So, you’ve decided to dive into the world of pubs, restaurants, or hotels. Whether it’s a lifelong dream or just a brilliant idea that hit you after one too many pints, the excitement of taking over a licensed premises can be thrilling—but let’s be honest, it’s also a bit overwhelming. You’re not just choosing a business; you’re choosing the right kind of ownership that suits your goals and your budget.
That’s where the big question comes in: Should you go freehold, leasehold, or tenancy? Each model comes with its own set of pros, cons, and eyebrow-raising challenges, and it’s crucial to get your head around them before you sign on any dotted lines. Freehold gives you ultimate control but comes with a hefty price tag. Leasehold is cheaper upfront but comes with strings attached. Tenancy? Well, that’s the easiest way in, but you might find yourself tied to a brewery with less freedom than you imagined.
Before I begin, this trade is not for everyone. Please do your due-diligence before making any decisions.
In this guide, we’ll break down each option so you can make the best choice for your dream pub, without ending up in a financial hangover. Ready? Let’s get into it.
Freehold Premises (Freehouses)
If you’re the type of person who likes to be in full control, then a freehold might sound like the holy grail. A freehold freehouse means you own the property outright—lock, stock, and beer barrel. No ties to breweries, no restrictions on what you can serve or who you can buy from. You can get creative with your suppliers and pick whatever suits your vision, whether that’s stocking craft beers from local brewers or offering the fanciest wines from vineyards you’ve personally handpicked. Sounds dreamy, right?
The Perks
Owning a freehouse gives you total freedom. Want to knock down a wall? Go for it. Fancy rebranding the place with a quirky new name? Be my guest! You’re in charge of all the decisions, from the décor to the drinks menu, without having to ask permission from anyone (as long as you stay within planning and licensing laws, of course).
But the real cherry on top is the potential for capital growth. Run the place well, and it’s not just your pint sales that’ll rise. The value of the pub itself can go up significantly, making freehold pubs a solid investment for those looking at the long game. It’s a bit like owning a house; the longer you have it, the more you might make when it’s time to sell.
The Challenges
Now, before you get too carried away dreaming of pub makeovers, let’s talk about the catch. Freehold properties aren’t cheap. You’re looking at a hefty upfront cost, and unless your pockets are deeper than the local brewery’s beer cellar, you’ll likely need a significant loan to make it happen.
There’s also the isolation factor. When you own a freehouse, you’re essentially out there on your own—no pub company to lean on for repairs or advice. Well, unless you manage to find yourself a reliable brewery to partner with. Take Batemans, who I use to supply my beer in Lincolnshire. They’ve always been there for me, not just for deliveries but also with advice, repairs, and the kind of support that really helps keep a pub running smoothly. Now, I’m not completely tied to them, but we have a bit of a gentlemen’s agreement. I won’t disclose the full details, but it’s mainly about buying a certain amount of their own brands. It’s a win-win—I get great beer, and I know they’ve got my back when things go south.
But not everyone is as lucky. Without a setup like this, you’ll need to be vigilant. The pub world is ever-changing, and if you’re not up to date on licensing laws and industry changes, you could land yourself in hot water.
Let me tell you a quick story—there was a lady running a freehouse who completely missed out on a major change in the licensing laws back in 2005. Despite all the news, TV broadcasts, and warnings, she was convinced her solicitor had sorted everything. Long story short, she didn’t apply for the necessary licenses and ended up in a right mess. If you’re going to own a freehouse, you’ve got to stay informed. Joining an industry group like the British Institute of Innkeeping (BII) is a smart move to make sure you don’t end up like that poor lady—completely out of the loop and facing a licensing nightmare.
Leasehold Premises
If the idea of forking out a hefty sum for a freehold makes you break out in a cold sweat, then a leasehold might be more up your street. With a leasehold, you’re renting the premises rather than owning it outright. You get to run the place, but the property itself belongs to a landlord, pub company, or brewery. Think of it like renting a house, but with a business twist—you’re in control of operations, but there are always a few rules (and strings) attached.
The Perks
One of the biggest draws of a leasehold is the lower upfront cost compared to freehold. Instead of buying the pub outright, you’re essentially paying a lower sum for the right to run it for a set number of years (typically anywhere from 10 to 21 years). This makes leaseholds more accessible for newcomers or those without piles of cash lying around.
The Challenges
Now, onto the flipside. With a leasehold, you’re often tied to specific suppliers—usually the landlord or a pub company—especially when it comes to wet stock (drinks). This is where things can get a bit frustrating. You might have your heart set on offering a wide range of local craft beers or wines, but if your lease agreement says you’re tied to a particular brewery or supplier, your options are limited. And those ties can affect your profit margins, as you’ll likely be paying a higher price for your stock compared to freehouses that can shop around for the best deals.
To top it off, lease agreements often come with other restrictions—like limitations on what changes you can make to the property or rules about subletting.
Let me share a quick story to show you how important it is to negotiate lease terms. A friend of mine once took on a leasehold pub and thought he’d got a cracking deal—nice rent, decent turnover. But he quickly realised the fine print wasn’t on his side. The Pub Co representative had promised him flexibility with suppliers and some leeway on rent, but none of it was in writing. When a new Business Development Manager (BDM) came in, he was told those ‘flexible’ terms were off the table, and he had no leg to stand on. Moral of the story? Get everything in writing. If it’s not on paper, it might as well not exist.
Negotiating Lease Terms
When dealing with leasehold agreements, negotiation is key. Make sure every promise, discount, and term you agree on with the landlord or pub company is written into the lease. Don’t be afraid to push back, ask questions, and get a solicitor involved if needed. You’d be surprised how much flexibility you can negotiate when the landlord or Pub Co thinks you’ll make a success of the place—but only if you make sure those terms are locked down.
Subheading 2: Understanding Pub Co Agreements
- Highlight the role of Pub Companies in leasehold agreements and the challenges with ties to suppliers (e.g., price per barrel).
- Share a tip about commercial agents and the negotiation process when taking on a lease.
Tenancy Agreements
If you’re looking for the cheapest way to get your foot in the door of the pub trade, a tenancy agreement might be your best bet. Unlike freeholds or leaseholds, a tenancy is more like dipping your toe in rather than diving headfirst into pub ownership. With a tenancy, you’re renting the pub from a brewery or Pub Co for a shorter period—usually anywhere from 1 to 5 years. It’s a bit like a starter kit for wannabe pub landlords, giving you the chance to run a pub without the long-term commitment or hefty financial burden.
The Perks
The main attraction of a tenancy is that it’s significantly cheaper than other ownership models. You’ll often only need to pay for the fixtures and fittings, making it the most affordable route into the pub industry. The terms are also shorter, so if it turns out that running a pub isn’t quite what you imagined, you’re not tied down for decades.
Another perk is that you’re usually only responsible for internal maintenance. This means while you’ll need to keep the interior in good shape, the big structural issues—like a leaking roof or dodgy foundations—are the landlord’s problem.
The Challenges
Of course, there’s always a catch. With most tenancy agreements, you’re restricted to buying products from the brewery or Pub Co you’ve signed up with. So, if you dream of stocking up on quirky local brews or offering a wider range of drinks, you might have to think again. In many cases, you’re tied to the brewery’s own brands, which can squeeze your profit margins and limit your flexibility.
Plus, let’s not sugar-coat it—tenancies can feel like you’re just a cog in a much larger corporate machine. I’ve heard stories where landlords and Pub Co’s treat their tenants as numbers on a spreadsheet, rather than real people running businesses. They set strict targets, and you’re left scrambling to hit sales goals that might not even make sense for your pub’s location or customer base.
Personally, I’ve seen friends stuck in these situations, where they were promised the world by a Pub Co but ended up feeling trapped in a contract that didn’t leave much room for growth. So, while a tenancy can be a great way in, make sure you know what you’re signing up for—because becoming just another number can feel pretty isolating.
For more insight the article “The Great Pubco Myth: Investment and Support” highlights the misleading claims made by pub companies (Pubcos) about offering tenants investment and support. It argues that Pubcos exploit tenants with inflated rents and refurbishment costs while marketing these expenses as “support” and “partnership.” Tenants often bear the brunt of repair and refurbishment costs, while Pubcos reap the financial benefits. The article challenges the idea of Pubco partnerships, revealing that tenants are often left struggling with little real support.
You can read the full article here.
Franchises: A Twist on Lease or Tenancy
In the pub industry, a franchise allows you to run a pub using a company’s established brand, procedures, and business model. It’s like a cross between a lease and tenancy but with stricter rules and more structure.
The Pros and Cons
Franchises typically come with less upfront financial risk than freeholds or leases, as much of the setup is already in place. However, the trade-off is usually high targets that can be tough to meet, and the agreement can be just as complex as a lease or tenancy.
Key Advice
Before signing a franchise agreement, get a solicitor to review it and make sure you ask for the previous year’s sales records. This will give you a clearer picture of the pub’s recent performance and help you assess whether the targets are realistic. One personal tip? Negotiate targets carefully. It’s easy to get roped into figures that seem achievable on paper but don’t reflect the current local market or the pub’s true potential.
Always remember, franchising can be a great opportunity, but it requires diligence and careful negotiation to ensure success.
Managed House and Management Contracts
A managed house is where you’re directly employed by the brewery or pub company, so you’re essentially a salaried employee rather than an independent operator. The brewery owns and manages the property, hires the staff, and handles all responsibilities like repairs and stock. This setup offers financial security but less independence.
With a management contract, you run the pub on behalf of a pub company. It’s similar to franchising, but the company typically takes care of repairs, maintenance, and stock. You’re paid a management fee with potential bonuses tied to performance, so you have the safety of a guaranteed income but less freedom in decision-making.
Both models offer security, but they come with trade-offs in terms of flexibility and control. Make sure to weigh those carefully before choosing!
Choosing the Right Business Model
When it comes to taking over a pub, choosing between freehold, leasehold, and tenancy is a crucial decision that affects everything from your level of control to your financial risk.
- Freehold gives you ultimate freedom and long-term investment potential but comes with high upfront costs and full responsibility.
- Leasehold offers a balance between control and cost but can come with restrictions from Pub Cos.
- Tenancy is the most affordable entry point, with shorter terms but often ties you to a brewery’s products.
My Personal Take
Personally, I lean towards a leasehold in today’s market. It offers more freedom than a tenancy but without the massive financial commitment of a freehold. Plus, if negotiated well, you can secure decent terms without being entirely restricted by the Pub Co’s demands.
What to Consider
Before making a decision, think about your location, available capital, and whether you have a solid team in place to manage the business. Also, consider how much freedom you want in day-to-day operations and what level of support you’re comfortable with. If you want more independence, freehold might be the way to go. If you’re looking for lower risk and guidance, then a tenancy or franchise might suit you better.
Other Types of Licensed Businesses
When considering a licensed premises, there are a few other models worth noting:
- Hotels with Pubs: These combine pub management with guest services. If you enjoy the idea of hosting overnight guests and running events like weddings, this model can be highly profitable, but it also requires more staff and management.
- Food-Backed Pubs vs. Wholly Wet Pubs: Food-backed pubs typically generate more revenue, but they come with higher costs, especially staffing. Wholly wet pubs (drink-only) are simpler to run and cheaper to staff, but they can struggle to be as profitable without food sales.
Both models have their challenges, but the food-backed option generally has more room for growth, especially in areas where customers expect a full dining experience. However, wholly wet pubs can thrive in niche markets or areas with strong community drinking culture.
Choosing between the two depends on your comfort level with kitchen operations and staff management, as well as your target market.
The Reality of Running a Pub with Food
Running a food-based pub can feel like a juggling act. I’ve had my fair share of kitchen nightmares—chefs not showing up on busy nights, or worse, leaving during service, I’ve come to learn many can be quite temperamental. There’s nothing quite like the panic of trying to organize 50 meals when you’re short-staffed in the kitchen.
Here’s a tip: Always cross-train your staff—and yourself! You should be prepared to jump into the kitchen or have a backup ready to call at short notice. Train your staff so that even if they aren’t full-time kitchen hands, they can handle the basics when things go wrong. This kind of flexibility can save you when chefs don’t show up or emergencies arise. Also, building and maintaining strong relationships with your team is key—happy staff are far less likely to leave you scrambling when things get tough
Practical Tips for Choosing a Pub
When it comes to choosing the right pub, a few practical tips can make all the difference:
- Inspect the living quarters – You’ll be spending a lot of time there, so make sure it’s liveable and meets your needs.
- Understand maintenance and repairs – Know what you’re responsible for, especially in lease and tenancy agreements.
- Review the financials – Carefully analyse turnover, profit margins, and any hidden costs before making a decision.
Your Pub Journey
For me, the most important thing when taking over a pub is thorough preparation. I’d prioritize getting a stock and asset auditor to ensure the numbers add up, and I’d conduct detailed inspections of the property to avoid hidden surprises. Maintenance can be a huge burden if you don’t know what you’re walking into. I’d also make sure to negotiate terms upfront—especially with suppliers. Flexibility in your contract, whether it’s about stock or repairs, can save you a lot of headaches down the line.
Choosing the right ownership type for your pub—whether it’s freehold, leasehold, or tenancy—can make or break your business. Each model comes with its own set of challenges and perks, so it’s crucial to understand them before diving in. My final piece of advice? Do your homework, negotiate everything in writing, and always trust your gut. Running a pub is hard work, but with the right setup, it can be incredibly rewarding. If you’ve got any questions or need some advice, feel free to reach out—I’m always happy to offer advice where I can!
I’ve spent over 20 years in the pub trade, starting at 21 when a family friend mentored me as a trainee manager. Since then, I’ve run two bars in Spain, worked in countless pubs, and now manage my own in Lincolnshire, where we’ve earned several awards, including CAMRA’s Pub of the Season and Community Pub Hero at the Houses of Parliament. Running a pub comes with its challenges, and if I could go back, I’d tell myself to slow down and find a mentor. My goal is to keep bringing the community together, win more awards, and help others avoid the pitfalls I’ve faced. Got a question? Reach out—I’m here to help!
– Steve
some very very good pointers and advice here, I have been looking at pubs after many years in the industry but see so many red flags in the pubco route, have spoken to a few and dont feel that their maketing is geared to exploit the younger and perhaps the rose tinted spectacle wearers.
Loved this and some of the links, eg the pubco myth!