Be Your Own Beer Baron: Exploring the Financial Potential of the “Revenue Share Deals”

Be Your Own Beer Baron: Exploring the Financial Potential of the “Revenue Share Deals”

For those harbouring dreams of entrepreneurial independence, the allure of owning a pub is undeniable. The image of bustling crowds, lively music, and happy customers enjoying your carefully curated selection of brews paints a picture of idyllic self-employment. But amidst the pints and merriment lies a crucial question: is it a financially sound venture? Enter the “Revenue Share Deals”, promising low initial investment and potentially big returns.

Yet before raising a toast to your future as a pub impresario, let's delve into the financial realities of this enticing opportunity first.

Owning the Buzz, Not the Business: The Appeal of “Revenue Share Deals”

Aspiring pub owners are often presented with turnkey solutions, providing pre-existing establishments complete with branding, staff training, and operational support. This eliminates the hefty upfront costs associated with building and running a leasehold or freehold business. It minimises the financial risks of starting a new business from scratch and maximises the returns, making it particularly appealing for newcomers to the hospitality industry.

Beyond the Bottom Line: Financial Considerations for Aspiring Pub Barons

While the potential upside is intriguing, financial prudence dictates a cautious approach. Here are some key factors to consider before stepping into your dream pub:

  • Employment costs: These constitute a significant chunk of your initial and ongoing fees from the pubco.
  • Lease agreements and rental costs: Be sure to understand the terms of your agreement including renewal options and notice periods.
  • Marketing and promotion: Standing out in a competitive market requires a strategic marketing plan and budget allocation.
  • Personal financial health: Ensure you have a solid financial cushion to weather potential dips in revenue or other unforeseen expenses.

Let’s crunch some numbers!

Here's a practical example to illustrate the financial implications of different pub agreements:

Consider a town centre pub with weekly net income of £20,000, with 30% attributed to food sales and 70% to drink sales. We'll analyse scenarios alongside an estimate for running the pub under a traditional tenancy agreement.

Deal 1: Involves receiving 20% of drink sales and 35% of food sales, with additional costs to be covered by you.
Deal 2: Offers 27.5% of total sales with minimal expenses for you.
Tenancy – A traditional agreement with rent agreed and costs based on using industry benchmarks.

As you can see, Deal 1 may seem promising but it would only remain viable if you were to run the pub with below-average labour costs. In contrast, Deal 2 presents a stable weekly net return of £760 with minimal risk, as all costs are covered by the pub company.

Additionally, a lease capable of generating £20k per week will be highly sought after. With potential returns of £1290 per week, your initial investment could be significant. However, while this lease deal emerges as the top performer, success still relies on your ability to efficiently manage the business and control costs tightly. With this deal, you will need to carefully consider the risk v reward.

And it's not all about the numbers - it's essential to note that pub companies often invest in the business up front as they do their managed houses, sometimes even lowering your initial investment requirements to as low as £5000. Nevertheless, always consider the notice period for these deals.

A Calculated Pint: Seeking Counsel Beyond the Bar

Navigating the financial intricacies of a pub agreement isn't a task for one. Consulting with an experienced accountant who understands the nuances of the hospitality industry can prove invaluable to your success. Here's how they can assist:

  • Analyse the agreements and contracts.
  • Develop a sustainable financial plan and budget.
  • Guide you on tax implications and compliance.
  • Offer ongoing financial advice and support.
  • Bonus: They are likely to know the pub company or even the pub!

Cheers to Calculated Success: The Takeaway

While owning a pub on a revenue share deal offers potential lucrative returns, it's not a guaranteed shortcut to financial freedom. Careful planning, realistic expectations, and expert guidance are keys to unlocking the doors to profitability and long-term viability. So before raising a toast to your pub empire, ensure you understand the numbers, risks, and rewards. With diligent planning and strategic execution, you can transform your entrepreneurial dreams into a thriving reality- one pint at a time.

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