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Morning Briefing Strap Line
Fri 21st Sep 2018 - Friday Opinion
Subjects: Avoiding commoditisation, beyond the call of duty, sunny side up and copyright protection racket
Authors: James Hacon, Glynn Davis, Shourav Sen and Paul Chase

Avoiding commoditisation by James Hacon

In a world of clickbait headlines and sensationalised news, it seems for some restaurant critics the way to join in the game is to review mass-market brands. I’m sure their editors love no more than a big high-street name getting slated with the ferocity and disdain their readers love, and in their minds the patrons of such run-of-the-mill establishments would hardly understand. Mass-market brands are such an easy target one feels compelled to question the motives of reviewers.

I take great exception to the unfair way some of these critics take aim at mass-market brands. Not because I can’t relate to some of the points being raised but because it’s often not put in context of the market that branded outlets are seeking to serve. It’s easy to be classist and elitist when visiting high-end restaurants several times a month but you’ve got to remember the majority of the population don’t visit this type of venue. Mass-market brands are serving millions of people each day. They are the norm for most people dining out in the UK. Do they deserve to be challenged? Yes! Does anyone in those businesses get out of bed each morning planning to do a bad job? Of course not! Restaurants are hard businesses to run, as anyone reading this article knows.

All I’m asking of critics is some appreciation of the fact there are people behind these brands who work hard and there are people on the floor of these restaurants who work equally as hard and care passionately about what they do. There are also millions of people out there who love the service, food and experience they deliver each day. It adds joy to the lives of the people they serve, a place to socialise, enjoy time with their family and friends, to try something new or even just a break from cooking for the night. Perhaps not award-winning but important nonetheless.

All said, work definitely needs to be done in this area. In these tough times we have to continue to work harder, even when we know the rewards aren’t as high as they once were. We need to focus on great hospitality, not just the bottom line. In reality we are having to find a new normal for our business levels. For most brands, that’s not going to be significant growth. There are clearly ridiculous hurdles placed before us by legislation that make this business even harder, which we need to work together to fight as an industry. That is why I would encourage you to join UKHospitality.

If there is one benefit from the turmoil of the past few months it’s that we have almost certainly seen a refocus on hospitality and standards instead of a drive towards exit, which seems to have distracted so many leaders for so long, perhaps fuelled by many looking to make their fortune or a statement from their final hurrah in the industry.

More widespread is a narrative of reducing the technical complexity of dishes (if consistency is a problem). It also means evolving a service model that combines efficient, great service with technology to overcome the difficulty of finding great team members. The goal is using technology to support a leaner, better trained, better rewarded workforce. When adding in the pressures of Brexit that are likely to reduce the availability of talent further, it is even more reason why owners need to commit to training great team members to deliver great food and drink to a consistently high standard. That means committing to even more training and upskilling. We know this is costly and, again, I wholeheartedly support the work of UKHospitality in driving an agenda that asks government to support this – and the promotion of our important industry as a career. We don’t need to wait, of course. Clearly there is scope for work to be carried out immediately by brands to reinvest in broader skills training and committing to skills, not just shipping produce in from central production units.

As easy as it is to bash us as a branded sector, the broader industry relies on branded outlets and big players. We are where many chefs and managers start their career before heading out on their own as entrepreneurs and driving the cycle that will keep our sector fresh. Let’s make sure we keep the sector vibrant and not always take the easy route but the one that proudly continues to deliver great hospitality.
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

Beyond the call of duty by Glynn Davis

We have just hit the tenth anniversary of the collapse of Lehman Brothers and it brought to mind an anecdote I heard from just before that period. Sir Fred Goodwin, chief executive of Royal Bank of Scotland (RBS), and Terry Leahy, chief executive of Tesco, were sharing a platform at a conference when the subject of “putting the customer at the heart of a business” was raised.

Apparently as they came off stage, Goodwin asked Leahy whether he really “believed all that customer guff”. Leahy continued to build a massively successful customer-centric business and earned a knighthood, while Goodwin oversaw the near death of RBS and was stripped of his.

Companies all too often talk about their laser-like focus on the customer when in reality it never gets much beyond them simply talking about it with no action taken at all. I was therefore fascinated to read about a restaurant in the US that seems to take customer service to the extreme.

Waffle House is based in the state of Georgia in the heart of an area prone to hurricanes. With recent news focusing on Hurricane Florence in North Carolina, it came to light that Waffle House has become renowned as the last place to close even when the weather is nearing its worst.

The efforts of the 2,100-strong chain of eateries has seen it become a bellwether used by US authorities during storms. The Federal Emergency Management Agency has revealed it has an informal “Waffle House Index”, which is used to determine how bad the damage is in specific parts of the storm-prone region on the southern coast.

If an outlet is forced to close, the local situation is deemed “red”, if there is a limited menu available the status is “yellow” and if a restaurant is offering a full menu the index remains “green”. For Waffle House to find itself in this unusual position has taken a significant amount of effort over the years and a desire to serve its customers to a level I doubt is reflected in many other businesses.

The company starts its annual hurricane preparations in May, before the storm season begins, putting plans in place to buy items such as generators, refrigerated trucks and portable toilets. It moves these resources around and loads as much product as possible into restaurants that are in the eye of impending storms.

The company also uses restaurants on the periphery of storm areas as temporary warehouses for those outlets in the heart of trouble zones. When the storm passes, Waffle House trucks in essential supplies such as bottled water and cleaning products to help return the outlets to normal.

This stay-open-at-all-costs mindset has ensured Waffle House has a special place in the hearts of the people in these storm-ridden regions. They have a loyalty to the business based on its commitment to serve them whatever the weather. It brings to mind the position pubs found themselves in during the Second World War, in London particularly, when great efforts were made to keep up morale by only closing pubs as a last resort.

This prompted a renaissance for the pub after a tough period during the First World War, when drunkenness was deemed inappropriate. This unique British institution was seen to play a crucial role in fostering community spirit and during this period it began to enjoy rising numbers of female customers for the first time.

With many foodservice companies having a tough time at the moment, I wonder how many of them have thought about how focused they are on their customers and how often they deliver a level of service that goes beyond the call of duty.

Clearly Waffle House takes this to the absolute extreme and sets a benchmark companies outside storm-ridden countries would find hard to emulate. However, its actions should at the very least prompt hospitality businesses to consider what they stand for and what they deliver to their customers.
Glynn Davis is a leading commentator on retail trends

Sunny side up by Shourav Sen

It seems 2018 is the year to challenge British weather stereotypes. At the end of February, the “Beast from the East” hit the UK bringing widespread, unusually low temperatures and heavy snow to large areas in one of the coldest spells in almost 27 years. Five months later, the country experienced one of most intense and drawn-out heatwaves since records began, reaching 35.3C; hotter than Cairo, New Delhi, Khartoum and several regions in mainland Europe. So what was the impact of all this weather on the out of home (OOH) food and drink sector?

According to Morar HPI’s BrandVue Eating Out daily brand tracker, penetration fell 2% at the time the cold snap hit compared with the start of the month. Furthermore, with people staying closer to home you would expect the delivery sector to have taken the lead between 25 February and 4 March. However, there was a 3% drop in orders that was notably larger for those providers outside larger conurbations where roads were more affected by the hazardous conditions.

Come summer and the heatwave no-one expected lasted more than six weeks. With the rise in temperature, the market was able to rebalance and recover from the dip during February and March. BrandVue reports a 2% year-on-year increase in the number of consumers eating and drinking out during this period. England’s World Cup run and the hot weather continuing into July was good news for pubs, which took a share of spend from restaurants. According to Barclaycard, year-on-year consumer spending in July increased 16.8%. Overall, consumers spent 41% more in pubs on England match days than on the equivalent days in 2017, rising to an impressive 73% on the day of the England versus Croatia semi-final, compared with the same time last year.

Moreover, BrandVue reveals consumers were not only spending more in pubs but were happier doing so. During this period, average NPS was 25% higher, at +25 points compared with the same time in 2017. Pubs scored seven points higher than average satisfaction for restaurants during the same period as the extended hot weather deterred people from visiting shops and restaurants or sitting indoors and ordering online.

What it’s key to note is fewer people visiting restaurants during the hot weather is no indication of the future. Consumers were eager to take advantage of the sunshine while it lasted, with almost one-quarter (23%) saying the hot weather had prompted them to spend more money than usual on experiences and outdoor activities. In fact, one in two (50%) were buying more food and drink than normal to enjoy barbecues and picnics with friends and family, leaving less cash to spend on other items. In essence, the effect of the weather was to divert spend from one thing to another – not simply generate more spending. 

However, despite a willingness to spend on summer treats while the good weather lasted, consumers remain cautious about the broader economic picture, according to Morar HPI’s Consumer Compass. With a period of quiet following the political uncertainty of recent years, we see consumers finally regaining some assurance in their own financial situation, pushing overall consumer confidence up from recent lows. However, this returning optimism in finances has yet to translate into spending, which remains cautious. When looking at spending habits overall, eating (whether in or out) has been second only to fashion to see a cut in expenditure this year.

While the weather can influence the OOH food and drink category, there are swings and roundabouts, winners and losers, so the overall impact is subtle. A few months ago a period of lost output was blamed on snow. Between snow, heat and leaves on the line, the climatic sweet spot for Brits seems vanishingly small!

Nevertheless, the clear winners are those who were prepared for the extreme circumstances related to both weather events and were able to remain flexible and struggle on despite the logistical and economic pressures. It is a risky strategy to hope major weather events will be accommodating in the future, particularly as they are predicted to become more frequent. Brands of all sizes should work on their adaptability and enable technology to communicate tailored weather-specific offers and menus effectively and always plan ahead towards issues that may arise from absenteeism, shortage of supplies, property maintenance and so on. It is always worth remembering that whatever happens we can’t control the weather – but reacting and remaining resilient is always within our grasp.
Shourav Sen is business development executive at Morar HPI

Copyright protection racket by Paul Chase

The issue of fees charged by copyright organisations Phonographic Performance Limited (PPL) and Performing Rights Society (PRS) is back on the agenda. Nowadays there is only one music licence granted by PPL PRS for those premises playing music that is under copyright. The current proposal is to set a new tariff for “specially featured entertainment” (SFE), which would see music copyright fees rocket and put many venues at risk of going out of business. The new SFE tariffs would apply to pubs, nightclubs, bars and restaurants that feature recorded music entertainment, DJs and DJ nights. Once established they will look at revising fees for other places where copyright music is played, such as offices, shops and other places of work.

PPL estimates that currently its fees amount to a charge of 3.8 pence per person, per hour of attendance at an SFE event. The proposal is to raise these fees so they average 22 pence per person, per hour of attendance – a six-fold increase.

How are we even in a position where venue operators cannot charge a fee to music publishers or performers for giving publicity to their recordings thus helping their sales but must instead pay a fee to them for the privilege? 

The PRS was formed in 1914 by a group of music publishers to protect the value of their copyright and provide an income for composers, songwriters and music publishers. The PPL was founded in in 1934 by Decca and EMI to licence the sound recording of a song or other musical performance. These copyright permissions have since been confirmed in court cases and statute law, specifically the Copyright, Designs and Patents Act 1988. It is this the government needs to look at urgently.

The whole area of intellectual property is complex but breaks down into four basic areas – copyright, design, trademarks and patents. Few people would argue against rights of ownership being assigned to the intangible products of human intellect but there is an argument about the worth of such intellectual property and how long its originator is entitled to benefit from it.

Patents, which are basically processes for producing something, are time-limited. Whether we’re talking about the process for producing the cats-eyes that adorn our highways or medicines that require a huge amount of investment in research and development before they’re brought to market, patents ensure these investments are protected and the originators get a return. Music copyright is time-limited too, but can we really equate writing or recording a song to developing a life-saving vaccine?

At what point should we consider a song has entered the public domain and we no longer have to pay for the privilege of playing it in public? In simple terms, copyrights exist for 70 years after the music was first communicated to the public and fees are paid to producers, publishers and performers of such music. Reportedly, when Tony and Cherie Blair stayed at Sir Cliff Richard’s house in Barbados in 2006, Richard complained some of his older recordings were about to fall outside of what was then the 50-year copyright limit. Richard denies this but certainly Blair became an advocate of extending music copyright to 70 years. And isn’t it comforting to know dear old Noddy Holder and Slade get a royalty every time Merry Christmas Everybody gets played!

I don’t want to see anyone deprived of just rewards for their labour but when copyright royalties are collected by large copyright organisations such as PPL and PRS they are not so much exercising a right as exploiting a monopoly. And monopoly rights lead to the levying of an “economic rent”. 

PPL and PRS are in a powerful position and the high-handed arrogance of their demands is reminiscent of a protection racket. Although there is an Ombudsman that will adjudicate on PPL’s proposed fee increases, the increases proposed are so draconian as to constitute an existential threat to venues that play copyright music. Why should a performer, author or publisher expect to get any payment in addition to the slice of cake they receive when a recording is sold to a consumer? If such rights are to be maintained, should there not be a countervailing right for a venue to charge for giving publicity to an audience of music played, thereby encouraging further sales?

The fees now being proposed by PPL take us way beyond an increase to account for inflation and are based on a complex model it has developed to estimate the “real value” of music played by licensed premises. It hangs in the balance and trade body UKHospitality has a big fight on its hands. When I read the basis on which PPL proposes to calculate fees in future I couldn’t help thinking the licensed trade is a very big cake, and everyone wants a slice.
Paul Chase is director of CPL Training and a leading commentator on alcohol and health policy

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