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Fri 10th Aug 2012 - Friday Opinion
Subjects: Minimum pricing, 2013 restaurant trends, business rates
Authors: Tim Martin, Mike Palmer, Anthony Alder
 

Those calling for minimum pricing are flat-earthers by Tim Martin

Publicans have rightly perceived for many years that supermarkets are an existential threat to their businesses. Not surprising, really, since pubs have lost 50 per cent of their beer sales to supermarkets in the last 30 years. Wander into Tesco, M&S or Waitrose and you’ll get a big fright at the vast range of their beers, wines and spirits and a serious shock at the disparity between their prices and ours. 
 
The virtuosity of the modern-day supermarket offers in respect of alcoholic drinks is also matched by the brilliance of the improved food offerings, ready-made or not, from all corners of the world in all seasons. The consequences of the vastly more competitive supermarket offerings are pub closures on a grand scale, great pressure on individual publicans and a poor return on capital from most of the listed pubcos. 
 
More worryingly, many customers are getting out of the pub-going habit and are reverting to the house-party/dinner party circuit. The mistaken response of many of us has been to implore the government to introduce minimum prices for supermarkets. Whisper it secretly, but minimum prices are manna from heaven for supermarkets, who like nothing more than a price rise (just like us), especially one that has no associated costs. Everyone buys a basket of goods from a supermarket and they just need to maintain an overall GP percentage. 
 
So they’ll get a higher GP on alcoholic drinks, if the minimum price brigade get their way, but they’ll maintain their competitiveness versus pubs by dropping the price of soft drinks and food to compensate. So the supermarkets competitive position will be preserved for another generation, until the licensed trade speaks out with one voice about the real problem. 
 
The real issue is tax. Not only do supermarkets pay no VAT to speak of in respect of food sales, they also pay a lot less cash tax per pint than pubs because of their low prices. Indeed, the competitive position of pubs has been further eroded by the increase in VAT to 20 per cent recently, and the real structural decline in the on-trade can be traced to the doubling of VAT by the government in about 1980. 
 
In Britain, we’ve learnt how to compete at the Olympics by assiduously copying the best techniques from abroad (the ‘aggregation of marginal advantage’, says cycling’s Dave Brailsford) but in the pub trade we’re way behind France, Sweden, Ireland and many other European countries who’ve realised that job and revenue creation for the government requires tax equality between supermarkets, restaurants and bars. 
 
The sharper pubcos have already understood this message with family brewers like Fuller’s, Shepherd Neame and St Austell joining Jacque Borel’s lower VAT campaign and even the previously ostrich-like Punch clambering on board. However, there is a deafening silence in respect of VAT equality, or at least a damning with faint praise, from many of the biggest pubcos: where are Greene King, Enterprise and even M&B, on this issue? 
 
Let’s get real, you flat-earth minimum pricers, about what minimum pricing will do for the pub trade: absolutely nothing. It’s impossible to compete against supermarkets in the long term unless pubs have tax parity. If you even dream that you can prosper against supermarkets in the next ten or 20 years by tinkering with minimum prices, you’d better wake up and apologise, to paraphrase the words of Muhammad Ali.
Tim Martin is chairman of JD Wetherspoon
 

The key UK restaurant trends for 2013 by Mike Palmer

The eating scene is changing rapidly and below I outline some of the key trends that will shape the market in the coming 18 months.

1. Continental Drift: sharing, informality and casualness: The concept of personal space is changing as we get more and more used to the feeling of being European. And gone are the huge linen encrusted barriers confused with fine dining. In comes counter-dining across the spectrum from quick-casual to Michelin star restaurants along with huge shared tables and cuisine to match. And sharing, grazing and people eating late is very much on the up.

2. Breakfast all the time: symbols of home and comfort: Increasingly across London and the UK, restaurateurs that jumped into the breakfast timeslot, as a means of defeating overall market decline, are beginning to look at what’s next. And it’s not just because, as more and more restaurants and quick casuals pile into pre-11am, there is oversupply in many areas. Breakfast items are extending across the menu, firstly because ingredients are often cheaper and, in the main, because it’s a symbol of home.

3. Speed: Giving power back to the guest: Do you loathe the acceleration of restaurant culture? Get a grip. Having spent the last couple of years admiring the queue at the fast food place on the other side of the road, casual dining is abuzz with the radical idea that delivering food to busy guests in record time may be a good idea. Restaurants need speed so they can get back into the lunch market. 

4. Meaning: Value-for-money redefined: The ‘value-for-money’ restaurant trend is being redefined. Questions such as, “Where is it from?”, “Does it fit in with my lifestyle?” and issues such as sustainability, transparency (open kitchens, hygiene ratings, supplier sourcing), local, artisan, ‘teach-me’ and above all wellness are taking over from financial decision-making. Food with meaning is taking consumer choice beyond price, status and materialism.

5. Street: Creative, entry-level capitalism catching on: High streets cluttered with chains are producing opportunities for street food, pop-ups, swarms and food trucks. 2011’s most notable entrants were #meateasy (pop-up) which anchored for a while in New Cross, the sellout “BurgerMonday” (pop-up) which has a huge following inviting guest chefs to join the search for burger enlightenment, and relative newcomer “Tweat_up”.

6. Flavour and fusion: Umami, bolder flavour and cross over: In itself, it’s not big news that restaurant trends include bold flavours being used across the board. The interest is in what’s happening next, and that’s manifesting itself as a return to fusion, which you may remember from the 1990s. The issue with 1990s fusion was that it became a byword for confusion and over-work. This time around, with more familiar flavours and a focus on simplicity, the more progressive operators are mixing it up. 

7. Food and your life: blurring of occasion: As informality rises, so does the blurring of occasion. This trend describes people segregating their experiences and forward-thinking restaurants are pouncing as boundaries between supermarkets, restaurants, home cooking, the local bicycle repair shop and the bank (for God’s sake!) are shrinking fast. For the consumer, this restaurant trend is about time-saving, engagement and community.

8. There’s an app for that: tech enabling reasons to visit: Geo-location is turning the anonymous into the known. The common theme here is to provide recommendations based on your geographic location (via your phone). Users can ‘check-in’ at their current location, find what specials or restaurant deals are offered, read helpful tips from other people, check the latest hygiene rating and accumulate points/badges which they might exchange for loyalty based special offers.

Mike Palmer writes the industry blog lostincatering.com and has consulted for many of the UK’s best-known operators

Business rates and how you appeal them by Anthony Elder

At a time when Her Majesty’s Government is coping with an increasing budget deficit on one hand and the political ramifications of non-domicile footloose tax-payers on the other, the taxation of property is more popular than ever with politicians. Property is not transient and is relatively easy to tax and there is no sign of any erosion in revenues collected. In 2005/2006 £19.9 billion was collected in business rates, representing 4.35 per cent of the total UK tax income. In 2008/2009 it had risen to £23.7 billion collected. The increased burden on rate-payers has not gone unnoticed and business rates have slowly risen up the political agenda with the system coming under increased scrutiny by the rate paying public.

At its loosest definition, the rateable value of a property is defined as being the equivalent annual rental value for a particular property. It is gently infused with a number of hypothetical assumptions and it is widely accepted that the current valuation methodology used to calculate the rateable value of a property has stood the test of time relatively well. Whilst no system is perfect, the rationale is at least relatively simple to grasp. 

Criticism of the rating system has primarily been targeted at the amount collected - in particular the rate in the £ levied. There has also been criticism in the increasing complexity of rates demands and the calculations therein and there is also an array of surcharges and other adjustments, introduced by successive governments using the rating system in their game of political football. Pressure is growing to simplify the rates collection process, in particular to abolish transitional relief. Until rates demands are made simpler and there is greater transparency the majority of rate payers will remain as confused as ever – and erroneous rates demands will remain unchallenged.

In the meantime a ratepayer can nevertheless take pro-active steps to mitigate his or her rates liability and the following five areas should receive particular scrutiny:-

1. Check what has actually been valued. Are the floor areas correct? It is surprising how often the floor areas are wrong. Has the correct value been attached to air conditioning units and treatment of external areas / car parking. 

2. Is the basis of valuation right? Public houses are assessed on a different basis of valuation to restaurants and there may be scope to switch the basis.

3. Has the Inland Revenue correctly analysed the rental information? A rent free period granted at the commencement of the lease, or capital contribution paid by a landlord to a tenant, provides useful ammunition in any appeal process. In addition certain classes of property require specialist knowledge – a public house for example is assessed by reference to turnover and correctly assessing the Fair Maintainable Turnover requires skill and professional judgement.

4. Have you provided the correct information to the Inland Revenue? The Inland Revenue frequently seeks to update its database and check what rent you pay. Care needs to be taken in providing the correct information to the Inland Revenue when requested.

5. Is the comparable evidence valid? We need to compare apples with apples – each property is different and it must not be assumed that one value fits all. 

Not every property is capable of appeal – in some cases the assessment may be too little, not too much. Too often a badly advised rate-payer will make an appeal which ends up costing money, not saving money. So exercise caution and take some advice - the government may be in financial difficulty but remember charity begins at home (and within your business!)
Anthony Alder is a partner with agent AG&G

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