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Morning Briefing for pub, restaurant and food wervice operators

Fri 31st Oct 2014 - Friday Opinion
Subjects: US influences, the tenanted pub company statutory code and service recovery
Authors: Russell Margerisson, Peter Holden and Ann Elliott

Big in the United States, big in the United Kingdom by Russell Margerisson 

Are you old enough to remember when fast food in the UK was fish and chips, when pubs served beer and a packet of crisps if you were lucky and coffee was Instant or Camp?

How things have changed and I am not talking about technological advances over the past 40 years, but the continued Americanisation of UK society and culture.

Let’s just take a moment to think through some of the changes we have seen in the past 40 years or so – fast food restaurants, for example. McDonald’s certainly springs to mind, but what about KFC, Burger King, Pizza Hut and Dunkin Donuts.

More recently, the likes of Ed’s Easy Dinner, Five Guys and Tinseltown to name but three have all brought a part of the US of A dining experience to the UK.

Then there is the inexorable rise of coffee and drinks on the go – it seems almost that you are not dressed in London now unless you have a takeaway beverage in your hand. Now that’s not to say that all this is bad news; one of the great things that we have seen over the years is the improvement in service levels in bars and restaurants. Not only is the food of a higher quality but the service standards, and I am talking generally here, are much better. From meeting and greeting to taking your order, checking that all is fine with your meal, and that you are okay for drinks, through to paying your ‘check’ on departure, the overall service experience is much-improved.

But it’s not just from the service perspective that all things American have invaded our shores. We now have regular NFL games at Wembley including last Sunday and according to The Evening Standard no less a figure than George Osborne is keen on Wembley having a permanent franchise. What about flash sales and Black Friday – yes that’s the day after Thanksgiving (the fourth Thursday in November for those of you not yet fully Americanised). It’s coming in a few weeks, so watch out for all those sales adverts that are likely to invade your inbox. Oh yes and that’s closely followed by the ‘holidays’ otherwise known in the UK as Christmas, although in fairness the Americans do not have the long break that we now do!

Drinks trends, particularly alcoholic ones, are also revealing. Obviously, we have the invasion of Budweiser, plus Miller and Coors but what about Bourbon – Jack Daniels and Coke anyone? In the UK, we have a rich history of brewing, we exported beers to the US for years but now have the emergence of craft beers and stubbies all following a trend from America. Yet despite that, overall beer consumption in the US has fallen as wine and spirits have grown, so perhaps the real trend to watch out for is craft distilleries as spirits improve via premiumisation and retro cocktails. There has also been the trend for increased flavour variants with vodka still leading the way but also notable growth for rum, bourbon and tequila. Whiskey Sours anyone?

So why talk about this today – because of course it’s Halloween! Yes, it’s a festival that has been around for years but have you noticed how Americanised this has become? You can see houses with pumpkins and candles, spiders webs and witches, and the chances of there being no kids coming to play trick or treat is virtually non-existent. But for pub, bar and club owners, it’s fantastic and has become a massive calendar event. The young have embraced it like there is no tomorrow; head for any of our clubs tonight and, if you can get in, you are assured of a scary evening. But don’t even think of going unless you are dressed up in a Halloween outfit, otherwise you will stand out more than a City fan in the Stretford End at Old Trafford or a Union Jack flag in a Fourth of July Parade.

Halloween has simply become one of the busiest nights of the year and depending on what day of the week it falls is a real bonus to businesses, so here’s to the Americanisation of our nightlife. I look forward to seeing how well we have done tomorrow and then I may even raise a JD myself.
Russell Margerisson is chief financial officer of nightclub operator Luminar Group

The unintended consequences for the industry of the Statutory Code and a solution by Peter Holden

In the last month or two a lot of heat and light has been generated because the government intends to include tenancies-at-will and shorter term agreements within the core Statutory Code of Practice for the tenanted pub sector. Many industry figures are requesting that an exemption be made for these types of agreement and have warned that this could result in pub closures. Is this correct?

Before answering this question it might be as well to reflect upon the consultation paper that was issued as the government’s response. This has shown a heightened sensitivity on the part of the government to pub closures resulting from legislation. Similarly, the government has shown some awareness of potential unintended consequences and it might be as well to consider what the consequences (foreseeable or otherwise) might be. 

It is also worth making the point that the atmosphere of distrust between some pubcos and some tenants has reached a stage where sensible points cannot be made by one side without the other making the accusation that this is just another attempt to protect vested interests. This is, perhaps, inevitable where entrenched positions have been adopted. 

It is quite obvious that there are certain provisions of the Statutory Code that cannot sensibly be made to apply to tenancies-at-will or some shorter term agreements. It must also be said that there are some provisions of the Code that should properly apply to both of these. As an example, I do not think that anybody could sensibly argue that the overarching principle of fair and lawful dealing (Part 2 of the Code) should not apply to these types of agreements.

Tenancies at will; keeping pubs open
Tenancies-at-will should only be used in periods of transition. They are not properly suited to anything other than short term holding arrangements. The law does, in any event, imply a tenancy-at-will in some circumstances even where an agreement has not been documented and signed. Sometimes, you have to enter into a tenancy-at-will just to get someone into the premises where a previous occupier has suddenly vacated. In those circumstances, you need an agreement that can cover a short period of occupation and until you have had time to make proper arrangements for a substantive agreement to be entered into. It is preposterous to imagine that it will be possible to conclude a business plan prior to the granting of the tenancy-at-will in those cases. If the government insists on this, the simple fact is that pubcos will not be able to deliver it and it will unquestionably lead to pubs closing for, at the very least, periods of time. This cannot be to anybody’s advantage. 

Interim arrangements are in everyone’s interests
There should, separately, be an exemption for what used to be called “probationary” tenancies. These can last typically for six or 12 months and are intended to give both sides an opportunity to see if they can make it work. There is nothing threatening or unfair in this. It is a very sensible interim step before parties enter into long-term commitments. These types of agreements are characterised as being, generally, for less than 12 months, contracted out of the Landlord and Tenant Act and containing various break clauses. 

The purpose of these arrangements is, as stated, to see if both sides can make it work and to give everybody a little bit of time and space to formulate a proper plan for the premises going forward – not least of all the business plan referred to in the Statutory Code. It is simply not practical in these cases to conclude the business plan before the tenant has dipped his or her toe in the water. The better policy is to have probationary tenancies excluded from certain provisions of the Code so that you can provide for a cost-effective entry into the pub business but without being caught on long term commitments. If there is to be an exemption in these cases then there must also be a cost-effective exit where it does not work out. In reality, this means the pubco allowing for notice to be given and for a fair allocation of costs with the outgoing tenant – and this should be made clear at the start. It would also be necessary for the pubco to have a plan for the pub while the tenant settles in and starts to consider a longer term business plan. This “interim” plan must be agreed with the tenant and must say in clear terms who does what.

Proposals for change

Accordingly the legislation should be changed in the following respects:

1.   Tenancies-at-will covering periods of transition should be excluded from certain of the provisions of the core Act (I will not bore readers by detailing them here but, obviously, the need to supply a business plan is one of them).

2.   No tenancy-at-will can be allowed to continue for more than six months – realistically this is more than any period of transition. 

3.   You cannot have successive tenancies-at-will granted to connected persons with a view to avoiding core provisions of the Act.

4.   You can only have one probationary tenancy per person.

5.   For a probationary tenancy there must be a plan, provided by the pubco, to cover the period while a proper business plan is settled and which will make it absolutely clear who is responsible for what. Repairs and compliance with statutory requirements would not generally be the responsibility of the tenant although any damage they cause must be put right. This plan should make it clear what the tenant can expect to make out of it.

6.   If the pubco does not want to proceed it must explain in writing.

In short this proposal does not undermine the proposed legislation and is in fact to everybody’s advantage. 
Peter Holden, of national legal firm Freeths (formerly Kimbells), has provided advice to the industry on many regulatory issues

Outstanding examples of service recovery by Ann Elliott

During the last ten days or so I have eaten (or drunk in) d’Parys in Bedford, The Greenhouse in W1, Gallery Mess in the Kings Road (run by Rhubarb), Cote in Oxford, Las Iguanas, Banana Tree in Milton Keynes, The Swan in Denham, Caffé Nero, The Betjeman Arms in St Pancras, Bone Daddies, Somerstown Coffee House, Costa, La Bottega and Big Easy in Covent Garden

Lots of different experiences and not a bad one amongst them, apart from Costa, that is. Service at the particular site was incredibly slow, it was short of staff and had a load of unclean tables, which meant we had to tidy up a table before we could sit down and have our coffees. More coffee seems to be spilt here than anywhere else I go – maybe it’s the tall glasses on unstable saucers being carried on small trays by people having to manage bags and phones – but we had to move quite a bit of slopped coffee out of the way to sit down. It didn’t really set us up for the day ahead.

Apart from that experience, service has been generally great. But I had two specific instances of recovered service which were quite brilliant.

At Cote, I arrived to find my booked table was in a room right at the end of the restaurant where the only other table was occupied by two families and an indeterminable number of very noisy children. I asked to move but the place was packed and there was nowhere else I could go (how quickly you forget what it’s like to dine with young children). My friend was very late and I felt a tad ignored until she arrived. That’s normally when the whole experience starts to go into a downward spiral and it’s very easy to be critical of everything that follows.

We ordered our mains. We were talking and not really aware of timings until the manager arrived with two glasses of champagne apologising for the delay (which we just hadn’t noticed) in our food. The food, served by Sarah (a really bubbly and friendly waitress), was tasty and well-presented. Our desserts were just as good. When the bill came they had knocked off the costs of the mains due to their ‘timing issues’. So between the manager and Sarah we felt charmed, cared for and ‘loved’ – a great service rescue in operation.

In Big Easy, I arrived five minutes early for a 12pm table. I asked if they had our booking for two. Four times I had to ask. Four times the receptionist gave me a card and told me to call the number for central reservations. Maybe it’s my Northern accent. All the customers who had the temerity to turn up five minutes before opening time had to wait until it opened at 12.03 and were ignored by every passing member of staff (just a ‘hello’ would be nice). I was thoroughly annoyed (and that’s putting it nicely) by the time they kindly granted me the table.

After that the whole service experience escalated positively about ten-fold. A brilliant member of staff took me to the table and chatted on the way there, a friendly waiter took my drinks order and our table waiter was awesome – fast, knowledgeable, lively, responsive. The food might not be to everyone’s taste (not the place for carb avoiders) but the atmosphere is wonderful, the décor is bang up-to-date and the service (once past reception) is case study material. So a great service rescue here too and I would recommend it to anyone who wants an alternative to TGI Friday’s, a choice of 500 spirits, food all over their clothes and a dry cleaning bill.

I had stunning food in both Bone Daddies and Banana Tree and no need for any service recovery in either restaurant – both worth a visit. Hopefully they live up to my experiences.
Ann Elliott is chief executive of leading sector PR and marketing agency Elliotts –

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