proceed with caution.

Going the way I advise takes the risk out of it for you. Your stepfather has the responsibilty (and so he should as he owns the property) and you are proactively helping him to run the business.
 

Bronte

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Having worked in pubs and run a pub I'd be listening to Smeharg, wbbs and simplyjoe.

All the questions you have on figures and running a pub should already be known by your other half, and if not should be asked of the stepdad.

The only reason you seem to want to do this is that 'it would be nice' to have a family pub. If you are hell bent on this, only tie yourself in for max 2 years. Be very careful what you sign, particularly as you are not married.
 

Jonny

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As per Smeharg (excellent reply) you need to get to an "open the door " figure ie the amount of weekly profit needed to break even & then relate this back to how much is needed to come across the counter. As stated this can be a serious wake up call ! You also need to become familiar with the tax issues - the big one being the VAT The advises of a good accountant who is familiar in this area & has experience of same is invaluable at this stage or as previously stated its too late lateron..
 

joe sod

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With the pubs closed now for the coronavirus pandemic what are peoples opinions on entering the pub trade now? This post started a decade ago and the long term decline of the trade continued even throughout economic recovery. Maybe alot of pub owners after having this long break might decide that now is the time to get out. On the other hand this hiatus could be the injection the trade needs, people will be craving going out for a drink or meal again. Sitting at home for a month or more will propel them out like never before.
 

noproblem

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2,142
With the pubs closed now for the coronavirus pandemic what are peoples opinions on entering the pub trade now? This post started a decade ago and the long term decline of the trade continued even throughout economic recovery. Maybe alot of pub owners after having this long break might decide that now is the time to get out. On the other hand this hiatus could be the injection the trade needs, people will be craving going out for a drink or meal again. Sitting at home for a month or more will propel them out like never before.
Probably one of the toughest jobs in business. Like a person buying a Rolls, if you've to ask why then you can't afford to go into it either mentally, physically or financially.
 

newtothis

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562
I'd be curious to know how it all panned out for the OP of this thread.

Without looking into the figures in any detail, I'd say €4k/week in sales for a pub is next to impossible to make work on any level.

There are certainly opportunites in hospitality (once the current crisis is over), but it is highly competitive and they are defintely not in the traditonal pub trade.

There are two pubs near where I live: both moribund for years. One still is. The other has re-invented itself (putting drink prices up!), including serving decent food in the evening, a cafe in the daytime with a great brunch at the week-ends. The place (until two weeks ago!) was packed out within a couple of weeks of re-opening and had been flying it untll it closed.
 
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