Mark S. Elliott has spent 25 years working in various management roles within the tenanted and leased divisions of the UK's largest breweries and pub companies. His extensive knowledge and day-to-day involvement with pubs and publicans make him well qualified to know what is required to run a successful pub. He shares his knowledge and many 'insider tips' with you in this book. Mark is based in Cockermouth, Cumbria.
Amusement machines can provide you with a steady source of income, with the average tenanted and leased pub taking an estimated £ 70 per week from their amusement machines, and the highest earners taking in the region of £ 400 per week. (Based on sharing net income on a 50/50 basis with their brewery or pub company.) The majority of your machine income comes from AWP (Amusement with prizes) machines, also known as fruit machines or gaming machines. Added to this, is income you earn from equipment such as video machines, pool tables, jukeboxes and any other types of machine, such as arcade games.
The actual amount of income you make from your machines is determined by the type of customers you attract, the kind of pub you run, how net income is split, and how well you manage your machines. Before taking on your pub, get written confirmation of how much amusement machine income is currently being earned.
Arrangements for sharing machine income
If you are a tenant or lessee, you will probably be required to use machine suppliers recommended by your brewery or pub company, and there may also be an arrangement to share the net income from your machines with your brewery or pub company. These share arrangements vary; some require you to share only the AWP income (possibly on a 50/50 or 60/40 basis), while others require a share of income from all machines and equipment such as video machines, pool table and jukeboxes. A small number of tenancy and lease agreements allow you to keep all machine income for yourself, ie you retain 100% of the machine income.
If you own the freehold of the pub, you will not be tied by an agreement to use particular machine suppliers, or have to share income with a brewery or pub company. You will however, have to monitor machine performance and manage suppliers yourself.
How your machine income is calculated
The machine supplier collects their rent from the gross income in their machines when they come to empty the cash on a fortnightly basis (or weekly for high-earning machines). Out of the remaining balance, they deduct an apportioned amount to cover Amusement Machine Licence Duty (AMLD) payable to HM Revenue and Customs, and leave you with your share of the net income. VAT is payable by you on the ‘taxable take’ of amusement machines, that is, the amount put into the machine less the amount returned as winnings to players.
There may be circumstances where a poorly-performing machine does not take enough money to cover the rental and licence duty deductions. This is known as being in ‘shortfall’, and you will owe your supplier money to cover this loss. In this situation, urgent action needs to be taken to prevent its reccurrence. (See section below, on ‘Maximising your AWP and SWP income’.)