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Fri 13th Jul 2018 - Friday Opinion
Subjects: You must make delivery deliver for your brand, stools are cool and a kinder, gentler capitalism for wet-led pubs
Authors: James Hacon, Glynn Davis and Ann Elliott

You must make delivery deliver for your brand by James Hacon

Few trends can truly be said to have had a fundamental effect on the restaurant business model. The growth of delivery is one.

When it comes to delivery, consumers are not voting with their feet but with their fingers and thumbs – opting for the convenience of having restaurant-quality food delivered to their home or workplace, even when the result is often far from restaurant-quality food by the time it has undergone several backflips and somersaults at the hands of a helmet-clad delivery driver.

It’s clearly what consumers want and there are plenty of us out there cashing in to give it to them. The question is, at what cost?

As most of you know I am a pragmatist, a realist and far from an evangelical restaurateur who will write about the importance of the restaurant as a place to socialise, entertain and enjoy the experience – although all are pertinent points. The cost we are talking about is the future of your business. 

I understand customers want different things for different occasions. When I stay in a hotel for business, rather than choosing ridiculously overpriced room service or a table for one, delivery is a great option. On those dark winter nights when you get back late after a long-delayed commuter train, delivery is right up there once more. These are different occasions than when I want to get dressed up and enjoy a full-service restaurant experience. 

We can all see the appeal I’m sure. I’m also sure, however, that there is cannibalisation within businesses and there will be times when your customers, who have made that extra effort for their favourite cuisine or brand in the past, will take the opportunity to eat it at home – because they can.

The other obvious cost is the commission charged by the delivery partner, with some smaller businesses paying more than a third for this service, inclusive of VAT, so in real terms more than 40% on your net. It’s a costly business.

Next up is the distraction to your service teams and your kitchen having to cope with a full restaurant and a new set of delivery orders during peak times.

You’ve also got the negative effect of having drivers with cumbersome backpacks blocking your restaurant entrance, putting off guests and interfering with the beautiful guest journey you’ve built and pride yourself on.

So why do we do it? Because our customers want it and right now so do most of our investors. I’d hate to think of the level of like-for-like decline we’d see, even from some of our most successful brands if it weren’t for the saviour of delivery.

All emotion and drama aside, if you are offering a cuisine that travels well you should be maximising the delivery opportunity. I helped deliver a seven-figure revenue line through delivery in a recent role, one that was continuing to grow and was far from insignificant.

So what do you need to do to make it work for you? The first thing is to ensure you have robustly tested the suitability of your product in delivery trials. See what travels well, use the data at the disposal of your delivery partner to plan what sells and make sure it’s tight and easy for the kitchen to deliver at peak times. Don’t fall into the trap of thinking you need your whole menu online.

Second is commit to it. Push the site teams to monitor sales levels on the chosen platforms you use and avoid turning it off. The dishes you put out for delivery need to be produced fast. There is an almost direct correlation between speed of food being ready and the number of orders you gain.

Third is make someone responsible. If you are a major brand with lots of sites and this opportunity could bring in that seven-figure sales line, why not hire someone to manage and maximise it? It’s likely to be worth more than one unit so it’s worth the investment.

Next, use your packaging and accompanying collateral to sell your brand, highlight your key message and drive site visitation. Bounce-backs work really well.

Think about the additional revenue opportunities around drinks, desserts and retail. What will people want on those home-dining occasions? How about popcorn or chocolate bars with their pizza for movie night? All great upsells. Don’t feel restricted by what you are selling in the venue and let’s not be restricted by restaurant pricing either. Few people are going to pay £25 for a bottle of wine to drink at home, but they might pay £10. Speak to your wine suppliers, find good-quality wine with popular grape varietals that can be priced at this level. Think of the incremental revenue opportunity not the percentage margin while, of course, remembering the commission levels.

We know the big players. Just Eat pitches itself as the online market place for takeaway food, while UberEats is a transport provider that will deliver food as well as people from A to B.

But what of Deliveroo? Its positioning used to be clear. It was the delivery platform for restaurant-quality food, the place you’d go for better-quality food from brands you knew and trusted. Not any more it would seem. In my opinion its business model is confused, which is leading to a growing level of discontent within the industry. Speaking to many brand marketers, they feel the once-protected space alongside brand contemporaries has gone, with fast food being listed above or below their brands, which is not ideal for many.

I saw one commentator label them the “Trojan horse of our sector”, which I can understand. In all cases of third-party platforms, the relationship with the customer is removed, which is something many have come to accept as a quid pro quo for their increased revenue. However, for the most part restaurateurs feel safe in the knowledge the partner is simply offering a service, connecting the customer to their brand. 

Deliveroo’s recent actions make me feel uneasy, though, with a seeming intention to use the platform and audience it has built to take the spoon out of the mouths of the brands they are feeding. The company has been operating dark kitchens for some time under the premise you don’t need a restaurant at all, just a kitchen. To date, these have been managed by operating partners that provide the team, food and know-how, paying a higher percentage of commission for a fully fitted kitchen in a Deliveroo Editions site. A great opportunity for operators to spread their brand without capital investment – that’s the sell.

Seemingly it’s not necessarily working for some partners, though. The answer is to encourage people to create new brands the operator can prepare and sell out of the same kitchen. This is great in principle and for those operators in the short term who will make a better return from the investment, but what about the long term? Doesn’t it prove Deliveroo doesn’t need the established brand to be successful from these kitchens? The risk, of course, is it discounts the need for the brand at all, only requiring an operator. A very different place from being a partner to great brands.

Add into the mix the fact the company launched a dine-in concept with click-and-collect technology in Singapore and it leads to even more questions as to the company’s long-term plan.

We’ve seen technology companies change markets in many sectors. In the hotel sector, online travel agents overtook the traditional travel trade in less than a decade. Aggregators came next, shaking things up once more, then Airbnb came and disrupted it again, changing the game completely. In fact last October, the company announced it was working with developers to launch branded apartments in Florida – directly competing with hotels and other apartment owners that use the platform. 

With large consumer awareness and technology penetration, it seems the next step will be major technology players taking the opportunity to jump on the in-restaurant transaction and journey bandwagon. We could find we are paying ever-increasing commission levels on transactions beyond delivery.

It is vital the industry and key operators think for the long term regarding their strategies when it comes to online distribution and technology. Spread the risk by working with multiple players. Start building infrastructure to gain direct orders in addition to third parties, even if only initially through click and collect. Partner each other to find, define and develop solutions.

Third-party providers have their place and will undoubtedly become a bigger part of the mix. I think we should be careful we don’t give up our intellectual property, our know-how and customers to let them pull the rug out from under us. Keep the keys to the castle safe – think for the long term, not just this year’s like-for-likes.
James Hacon is managing director of Think Hospitality, which advises multi-site brands on growth, brand and development strategy, as well as investing in early-stage concepts with a bright future

Stools are cool by Glynn Davis

I had the privilege of being asked my views last year on what elements I’d like to incorporate into my local pub. London brewer Fuller’s had recently acquired a lovely Victorian boozer, The Great Northern Railway Tavern, which it intended to restore to its former glory.

Rather than rushing into anything, Fuller’s sensibly canvassed some local opinion before committing any investment. The two key essential items I suggested were a great beer list and bar stools – not necessarily in that order. My children recommended I also propose free ice cream at all times, which I also put forward.

My bar stool suggestion not only highlighted my love affair with this humble piece of furniture but was also a fight-back against previous managers of the pub, who removed all stools from the bar for a time. Their reasoning was to dissuade people from crowding around the bar. This mirrored the strategy town centre bars brought into force to avoid so-called “vertical drinking”. I can understand it in circuit pubs in city centres but it seemed a rather bizarre decision in a local boozer in a north London “suburb”.

Thankfully, Fuller’s reintroduced bar stools – along with a super, rotating selection of beer – although my children were disappointed by the lack of free ice cream. My view is that the beating heart of a pub is found at the bar and, space permitting, where I invariably gravitate – perched on a stool. It’s where the action is and it’s the buzz around the bar which gives any pub the energy that permeates throughout the premises. I suspect we take this for granted in the UK because it’s one of the things tourists comment on when visiting this country.

For customers of Charles Wells’ chain of 12 “British” pubs that are expanding across France, one of the appealing aspects of the venues has been the requirement for customers to visit the bar when they want to buy a drink. This is in contrast to the French tradition of orders being taken at the tables. This British system sucks people to the bar and enables much more interaction among the customers, who invariably find they congregate around this central point. This has found particular appeal among young French drinkers.

As a bar stool advocate it has been interesting to see the move by restaurateurs to incorporate counter seating into their dining rooms. I’d say pretty much any new opening now includes some such seats – more often than not positioned around an open kitchen. This move has been driven by a number of factors including the need to squeeze more covers into venues to counter the increased cost of running restaurants.

Such seating also suits solo dining much better because the customer can focus on the action behind the counter and from an economic point of view because they don’t take up a whole table. It also chimes well with the move towards more casual dining because even in the smartest restaurants, it feels rather louche to be perched on a bar stool.

I’ve had some of my more enjoyable meals out this year dining at the counter. Stools in Spanish restaurant Rambla in Soho puts you right at the heart of the action as chefs work away creating magical dishes. The stools also put you over the top of everybody else in the compact room, giving great visibility.

It’s the same story at another of my local restaurants, Irwin, which successfully mixes Italian and Scottish cuisine and drinks – but I only visit if I can grab a couple of stools at the pewter-topped counter. The more relaxed nature of its bar-counter seating means an evening intended as “drinks only” can seamlessly morph into a procession of small plates for dinner in a way that wouldn’t be possible at the tables in this tiny venue.

Being a bar fly in Irwin also affords an opportunity to chat with the owner, who works behind the bar, and to people-watch as the restaurant entrance is alongside the bar. These things combine to make you feel you are in the thick of things. It’s safe to say my love affair with the bar stool continues but it now has some competition from the newcomer in town – the restaurant stool.
Glynn Davis is a leading commentator on retail trends

A kinder, gentler capitalism for wet-led pubs by Ann Elliott

Amber Taverns managing director James Baer gave a stunning presentation at the Propel Multi Club conference last week. Not stunning in the sense of flashing lights, dramatic pauses, creative videos and overacting – more in the sense the content was incredibly powerful.

We have been used to viewing what has happened in the past 25 years in the tenanted/leased pub sector – with the growth of venture capital, private equity and the like – as the natural state of capitalism. That’s what happens. They invested, they risked, they lost, they won. 

We can sometimes forget, though, when looking at the bigger picture, what happened to those who took on pubs early in the process and lost everything. We tell ourselves they knew what they were taking on, they should have taken legal advice, they could read the lease – we made it all perfectly clear. I say this as one involved in the conversion of tenancies to leases in the early 1990s on behalf of Whitbread Pub Partnerships (and knowing the script) as well as having five Inntrepreneur leases of our own (and, yes, we lost everything).

This world has changed dramatically during the past three years or so, with many pub companies realising this approach was untenable in the longer term because having a group of unhappy and disaffected lessees was just the same as having a group of unhappy and disaffected team members – you can keep replacing them but ultimately something has to change. There are now more types of agreement, more flexible agreements, cheaper rents, more support, more non-rentalised capital investments, less upward-only rent reviews, and a stronger sense of fairness.

James, I believe, was supporting these changes and the adoption of a gentler kind of capitalism. He started, unusually, with a quote from Karl Marx – although I can only find it accredited to Lenin to be very picky – using it to describe the hyper pub companies in the 1980s as “rentiers”. The word is described in the quote as: “The extraordinary growth of a class or rather of a stratum of rentiers, ie people who live by ‘clipping coupons’, who take no part in any enterprise whatever, whose profession is idleness.”

The quote actually continues: “The export of capital, one of the most essential economic bases of imperialism, still more completely isolates the rentiers from production and sets the seal of parasitism on the whole country that lives by exploiting the labour of several overseas countries and colonies.”

James also used this quote to suggest the old model of leased pubs was broken and a new, more compelling and fairer system was required: “The gaining of rentier income from ownership or control of assets rather than from capital or labour or labour used for production in a ‘free’ competitive market.”

He wondered if this rentier philosophy influenced too many of the big pub companies in the early 1990s – the high level of debt for those companies led to limited investment, high beer prices, high rents and frequent turnover of tenants, all of which combined to deliver a poor customer experience.

James argued for a kinder, gentler capitalism for wet-led pubs – the type he is no doubt adopting in Amber Taverns. These pubs involve sensible operator agreements, well-invested sites, value-for-money beer pricing, a full Sky/BT sports package, and a high level of head office support.

Of course, this isn’t just happening in Amber – it is happening in Craft Union, Marston’s and Hawthorn Leisure, to name just a few.

I also think this swing towards a more equitable tenant/landlord relationship has coincided with the rise of the “value” market place in the pub sector. Much of the talk now is about premiumisation of drinks, food and entertainment, particularly in London, but not every customer wants (or can afford) to pay more than they have to. They may not have much disposable income but they still want to go to the pub and have a drink with their friends and family, watch sport, have a laugh and not feel they are in a restaurant. We ignore this market at our peril.

James was modest, ego-free, unassuming and full of integrity. He talked a lot of sense and I learnt a lot. Brilliant.
Ann Elliott is chief executive of Elliotts, the leading integrated marketing agency in the hospitality and leisure sector –

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