The future of JD Wetherpoon’s Mardi Gras pub in Manchester’s Trafford Centre is under consideration after a rent review saw an annual increase of almost 100%, The Caterer understands.
JD Wetherspoon’s chairman and founder Tim Martin quoted Taylor Swift as he explained that F&B chains taking sites at inflated rents had led to the increase saying: “I knew you were trouble when you walked in.”
Martin said: “It only takes one optimist to agree a daft rent and every tenant in the town ends up paying something similar.”
The veteran pub boss drew similarities with the pub boom of the 1990s, which he said led to an “inevitable crash”, adding that JD Wetherpoon had agreed virtually no open-market rent reviews since, instead opting to buy freeholds or taking leases with fixed uplifts and break clauses.
Martin explained: “Wetherspoon has normally, but not always, stayed away from these developments, and has been wincing for years at the rents being paid – and congratulating ourselves on our foresight regarding open market reviews.
“But we’re not as clever as we thought.
“One epicentre of rental insanity is the Trafford Centre in Manchester, a mainly retail development.
“Some years ago, Wetherspoon agreed to take a lease of a failed restaurant there, at a rent of 10% of sales, or £220,000 per-annum, whichever was the higher. Reviews would also be at 10% of sales, or open market.
“Although we don’t normally agree to open market reviews, we did here, reckoning that 10% our trade, which is normally much higher than rivals, was the maximum we’d be asked to pay, in practice.
“But a year or two ago, just before branded restaurants started to collapse, a major pubco, in a rush of blood to the head, took a smaller unit than us in the Trafford Centre, at a higher rent, reflecting the rents of recent restaurant lettings – which they now deeply regret.
“Based on the percentage of sales formula, Wetherspoon had been paying about £230,000 per annum in the Trafford Centre, slightly higher than the base rent agreed a few years back.
“At the review, the landlord’s surveyor argued that the rate per square foot, based on the most recent lettings, would give rise to a rent of £691,000 per annum at our pub.
“The matter was referred to an arbitrator, who decided that the market rent was £415,000, about 20% of our sales, and just enough to ensure that the pub makes no money.”
This year has already seen several casual dining brands including Carluccio’s, Jamie’s Italian, Prezzo and Byron Burger agree CVAs including significant rent cuts, with many analysts saying prices had left businesses unsustainable.
Martin added: “Whatever the answer, the property market is again making a bad situation worse, by pushing up rents in the teeth of a vicious restaurant recession, and in a climate where three or four pubs are shutting down every week.
“In her song Taylor Swift ended up ‘lying on the cold, hard ground’. Many restaurateurs and retailers now feel the icy blast, and would bail out of developments like the Trafford Centre, as would Wetherspoon, given half a chance.”