Big firms waiting to grow? Franchisees in the pub sector

Abstract

Abstract Pub‐operating companies have undergone major changes in their business organization over recent years. One of the effects of the ‘Beer Orders’ has been to break up the large estates of pubs directly tied to a beer producer. In many cases, the larger brewers have directly managed their estate of large high‐volume pubs and bars. More typically, however, companies control pubs in indirectly managed forms. Tenancies and leases offer the pub operator strategies that allow them to operate on a larger scale with less risk because the smaller firm takes the risk and also has the entrepreneurial motives to build the business. In many ways, this limited form of franchising appears to offer many benefits as a business strategy because it enables the pub operator to trade at a higher scale and at lower risk. The problem is that many companies have a limited understanding of the motives of the small‐firm operators who are running their pubs as tenants or lessees. Whilst the key motive for indirect forms of pub control was to maintain outlets for the beer product, these strategies are flawed when properties need to be run as retail outlets, intent on maximizing sales and business growth. This paper explores some of the motives of the small firms who operate pubs via tenancy and lessee arrangements and the difficulties that exist between the pub‐operating companies and their small‐firm partners. Copyright © 2002 John Wiley & Sons, Ltd.