Project
The family had acquired the tenancy of the business from a regional brewery chain in February 2020 - just before the first Covid-19 lockdown. As the tenant, they successfully pivoted the public house’s offer during the business restrictions of lockdowns. In being located in an established Norfolk market town, on the edge of the ever-popular leisure destination of the Norfolk Broads, the business had fared well since it had been acquired by the tenant since 2020.
However, the tenant wanted not only to take on the freehold per se, but also in order to improve and upgrade the accommodation and further invest to extend the offer of the licensed premises under their independent ownership.
Approach
In undertaking any trading valuation the starting points are considerations of the fair maintainable operating profit (FMOP) and the assumption of a reasonably efficient operator (REO).
For many licensed premises, staffing costs and the cost of living crisis have been acute concerns since 2022, with staffing costs further impacted by the announcement of the increase in National Insurance (NI) contributions trailed in October 2024’s Budget Statement.
Staffing costs were mitigated, to a degree, in the case of this public house as it was very much a family-run business and this was to remain at the heart of the tenant’s plans post-freehold purchase.
This was a key consideration in assessing the operational costs, alongside the current and post-purchase supply arrangements with the brewery and the ownership arrangements and value attributable to in-situ fixtures, fittings and equipment, allowing for depreciation.
In making the valuation, account was taken of the investments the tenant had made already in improving the kerb appeal of the bar and restaurant areas and, of course, their plans for upgrading the public areas further, specifically, the first floor accommodation to move the business forward with rooms for hire.
Results
A trading valuation of the licensed premises laying out the full freehold value as a going concern and also as a property-only valuation ahead of the freehold purchase by the incumbent tenant is fairly typical of the scenario in which Eddisons is asked to undertake a trading valuation on behalf of a lender client.
In this instance, a full report was made to our client as to the trading and property-only values of the premises presently and in regard to its potential, given the plans and revenue estimations to which we were made party.
The tenant family was successful in purchasing the freehold and officially launched the public house as an independent ‘free house’ in late spring 2025, in good time for the summer holiday season in the local area.
