Pub Kitchen Agreements: Licence to Occupy vs Commercial Lease

The legal structure of your pub kitchen deal matters more than most operators realise. The vast majority of pub kitchen arrangements in the UK — including those available in London, Manchester, and Birmingham — use a licence to occupy rather than a commercial lease. The distinction isn't just legal jargon; it affects your rights, your obligations, and how easily you can walk away.

What Is a Licence to Occupy?

A licence to occupy gives you permission to use a space for a specific purpose. It does not give you exclusive possession — the landlord retains the right to enter the kitchen, and in most cases, the pub staff may use shared facilities. Licences are personal agreements that cannot be transferred or assigned to someone else.

What Is a Commercial Lease?

A commercial lease grants exclusive possession of a defined space for a fixed period. You have security of tenure under the Landlord and Tenant Act 1954 (unless contracted out), meaning the landlord can't easily remove you when the term expires. Leases are registrable, assignable, and provide stronger legal protections.

Head-to-Head Comparison

Why Most Pub Kitchens Use Licences

Licences suit both parties in a pub kitchen arrangement:

• For the operator: Lower upfront costs, shorter commitment, easier exit. If your concept doesn't work in a particular pub, you can move on without a years-long liability.
• For the landlord: They retain control of their premises. A licence doesn't give you tenancy rights, so if the arrangement isn't working, the landlord can terminate more easily. They also keep responsibility for the building, which matters when the kitchen is inside their trading pub.

What to Look for in a Licence to Occupy

Even though licences are simpler than leases, you should still read every clause. Key things to check:

• Break clause: How much notice to terminate? Push for mutual break at 3 months.
• Revenue share definition: Does the percentage apply to dine-in only, or delivery too? You want delivery revenue excluded.
• Equipment responsibility: Who repairs the oven if it breaks? Typically the landlord owns the equipment and maintains it, but confirm this in writing.
• Insurance requirements: What cover do you need? Public liability is standard; the landlord should have buildings insurance.
• Termination conditions: Under what circumstances can the landlord end the agreement early? Common triggers include non-payment, breach of food hygiene standards, or the pub itself closing.
• Trading hours: Confirm exactly when you have kitchen access. "Evenings and weekends" means different things to different landlords.

When a Lease Might Be Better

A small number of pub kitchen arrangements use formal leases. This makes sense when:

• You're investing significant capital in equipment or fit-out
• You want long-term security in a premium location
• The kitchen is a separate unit (e.g., an outbuilding) with its own access
• You're an established operator with a track record and want to negotiate from strength

Red Flags to Watch For

• "All-inclusive" deals with no written agreement — always get it in writing, even for a simple licence
• Revenue share on delivery sales — this erodes your margins significantly given 25-35% platform commissions
• No break clause — you should always have a way out
• Personal guarantee on a licence — unusual and worth pushing back on

Key Takeaways

• Most pub kitchens use a licence to occupy — simpler, cheaper, and more flexible than a lease
• Licences don't grant exclusive possession or security of tenure
• Always get written terms, even for informal-seeming arrangements
• Push for delivery revenue to be excluded from any revenue share
• Check break clauses, equipment responsibility, and termination conditions before signing