Two pubs on the same road. Same size, same trade, same beer on the bar. One makes money and one does not, and the difference is not the landlord's personality. It is written into the tenancy agreement of one of them, in the clause requiring all draught products to be bought from the pub company that owns the building.
The British pub is one of the most analysed small businesses in the country and still one of the most misunderstood, because two pubs with identical takings can have entirely different cost structures.
The tie is the single biggest number in the business
A tied tenancy means you rent the building from a pub company and buy your beer from them, at their list price. A free of tie lease means you pay a higher rent and buy your beer wherever you like, usually from a brewery or a wholesaler at a negotiated discount per barrel.
The arithmetic is not obvious. Tied rent is lower, sometimes dramatically lower, and the pub company takes its return through the beer price instead. Whether that is a good deal depends entirely on how much beer you sell. A wet led pub shifting a lot of draught pays the tie many times over. A food led pub selling relatively little beer often does better tied, because the rent saving outweighs a modest volume of dear beer.
The Pubs Code etc. Regulations 2016 gave tied tenants of pub companies owning 500 or more tied pubs in England and Wales two things worth knowing. The first is the overarching principle that a tied tenant should be no worse off than a comparable free of tie tenant. The second is the Market Rent Only option, which lets a qualifying tenant ask to go free of tie at certain trigger points, including rent review and renewal. The Pubs Code Adjudicator arbitrates disputes. Scotland has its own regime under the Tied Pubs (Scotland) Act 2021.
Whether MRO works out better is a calculation, not a principle. Rent will rise. Beer will fall. Do the sums on your actual barrelage over twelve real months, not on a projection.
Wet and dry are two businesses sharing a roof
Trade convention splits pub takings into wet sales, meaning drinks, and dry sales, meaning food. They behave completely differently.
Wet sales carry high gross margin and almost no labour beyond the person pulling the pint. Dry sales carry lower gross margin and a great deal of labour, because food needs a kitchen, a chef, a pot wash, waiting staff and a cleaning regime. The trade rule of thumb puts food gross profit somewhere in the mid sixties as a percentage and draught beer well above that, though a tied price can push wet margin down to something closer to food.
That is why the shift to food saved the pub trade and then squeezed it. When beer volumes fell and the smoking ban changed the customer base after the Health Act 2006 took effect in England in July 2007, food filled the room. It also introduced a fixed cost base that does not flex: a kitchen brigade must be there whether forty people book or twelve.
The consequence is a pub with a break even point far higher than it used to have. A wet led pub on a quiet Tuesday costs you one member of staff. A food led pub on a quiet Tuesday costs you a kitchen, and the decision to close Mondays and Tuesdays entirely, which a great many good pubs have now taken, is simply that arithmetic being faced honestly.
Duty, discounts and the price on the bar
Alcohol duty was reformed on 1 August 2023 so that products are taxed by strength in bands rather than by category. Alongside it sits Draught Relief, a lower rate for qualifying draught products sold in containers of at least 20 litres, which was increased for beer and cider in February 2025. The rates are set at fiscal events, so treat any figure you read as current until the next Budget and check before you reprice.
The point for a publican is that duty is a fixed cost per pint that does not care about your rent. A pub selling a premium lager at a price the street will bear may be making less cash per pint than a pub selling a cask ale at a lower price, because duty, tie price and yield all differ.
Yield is the forgotten one. Line losses, over pouring, cellar temperature and a slow selling cask all convert stock into nothing. A wet led pub that never measures its yield is guessing at its margin. Weekly stocktakes are dull and they are the closest thing the trade has to free money.
- Barrelage discount, which rises with volume and is worth negotiating annually
- Duty, which moves at Budgets and applies per litre of pure alcohol
- Line loss and ullage, which you control with cleaning discipline
- The tie price, which you mostly do not control at all
Rates, rent and the landlord you cannot see
Pubs are valued for business rates on a receipts and expenditure basis by the Valuation Office Agency, which means your rateable value is tied to what the VOA considers the fair maintainable trade of the property rather than to its floor area. Trade well and a revaluation can catch up with you. The 2026 rating list, based on values as at April 2024, took effect on 1 April 2026, and retail, hospitality and leisure relief has been set annually rather than permanently, so the figure in your budget last year is not the figure this year.
The other invisible landlord is the freeholder's own view of the building. A pub with a large car park in a place where houses sell well has an alternative use value, and that shapes the rent you are asked for and the length of lease you are offered. Assets of Community Value registration under the Localism Act 2011 gives a community a moratorium to bid but does not stop a sale.
Where this shows up in the game
The Pub & Bar is one of the five business types in Business Baron's free game, so you can run one without paying anything. The seasons are real, and a quiet February arrives with a rent that does not care how many people came in. Gross margin is the number worth watching, and it is rarely the same on a pint as on a plate.