How a pubco works out your rent: the divisible balance, the 50% that isn't a rule, and the three numbers to check in any rent proposal

A pubco works out a tied rent by building a shadow profit and loss account for your pub: what a "reasonably efficient operator" should take, what it should make on that in gross profit, and what it should cost to run. What's left before rent is the divisible balance, and the rent is a share of it. People talk about "50% of the divisible balance" as if it's a rule. It isn't. The current RICS standard says there's no formula and no default split, and the BBPA's own guide shows rents anywhere from 35% to 65%. The numbers worth fighting over are the turnover, the gross profit and the costs, because each one moves the balance before anyone argues the split.

Rent reviews come up in the licensee groups constantly, usually as "they want another £6k a year, is that normal?" The honest answer is that you can't tell from the headline. You can only tell from the shadow P&L behind it. Here's how that P&L is built and where it usually goes wrong for the tenant.

The three steps behind every tied rent

If your pubco has 500 or more tied pubs, the Pubs Code says the rent assessment has to be done in line with RICS guidance, and a RICS member has to confirm in writing that it was. The current guidance is the RICS professional standard on valuing licensed leisure property, second edition, in force since 1 July 2025. It describes the profits method in three steps:

The profits method, as RICS describes it

Step	What it is	The question to ask
Fair maintainable turnover (FMT)	The trade a reasonably efficient operator would expect, with the pub properly equipped, repaired and decorated	Is it higher than you actually take? Why?
Fair maintainable operating profit (FMOP)	What that operator makes from the FMT after all running costs, before rent	What GP% and what costs did they use?
Divisible balance, and the split	The profit to be shared between landlord and tenant	What share is the rent, and why that share?

Two things in the RICS wording are worth having in front of you. First, FMT "is not necessarily the same as the actual level of trade achieved by the current occupier", which cuts both ways: a pubco can say a better operator would take more, and you can say your own extra trade is your goodwill, not the building's. Second, on the split: "there is no formulaic approach or default divisible balance figure." It's meant to come from evidence.

The 50% that isn't a rule

The BBPA's guide to costs for tied tenants, one of the benchmarks the Pubs Advisory Service says pubcos typically build shadow P&Ls from, says RICS guidance put rents in a range of 35% to 65% of the divisible balance, with many settlements more typically between 45% and 55%. The 2025 RICS standard has dropped any range and says the share depends on demand, risk, lease terms, the tie, the living accommodation and so on. So if a proposal just says "rent at 50% of divisible balance" with no evidence for why 50, that's a fair thing to question.

The split still matters, just less than people think. On the BBPA's own model for a community wet-led pub taking about £5,000 a week, the divisible balance is £742 a week. Every 5 points of split is £37 a week, about £1,930 a year.

BBPA community wet-led model, about £5,000 a week (2023 data, published June 2024), all ex VAT

Line	Per week
Total sales	£5,579
Gross profit (54.9%)	£3,062
Running costs, excluding the tenant's own wage (41.6% of sales)	£2,321
Divisible balance (13.3% of sales)	£742
Rent at 50%	£371 (£19,292 a year)
Left for the tenant at 50%	£371 (£19,292 a year)

The tenant's half is your wages

This is the bit I'd want every new tenant to see before they sign. The BBPA guide says plainly that its models leave out managers' salaries, because tenanted pubs don't employ a full-time manager. The tenant is the manager. So that £371 a week isn't profit. It's your pay, plus the return on whatever you put in, plus your cushion for a bad month.

At 50 hours a week, £371 is £7.42 an hour. At 60 hours it's £6.18. The National Living Wage is £12.71. If a rent proposal leaves you less per hour than the person you'd pay to cover your shift, the split isn't the only problem, the whole shadow P&L is.

Number one to check: the gross profit

The shadow P&L assumes a gross profit percentage. The real pub has waste, line cleaning, ullage, staff drinks, comps and the odd pint nobody rang through. If the proposal assumes a GP your stocktakes have never shown, the divisible balance is built on beer you don't actually sell.

On that same £5,000 model, drinks sales are £4,848 a week. Two points of GP on drinks is £97 a week, 13% of the whole divisible balance. If the rent is set off the assumed GP and you actually achieve two points less, the pubco still gets £371 and your £371 becomes £274. That's about £5,000 a year coming straight out of your half.

This is where your stocktakes earn their keep. Twelve months of stocktake results, each one showing the actual GP and the variance, is the strongest evidence a tenant has, because it's what the pub really did, not what a model says it should. If your yield has been 2% short for a year, that's a cost of running that pub, and a reasonably efficient operator would face some of it too. What's normal is in acceptable stocktake variance and what draught wastage is normal.

Number two: the sales mix

Wine, spirits and soft drinks make a higher GP than draught beer. So a shadow P&L that assumes more of your trade is spirits and less is lager comes out with a higher GP, without anyone touching a percentage. The Pubs Advisory Service and Morgan & Clarke's rent review guide shows a worked example: the same £383,140 of drinks sales, with the landlord's mix putting 33% through wine, spirits and minerals against the 20% the pub's records showed, gives about £8,000 a year more gross profit on paper. Your till reports by category are the answer to that. Pull twelve months of them.

Number three: the running costs

Costs in a shadow P&L usually come from benchmarks like the BBPA guide. The BBPA warns its own data reflects a past year and that the P&Ls it's built from "will largely reflect the position ahead of any negotiation". In other words, they're the pubcos' opening positions.

Small differences here are huge. The same rent review guide shows a pub with £360,000 FMT where costs assumed at 35% of turnover instead of a real 39% wipe out £14,400 of the tenant's profit, with the rent unchanged. On the BBPA £5,000 model, four points of costs is £223 a week. Take that off a £742 divisible balance and leave the rent at £371, and the tenant is left with £148 a week.

The lines I'd check against my own bills first: energy, wages at this April's £12.71 with holiday pay and employer's NI on top, card fees, Sky or TNT, and repairs. Every one of them has moved since the BBPA's 2023 data. I've done per-pint versions of most of them in electricity per pint, card machine fees and what Sky costs a pub.

What the Pubs Code makes them give you

For tenants of the big pubcos in England and Wales, the Code puts real weight on your side here. The proposal has to arrive at least six months before the rent review date. It has to contain the information in Schedule 2 of the Code, plus whatever else you need to negotiate "in an informed manner". During the assessment the pubco has to answer any reasonable request for relevant information, or explain why not. Someone involved in preparing it has to have visited the pub in the three months before. And they have to advise you to get independent professional advice before you agree. The full timetable is in rent assessment, step by step.

What I'd do when the proposal lands

1. Put their three numbers next to yours. Their FMT against your last 12 months' takings ex VAT. Their GP% against your stocktake GP. Their costs, line by line, against your bills.
2. Ask for the workings in writing. Which comparables, which benchmark, which year's data, and why that split. Under the Code they have to answer reasonable requests.
3. Price each difference. One GP point, one cost point, £10,000 of FMT. Turn every gap into pounds a year so you know which ones are worth the argument.
4. Do the hourly-rate sum. Your share divided by your hours. If it doesn't beat paying someone else, say so with the numbers.
5. Get a surveyor who acts for tenants. The Code tells the pubco to advise it for a reason. The other side's surveyor has done hundreds of these.
6. Know your other route. If you're with a Code pubco, market rent only may be on the table at the same time. MRO, step by step has the clocks.

Where StockTap fits, and where it doesn't

StockTap won't value your pub and it isn't a surveyor. What it does give you is the evidence side: every stocktake's GP and variance, dated and kept, so when a shadow P&L says 57% you can show what the pub has actually done month by month. If you've already got a year of stocktaker's reports, send them over and I'll set the bar up from them.

Common questions

How is a tied pub rent calculated?

Usually by the profits method. The valuer estimates the fair maintainable turnover a reasonably efficient operator would take, deducts the cost of the drinks and food and all running costs to get the profit before rent, called the divisible balance, and the rent is a share of that balance.

Is pub rent always 50% of the divisible balance?

No. The BBPA's guide says RICS guidance put rents between 35% and 65% of the divisible balance, with many settling between 45% and 55%. The 2025 RICS professional standard says there is no formulaic approach or default figure, and the share should come from evidence.

What is the divisible balance in a pub rent review?

It's the profit left in the shadow profit and loss account before rent is deducted, to be shared between the landlord and the tenant. On the BBPA's model for a community wet-led pub taking about £5,000 a week it is £742 a week, or 13.3% of sales.

Does the divisible balance include the tenant's wages?

No. The BBPA guide excludes managers' salaries because tenanted pubs don't employ a full-time manager, so the tenant's share of the divisible balance has to cover the tenant's own pay and return on investment.

What should I check first in a pubco rent proposal?

The gross profit percentage it assumes, against your own stocktake results. On a £5,000-a-week wet-led pub, two points of drinks GP is about £97 a week, roughly 13% of the divisible balance.