Buying a pub is one of the most layered business acquisitions a buyer can make. Beyond the financials, you are taking on a premises licence, a possible brewery tie, a leasehold or freehold property, a cellar full of stock and a team of staff — all of which carry their own checks, risks and obligations. This guide explains what to look for, what to ask and how to protect yourself before you commit.
Contents
What makes buying a pub different?
A pub is not just a hospitality business. It is a licensed premises with regulated obligations, a potential brewery or supplier tie, a property element (whether leasehold or freehold), a cellar full of perishable stock, and staff whose employment transfers automatically under TUPE.
A buyer taking on a pub is acquiring:
A premises licence under the Licensing Act 2003
A designated premises supervisor (DPS) arrangement
Wet sales (alcohol) and dry sales (food, accommodation, machines) revenue streams
A possible brewery or pub company tie — restricting which suppliers can be used
A lease or freehold property with specific conditions
Cellar equipment, bar equipment, furniture and fixtures
Staff employed under existing terms and conditions
A stock valuation at completion
An existing customer base with established habits and loyalty
A reputation built through online reviews and local goodwill
Each of these elements requires a separate layer of checking. Buyers who skip any one of them can find significant and expensive surprises after completion.
Leasehold vs freehold — what is the difference?
The structure of the property arrangement dramatically affects the economics and the due diligence required.
Freehold
A freehold pub means the buyer owns the building and land outright. This typically commands a higher purchase price but gives the owner full control over the premises. There is no landlord to negotiate with for assignment, no lease expiry risk, and the property can be used as security for financing.
Leasehold
A leasehold pub means the buyer takes on an existing lease or signs a new one. The landlord (which may be a brewery, a pub company or a private landlord) retains ownership of the building. The buyer pays rent and operates subject to the terms of the lease.
Leasehold pubs sold by pub companies (pubcos) or breweries often come with a tie — an obligation to purchase certain products (usually draught beer) from the landlord or their nominated suppliers. This restricts trading freedom and directly affects margin.
The Pubs Code, which applies to large pub companies in England and Wales with 500 or more tied pubs, gives tied tenants certain rights, including the right to request a market rent only (MRO) option to trade free of the tie.
Before committing to a leasehold pub, check:
Lease length and break clause position
Assignment rights and landlord consent requirements
Whether a brewery or supplier tie applies and which products it covers
Rent review mechanism and the most recent review outcome
Whether a Pubs Code adviser has been consulted
The repair and dilapidation position
When is the best time to buy?
The best time to buy is when:
Records are clean— accounts, VAT returns and EPOS reports all tell a consistent story
Revenue is understandable— wet and dry sales splits are documented and traceable
Compliance is organised— premises licence, personal licence/DPS position, health and safety records
Staff and systems are stable— there is not a mass departure risk immediately after completion
Risks are disclosed— the seller surfaces known issues at the right stage rather than hiding them until late in the process
That said, buying when a pub is under-performing but fixable can represent good value — provided you understand exactly what is broken and what it will take to repair it. A struggling pub bought on asset value alone, with no plan for trading recovery, is a high-risk proposition.
How valuation works
Pub valuations use several approaches, often in combination.
Trading profit method (going concern)
This is the most common approach for a profitable, trading pub. Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) is calculated after removing one-off items and owner benefits. A multiple is then applied to reflect sector risk, growth potential, tie status, lease quality, staff, reputation and buyer demand.
Fair maintainable trade (FMT)
Licensed property surveyors often use a fair maintainable trade approach — estimating what a reasonably competent operator would generate in the premises — and then applying sector-specific ratios to arrive at a value. This is commonly used by pub company surveyors and in rent review negotiations.
Asset value
For a freehold pub, the property itself has a separate bricks-and-mortar value. If the pub trades poorly, a buyer might consider the asset value as a floor — though converting a pub to alternative use typically requires planning permission, and not all authorities will grant it readily.
Key factors that affect value:
Wet versus dry sales split (food and accommodation revenue diversifies income and often attracts better multiples)
Brewery or supplier tie (a tied pub typically has lower value than a free-of-tie equivalent)
Lease terms (length, rent, review mechanism, repair obligations)
Staff quality and dependency
Customer mix and loyalty
Reviews and reputation
Planning history and permitted use
Financial information to review
Ask the seller to provide:
Three years of filed accounts— look for trends, not just the most recent year
Current year management accounts— how is trading now versus the same period last year?
Wet sales reports— draught, bottled, spirits, wine split
Dry sales reports— food, accommodation, machines, events, private hire
Cellar management records— ullage, wastage, GP on draught
EPOS reports— covers, average spend, session analysis
VAT returns— to cross-check declared turnover
Payroll records— staff numbers, hours, rates, pension, employer NI
Supplier invoices and statements— particularly the tied supplier
Brewery or pubco tie agreement— pricing, discount structure, volume commitments
Rent and service charge history
Utility bills— gas, electric, water (pubs can have high energy costs)
Insurance documentation
Outstanding loans or finance agreements
Stock valuation— agreed methodology for valuation at completion
Add-back schedule— items removed from profit to show maintainable earnings
What to watch for
Wet sales margins that are unusually low (could indicate unrecorded sales or a punishing tie)
Food GP significantly below sector norms
High wastage or ullage on draught
Owner working extreme hours that are not costed into the profit figure
Turnover that does not reconcile with VAT returns
Outstanding or threatened licence reviews
Sector-specific checks
Premises licence
Under the Licensing Act 2003, a pub selling alcohol must hold a premises licence. The licence sets out:
Permitted licensable activities
Operating hours
Licence conditions
Details of the designated premises supervisor
A buyer will need the premises licence to transfer before they can legally sell alcohol. This requires an application to the licensing authority. Take specialist licensing advice to ensure the transfer is handled correctly and that you understand any conditions attached to the licence.
Personal licence and DPS position
The designated premises supervisor is the individual named on the premises licence as having day-to-day control. When a pub changes hands, the buyer (or a named individual in their operation) must hold a personal licence and must be named as the DPS before alcohol can be sold.
If you do not hold a personal licence, you will need to apply through the relevant licensing authority. A personal licence requires a Level 2 Award for Personal Licence Holders (or equivalent) and a Disclosure and Barring Service (DBS) check.
Do not complete the purchase before this is in place.
Wet and dry sales split
A pub that generates most of its revenue from wet sales (draught and packaged alcohol) is more exposed to changes in drinking habits and licensing conditions than one with a strong food trade. Buyers and lenders both prefer a diversified income base.
Ask for a breakdown of:
Draught beer and cider
Packaged drinks (bottles and cans)
Spirits, wines and soft drinks
Food revenue by category
Accommodation revenue (if applicable)
Machines, events, private hire and other income
Brewery or supplier tie
A tied lease is one of the most commercially significant factors in a pub purchase. Under the tie:
The tenant must purchase certain products from the landlord's nominated supplier
Prices are set by the landlord and are typically higher than the open market
Discounts may be available but are often negotiated individually
Volume thresholds may apply
Before buying a tied pub, model what the business would look like if it could source freely. Then understand the gap between tied pricing and free-of-tie pricing. That gap represents the cost of the tie.
If the pub is covered by the Pubs Code (applicable to large pub companies in England and Wales), check whether the tenant has previously requested an MRO (market rent only) option assessment. This may give useful insight into the landlord's position on the property.
Lease and freehold title
For leasehold pubs, your solicitor should review:
The full lease and all licences, variations and side letters
Assignment provisions and landlord consent requirements
Rent review mechanism — upward only, open market, RPI-linked?
Repair and dilapidation obligations
User clause — is the use restricted to licensed trade?
Break clauses — who can trigger them and when?
Any ongoing dispute or correspondence with the landlord
For freehold pubs, your solicitor should review the title at Companies House (if the seller is a company) and at HM Land Registry, checking for charges, restrictions and easements.
Stock valuation
Stock is typically valued at completion and paid for separately from the goodwill and asset price. Agree in advance:
What is included (draught, packaged, spirits, wines, food, cellar gas)
How it will be valued (cost price, excluding any out-of-date or unsaleable items)
Who will carry out the stocktake (typically an independent stocktaker agreed by both parties)
What happens to cellar equipment owned by the brewery (it usually stays with the departing tenant's supplier agreement)
Cellar and equipment
Check the cellar carefully:
Line cleaning records
Condition of cellar cooling equipment
Age and condition of gas equipment (CO2, mixed gas)
Ownership of draught dispense equipment (often the supplier's property)
Condition of bar equipment (glasswasher, ice machines, fridges)
Kitchen equipment if food is served
Condition of any accommodation rooms
Gaming machine contracts — who owns the machines and what are the income terms?
Staff, contracts and handover
Under TUPE (Transfer of Undertakings (Protection of Employment) Regulations 2006), staff employed in the pub will typically transfer to the buyer on their existing terms and conditions. This includes accrued holiday entitlements, notice periods and continuity of employment.
Buyers should:
Request a full staff list with roles, hours, pay rates, start dates and contract status
Understand who the key people are and which ones are most likely to stay
Ask the seller honestly whether any staff have indicated they plan to leave
Review employment contracts for unusual provisions
Understand the TUPE notification requirements and ensure the correct information and consultation process is followed
Take employment law advice — the consequences of a botched TUPE process can be significant
After completion, a meaningful handover period — ideally two to four weeks — helps with supplier introductions, customer relations and operational knowledge transfer.
Confidentiality and due diligence
Do not share sensitive information too early. Before a non-disclosure agreement (NDA) is in place:
Provide only a summary — headline revenue, profit range, lease overview, staff headcount
Do not share full accounts, EPOS data, staff names or pay rates
Do not share supplier pricing, brewery tie terms or system access
After an NDA is signed and the buyer has been screened:
Release management accounts and a sales summary
Share the lease (with landlord contact details redacted at this stage if appropriate)
Provide EPOS and platform reports
Share the equipment list and finance schedule
Full accounts, staff details, supplier agreements and customer data should be shared only after heads of terms are agreed and in the context of formal due diligence.
Buyers should also conduct their own due diligence:
Company search at Companies House
Land Registry search
Licensing register search
Environmental and planning searches
Personal licence verification for the existing DPS
Credit checks on the seller entity, where appropriate
Buyer checklist
Seller identity and authority to sell confirmed
Reason for sale understood
Accounts (three years) requested and reviewed
Management accounts (current year) reviewed
Wet/dry sales split understood
EPOS reports reviewed
VAT returns cross-checked against turnover
Payroll records reviewed
Brewery/supplier tie reviewed and modelled
Premises licence reviewed — conditions, hours, DPS position
Personal licence position confirmed — buyer or named individual has or is obtaining one
Lease reviewed — term, rent, assignment, break, repair
Landlord consent process understood
Stock valuation method agreed — independent stocktaker arranged
Cellar and bar equipment list reviewed — ownership confirmed
Gaming machine contracts reviewed
Staff list reviewed — TUPE position understood
Handover period agreed
Finance approved (if applicable)
Solicitor instructed
Offer made conditional on due diligence, licence transfer and lease assignment
FAQs
Do I need a personal licence to buy a pub?
You do not need a personal licence to own a pub, but the premises licence requires a named designated premises supervisor who holds a personal licence. In practice, most pub owners or operators hold one. If you do not, you should apply before completion.
Does the premises licence transfer automatically?
No. A licence transfer application must be made to the licensing authority. Until the transfer is granted, the existing licence holder remains responsible. Timing this correctly around completion is important — take specialist licensing advice.
What is a brewery tie and how does it affect me?
A brewery or supplier tie requires the tenant to purchase certain products from the landlord's nominated supplier at set prices. Tied prices are typically higher than open-market alternatives. The Pubs Code gives certain rights to tenants of large pub companies in England and Wales, including the right to an MRO assessment. You should understand the full cost of the tie before buying.
Do all pub staff transfer to me under TUPE?
In most asset sales of a going-concern pub, yes. Employees connected to the business will typically transfer on their existing terms. The exact position depends on the structure of the transaction — take employment law advice.
Is stock included in the purchase price?
Typically not. Stock is usually valued separately at completion by an independent stocktaker and paid for on top of the agreed business price. Agree the methodology and who carries out the valuation before exchange.
Key takeaways
A pub purchase involves a premises licence, possible brewery tie, lease or freehold title, stock valuation and TUPE — each needs separate professional advice.
The wet/dry sales split significantly affects value, risk and lender appetite.
A tied pub trades on different economics to a free-of-tie pub — model both scenarios before committing.
The premises licence does not transfer automatically — apply to the licensing authority in good time.
TUPE will almost certainly apply — understand your obligations before completion.
Stock is usually valued and paid for separately at completion.
Make any offer conditional on licence transfer, lease assignment, due diligence and finance approval.
Related resources
Important disclaimer
Buy a Business Ltd is a marketplace, not a broker. Information, guides, checklists and examples on this site are for general guidance only and do not constitute legal, tax, financial, investment, valuation, brokerage or regulated advice.
Buying or selling a business involves risk. You should seek independent professional advice before buying, selling, valuing or financing a business.
Sources and useful references
GOV.UK: premises licence
GOV.UK: personal licence to sell alcohol
GOV.UK: TUPE
Companies House: Get information about a company
ICO: data sharing due diligence