The “Black Box” of Rent Calculations
You sit down with your BDM. They open a laptop, tap a few keys, and turn the screen around. “Based on the Fair Maintainable Trade (FMT) of the area,” they say, “your new rent is £45,000.”
How did they get that number? Did they account for the roof leak? The new Wetherspoons opening down the road? The fact that your “wet rent” (tied beer prices) is already costing you £20,000 a year in lost margin?
You don’t know. It’s a “Black Box.” They have the data; you don’t. So you argue, you haggle, and eventually, you agree to £42,000, thinking you won. Realty check: The actual market rent might have been £28,000. You just overpaid by £14,000 a year, for five years. That’s £70,000 lost.
The Fix: 3 Ways to Calculate Fair Rent
To fight a rent review, you need your own number. A “Shadow Rent.” Here is how you get it:
1. The “Back of a Napkin” Method
You take a percentage of your turnover (usually 10-12% for wet-led, 8-10% for food-led).
- Pros: Fast. Free.
- Cons: Inaccurate. BDMs will laugh this out of the room. It ignores specific costs, liabilities, and local market conditions.
2. The RICS Surveyor
You hire a chartered surveyor who specializes in licensed property. They visit the site, measure up, and produce a “Red Book” valuation.
- Pros: Highly accurate. Legally defensible in arbitration.
- Cons: Expensive (£2,000 – £4,000). Takes weeks.
3. The AI “Shadow Surveyor” (Pubs Code Guardian)
You use software that mimics the RICS valuation method. You input your barrelage, wet/dry split, and operational costs. The AI cross-references this with local market data and profit margins to generate a Shadow Rent Calculation.
- Pros: Instant. Costs £29. Gives you a hard number to slam on the table during your meeting.
The Winner: Pubs Code Guardian
Pubs Code Guardian includes a feature called Shadow Surveyor.
It doesn’t just guess; it builds a case.
- FMT Analysis: It helps you adjust your Fair Maintainable Trade figures so you aren’t being charged rent on your personal hard work (goodwill), but on the property’s potential.
- MRO Tactician: It calculates the “tipping point”—the exact moment where going Free of Tie (MRO) becomes more profitable than staying tied, even with a higher dry rent.
Calculate Your Shadow Rent Now
The Math: The £15,000 Difference
Let’s look at a real scenario:
- Pub Co Offer: £45,000 Rent + Tied Beer Prices.
- Your Guess: “I think it should be £40,000.” -> Result: You pay £40,000.
- Shadow Surveyor Calculation:
- Identifies over-estimated barrelage.
- Flags “disregarded” earnings.
- True Market Rent: £32,000.
The Saving: £40,000 (Your negotiated deal) – £32,000 (True Rent) = £8,000 per year. Over a 5-year lease = £40,000 cash in your pocket.
Cost of Tool: £29/month. ROI: 2,200%.
Free Tool: The Quick MRO Estimator
(Developer Note: Simple JS widget where user enters Weekly Turnover & Rent. Output: “You are paying X% of turnover. Warning: This is above industry average.”)
Don’t negotiate blind.