Stonegate pub and bar chain investigated over ‘unfair’ treatment of landlords

Stonegate Group, one of Britain's largest pub and bar chains, is under investigation for allegedly unfair treatment of its landlords. The probe, led by the Pubs Code Adjudicator (PCA), centres on claims that the company failed to meet legal standards set by the pubs code, which regulates how pub-owning firms interact with their tenants. If found guilty, Stonegate could face fines exceeding £16 million, up to 1% of its annual revenue. The investigation follows growing concerns among landlords who manage more than 3,000 of Stonegate’s venues. The PCA, which oversees compliance with the pubs code, has been in ongoing discussions with Stonegate for several months. Fiona Dickie, the PCA’s adjudicator, confirmed that there are “reasonable grounds” to believe the company violated the code. The code applies to “tied” tenants, those who lease premises in exchange for reduced rents and other benefits, but does not extend to Stonegate’s managed brand venues, such as Be At One and Walkabout, which account for over 1,000 locations. The current investigation focuses solely on the tenanted properties. Among the allegations, the PCA is examining whether Stonegate provided accurate data about necessary repairs, a factor that can significantly affect a landlord’s ability to operate profitably. There are also concerns that the company may have failed to calculate appropriate rental rates based on realistic financial projections. The PCA is scrutinizing whether Stonegate offered “evidenced” and “realistic” forecasts to determine rent levels. Additionally, the conduct of Stonegate’s business development managers, who serve as intermediaries between the company and its tenants, is under review. These staff members are accused of potentially failing to treat tenants fairly and documenting interactions appropriately. The PCA is also assessing whether Stonegate has shared all the necessary information with the regulator. Pub companies are legally required to disclose relevant details about potential breaches, and the PCA is checking whether Stonegate fulfilled these obligations. This part of the investigation aims to ensure transparency and accountability within the industry. The probe coincides with findings from a recent PCA survey of pub tenants, which revealed that Stonegate was rated the worst company to lease a pub from, with a customer satisfaction score of just 43%. Punch Pubs followed at 61%, while Admiral Taverns and Greene King scored higher, at 79% and 78%, respectively. These results highlight a significant disparity in tenant experiences across different pub chains. In response to the investigation, a Stonegate spokesperson stated that the company acknowledges the PCA’s actions and reaffirmed its commitment to fair treatment of its landlords. They noted that Stonegate has engaged extensively with the PCA over two specific cases forming the basis of the inquiry and pledged cooperation throughout the process. The statement emphasized the company’s dedication to maintaining transparent and equitable relationships with its tenants. Stonegate, headquartered in the Cayman Islands, is ultimately controlled by TDR Capital, a private equity firm that also owns Asda. Despite previous challenges with rising debt, the company recently reported its best-ever first-half profits, with adjusted earnings increasing from £17 million to £201 million during the 28-week period ending 12 April. This financial performance contrasts with the current regulatory scrutiny, underscoring the complex landscape facing pub operators in the UK.