Key facts
- Stonegate Group, owner of Slug & Lettuce and Be At One, is under investigation for potential breaches of the "pubs code".
- The investigation concerns the treatment of landlords who run over 3,000 of its tenanted and leased pubs.
- Allegations include failures in providing accurate repair information and calculating correct rents.
- The conduct of Stonegate's business development managers is also being examined.
- Stonegate could face a fine of up to 1% of its revenue if found in breach of the code.
Stonegate Group, the largest pub and bar operator in Britain, is facing a statutory investigation by the pubs code adjudicator over concerns of unfair treatment towards landlords who operate more than 3,000 of its venues. The investigation, led by pubs code adjudicator Fiona Dickie, could result in a fine of up to 1% of Stonegate's revenue, potentially exceeding £16 million, if breaches of the pubs code are found.
The pubs code governs the relationship between pub-owning companies and their "tied" tenants, who benefit from reduced rents and other advantages in exchange for leasing the premises. The adjudicator has "reasonable grounds" to suspect Stonegate has violated the code's provisions, which apply to its over 3,000 tenanted and leased pubs, excluding its managed estate.
Specific allegations include Stonegate's alleged failure to provide accurate information regarding necessary repairs, which could impact publicans' profitability. The investigation also scrutinizes whether Stonegate correctly calculated rents demanded from publicans, examining if the company provided "realistic and evidenced financial forecasts" upon which rents are based. Furthermore, the conduct of Stonegate's business development managers, who act as liaisons with tenants, is under review for potential unfair treatment and improper record-keeping of interactions.
This investigation follows a recent survey by the pubs code adjudicator that identified Stonegate as the company with the lowest tenant satisfaction rating, at 43%. For comparison, Punch Taverns scored 61%, Admiral Taverns 79%, and Greene King 78%.
A spokesperson for Stonegate acknowledged the investigation and affirmed the company's commitment to complying with the pubs code and treating publicans fairly. The company stated it has been in extensive communication with the PCA regarding the two specific cases forming the basis of the probe and pledged full cooperation. Stonegate emphasized its dedication to fair and transparent dealings with its publicans and fostering strong partnerships.
Stonegate Group is domiciled in the Cayman Islands and is ultimately owned by private equity firm TDR Capital, which also holds ownership of Asda. The company has previously faced challenges with significant debt but recently reported its strongest first-half profits, with adjusted earnings rising to £201 million in the 28 weeks leading up to April 12.