The owner of the Slug & Lettuce and Be At One chains is being investigated over concerns about possible “unfair” treatment of landlords who run more than 3,000 of its venues.
Stonegate Group, Britain’s biggest chain of bars and pubs, could be fined up to 1% of revenue, more than £16m, if it is found to have breached the “pubs code”, legislation governing how pub-owning companies treat their tenants.
Fiona Dickie, the pubs code adjudicator (PCA) who oversees the rules, said she had been in discussions with Stonegate for months in relation to a “small number” of cases but was aware of other complaints and was now seeking further information.
The pubs code covers the sometimes fraught relationship between pub-owning companies and “tied” tenants, who lease the premises in return for reduced rents and other benefits.
The PCA said it had “reasonable grounds” to suspect that Stonegate had breached the provisions of the code, which governs Stonegate’s more than 3,000 tenanted and leased pubs. It does not cover the remaining estate of more than 1,000 venues, including managed brands, such as Be At One and Walkabout.
Allegations include a failure to provide accurate information about required repairs. Dickie said a failure to provide such information could have an impact on publicans’ ability to run the business profitably.
Stonegate is also being investigated for potential failures to calculate the right rent that it demands from publicans. Rents are based on profit forecasts and the PCA is looking into issues including whether Stonegate provided “realistic and evidenced financial forecasts”, Dickie said.
The conduct of Stonegate’s “business development managers”, who liaise between the company and its tenants, is also a subject of the investigation, amid concern that they may not have treated tenants fairly and recorded interactions properly.
The PCA will also look into whether it received all the information it should have from Stonegate about alleged breaches, information that pub companies are required to share with the regulator.
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The investigation comes weeks after a survey of pub tenants by the PCA found that Stonegate was considered by far the worst company to lease a pub from, with a satisfaction rating of 43%. The next worst was Punch Pubs, with a rating of 61%, while Admiral Taverns and Greene King scored 79% and 78% respectively.
“We acknowledge the announcement by the pubs code adjudicator regarding the launch of a statutory investigation,” said a spokesperson for Stonegate. “Stonegate is fully committed to complying with the code and ensuring all publicans are treated fairly.
“Stonegate has communicated at length with the PCA over the two specific cases that form the basis of this investigation and we will cooperate fully throughout. We remain committed to working fairly and transparently with our publicans and to building strong, successful partnerships.”
Stonegate is domiciled in the Cayman Islands and ultimately owned by TDR Capital, a private equity firm that also owns Asda. It has previously struggled with mounting debt but last month reported its strongest first-half profits ever, saying adjusted earnings were up from £17m to £201m in the 28 weeks to 12 April.
