A cheaper drinks price does not, on its own, make a free-of-tie pub agreement the better deal. Equally, a lower tied rent does not establish that the tied package offers better value. Compare the whole arrangement: purchasing costs, rent, support, lease obligations and the cash needed to operate.
For an existing tenant, that comparison should distinguish a commercially negotiated free-of-tie agreement from the statutory Market Rent Only (MRO) process. They are not interchangeable routes.
Start with what each agreement actually includes
A tied pub agreement requires purchases from the landlord or nominated supplier within the scope of its tie. Read the documents to identify which products and services are covered, the discounts available and any volume conditions. Do not assume all tied agreements provide the same package.
For the free-of-tie alternative, obtain written supplier quotations matched to your likely volumes and product range. Record delivery charges, minimum orders, payment terms, equipment arrangements and the duration of discounts. Compare the price you can actually obtain, rather than an advertised deal that assumes different purchasing volumes.
Build a like-for-like trading comparison
Use one realistic sales forecast as the starting point for both options. If a different range could change sales, show that separately as an assumption to test. Prepare a side-by-side schedule covering:
- annual rent and other property payments;
- drinks purchases after contractual discounts and rebates;
- delivery, wastage and stockholding costs;
- cellar equipment, maintenance and services;
- support included in each offer and the cost of replacing what you genuinely use;
- repairs, insurance and other obligations that change between agreements;
- professional fees, deposits and other transition costs.
Keep VAT treatment consistent. Show ongoing operating results separately from one-off expenditure and refundable deposits. A deposit ties up cash even though it is not the same as an annual expense.
Then test a weaker trading case. Would the apparent advantage survive lower volumes, an expiring discount or additional staffing? Neither arrangement guarantees a stronger margin or a more profitable business.
Check whether the England and Wales MRO route applies
The statutory Pubs Code regulates qualifying pub companies owning 500 or more tied pubs in England and Wales and their tied tenants. Being tied does not automatically mean you fall within that regime.
For covered tenants, the PCA identifies four MRO gateways: receiving a Rent Assessment Proposal, a qualifying renewal, a qualifying significant price increase, or demonstrating a qualifying trigger event. Detailed conditions and exceptions apply. Ordinary trading pressure or any price rise should not be assumed to qualify.
Take advice promptly on eligibility, notices and strict time limits. Requesting an MRO offer does not itself commit you to accepting it. However, the process can end through particular decisions or missed steps, so understand the PCA's MRO procedure before agreeing terms.
Examine the proposed MRO terms as well as the rent
Ask for the assumptions supporting the proposed rent and check how tenant improvements have been treated. Do not carry assumptions from the tied valuation into the MRO comparison without checking them.
Identify deposits, rent in advance and changes in payment frequency. The PCA's guidance on MRO access addresses supporting rent information and upfront costs. A term presented in an offer is not automatically reasonable or compliant; ask your adviser to examine it.
Use the separate Scottish rules where relevant
For a Scottish pub, explore our Scottish Pubs Code advice and establish the framework that applies.
Scotland has its own Code and MRO request process. The England and Wales thresholds and gateways should not be applied to a Scottish tenancy. Scottish guidance identifies circumstances in which a landlord can decline a request, including lease timing, certain investment agreements and a previous request. Check these before acting: making a request can affect another request within the following two years.
Make the decision from a complete offer
Bring the agreements, supplier quotations and comparison to an experienced adviser. Identify unresolved assumptions and the cash required before accepting either package. Contact MDE to discuss the commercial comparison for your pub, or explore our pub business advisory service.
This article is general information. It does not determine your legal rights or recommend one agreement over another.
General information, not advice for a particular agreement. Rights and deadlines depend on the circumstances. If a date is approaching, obtain appropriate advice promptly.