As a result of the Drop In Sessions held in the VIllage Hall Cafe over this last week we have compiled a list of Frequently Asked Questions and answers for those interested in pledging for shares in the Crown Inn.
Q1. Will my share value increase over time (assuming the value of the pub goes up over the years)? Can I sell/trade my shares?
A. The value of the shares remains fixed and they cannot be traded, only sold back to the CBS at the same value they were purchased, a process known as withdrawal. Withdrawals are governed by the society rules and we are likely to prohibit them until the pub is fully established and thereafter limit them to a certain amount each year.
Q2. Will I receive a dividend payment on my shareholding?
A. The shares do not pay a dividend but rather pay interest, which when it comes to financial reporting is treated as a cost, i.e. is deducted before tax.
Interest, if paid at all given it is subject to society rules, will be a nominal amount. The business plan projects an interest payment of c.2% on shares in year 3 of the business.
Q3. What happens to shares in the event of death?
A. Shareholders can nominate one or more beneficiaries of their shares in the event of death. The society’s committee must then either transfer the shares to the nominated persons or pay those persons the full value of the shares. Note however that nominations only apply to the first £5,000 of share value. Any amount above that would be subject to the deceased person’s probate.
Q4. Do you know what effect having a pub in the village has on house prices?
A. Various studies have established a positive correlation between house prices and the presence of a local pub. For example, a recent research paper stated ‘our econometric models identify a positive relationship between an increase in the number of pubs and an increase in housing prices. This result adds to previous studies that highlighted the importance of pubs for local communities, focussing on community cohesion and social engagement, as well as on local economic development’ (European Planning Studies Volume 29, 2021 Issue 1, Public Houses and House Prices in Great Britain: a panel analysis).
Q5. Can we lose our money if it goes wrong?
A. If the business is ultimately unsuccessful and the managing committee decides to close and sell the pub, the money raised from the sale of the building and its contents will be used to repay creditors and members’ share capital, in accordance with the rules of the society.
However, if the funds remaining do not cover all of the liabilities, then partial repayments would be made to shareholders, so potentially you could lose some or all of your money.
Q6. What is the minimum share holding?
A. The minimum is 250 shares at £1 each – so £250
Q7. Are the shares held by an individual or can they be held jointly e.g. a couple?
A. The society rules require shares to be held by an individual. It is okay if you have pledged in joint names, but when the formal share offer is issued, you will have to nominate individual shareholders.
The minimum (250) and maximum (25,000) shareholdings apply to an individual, not a couple or household.
Q8. What is the extent of members’ liability?
A. Member’s liability is restricted to the value of their shareholding, i.e. if you invest £250 then you may lose all of this money but you will not be responsible for any further costs thereafter.
Q9. Will a Business Plan be produced and shared ?
A. A draft Business Plan is in progress and will be shared when the Community Share Offer is launched so that everyone has full
information before committing to buying shares.
A summary of the plan so far is attached below.
ASSUMPTIONS
The following financial statement is the best assessment after 3 years trading.
– Year 1 will be wet sales and light snacks only
– Year 2 will involve wet sales and a full menu
– Year 3 will include accommodation
– Figures and margins have been based on information and models received from Pub is the Hub, the British Beer and Pub Association, and several local pubs that have successfully converted to Community Pubs, in addition to advisors from the Plunkett Foundation and the Community Ownership Fund.
| YEAR 3 | YEAR 4 | YEAR 5 |
SALES | £ | £ | £ |
Wet | 70.000 | 100,000 | 140,000 |
Food | 191,000 | 230,000 | 280,000 |
Accommodation | 62,000 | 70,000 | 80,000 |
TOTAL SALES | £323,000 | £400,000 | £500,000 |
GROSS MARGIN | 65% | 64% | 63.5% |
GROSS PROFIT | £208,700 | £256,000 | £317,000 |
OPERATING COSTS | £132,400 | £146,000 | £161,000 |
NET PROFIT | £ 76,300 | £110,000 | £156,000 |
NET MARGIN | 23.6% | 27.5% | 31.2% |
RENTAL TO FOTC | £ 18,000 | £26,000 | £37,000 |