And they wonder why they can't get tenants

The good news, according to licensed trade pundits, is that the industry is recruiting licensees of the highest quality. The bad news is that there are simply not enough of them to go round.

These two simple facts, as reported in various trade journals recently, seem to suggest that the situation comes as something of a surprise when, in reality, the industry - or, more to the point, the major players - are simply reaping what they have sown.

Enterprise Inns, a pub-estate operator with more than 2,400 leases and tenancies, has launched a new agreement designed to attract and retain lessees. Licensee recruitment and development manager Peter Greave told me that, following the acquisition of a number of high-volume outlets from Bass, the E-Plus agreement, based on the traditional three-year tenancy agreement, was formed "to appeal to licensees with business flair" - a phrase guaranteed to arouse suspicion.

"Very often," Greave said, "licensees just don't have the sort of capital needed to pay for all the fixtures and fittings, which can sometimes amount to £50,000 or more. But, under the E-Plus agreement, we will retain ownership of the inventory in order to reduce the cost of starting up."

So far, so good - but when he went on to tell me that the rent charged would reflect the value of the inventory, the idea began to seem less attractive. When he further explained that an additional £40-per-barrel rent would be charged, up to the agreed barrelage threshold, I began to have serious misgivings - in spite of the fact that for every barrel of beer, lager and cider purchased over the agreed threshold a £40 discount would apply.

This is not a new idea. I remember Matthew Brown & Co operating a similar scheme in the 1970s and while, at the time, it was considered to be somewhat unscrupulous, I have to admit that those licensees of my acquaintance who entered into such tenancies did actually make profits which were commensurate with the time and effort involved.

But that was 20 or more years ago, since when the licensed trade has changed beyond recognition. So, I put it to Greave that, if quality licensees are to be recruited and retained, they will need to be convinced that they can make a significant profit. He was quick to assure me that licensees who take on an E-Plus agreement stand to make a very handsome living indeed. I hope he is right, but time will tell.

It is worth noting that about three-quarters of the roughly 20,000 houses which are owned by pub estate operators, and nearly half of those which are owned by brewers, are tenanted. This would seem to suggest that brewers and pub-estate operators have very clear ideas as to which pubs are the most profitable.

In an industry dominated by the City, shareholders and other interested parties, only those pubs with the best locations and the highest volumes of sales are considered profitable enough to be managed houses. The rest are put out to tenancy.

This is where it all goes pear-shaped. With managed houses laying claim to most of the prime trading locations, the majority of tenanted and leased pubs are less fortunately placed. In spite of this, tenants and lessees find that they are paying more and more for less and less.

Annual rentals of £20,000 to £30,000, or even more, are commonplace these days, but the rent is only a starting point. Add to that the fully repairing liability, insurance costs for the building as well as the contents, heating, lighting, staff costs and spiralling rates and two conclusions emerge like beacons in the darkness: it is small wonder that pub-estate operators favour tenancies and leases, and equally unsurprising that quality licensees for such outlets are in short supply.

But whereas the major players are experiencing difficulty in recruiting and retaining licensees, some smaller operators have no such problems. In my part of the world, Jennings, JW Lees, Robinsons and Mitchells all operate tenanted estates without any difficulty whatsoever.

Jonathan Barker, tenanted estate director at Mitchells, put it in a nutshell when he told me: "We see letting as a long-term partnership. Continuity is very important and the only way to achieve this is through the financial well-being of the licensee."

He added: "We all have to make a profit and the tenant licensee is no exception." Amen to that.

David Best is publican of the Bushell's Arms in Preston, Lancashire