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Fri 8th Nov 2019 - Friday Opinion
Subjects: Facing up to technology, boutique fitness fuels success, and making a quilt from patchy licensing policies
Authors: Glynn Davis, Casey Phillips and Michelle Hazlewood

Facing up to technology by Glynn Davis

One of the few irritating things about pubs is when somebody gets served ahead of you when you know you’ve been waiting longer. On occasion I’ve been so incensed by the injustice I’ve left the premises and taken my business elsewhere.

Therefore when I heard London-based company DataSparQ had developed AI Bar, facial recognition software that tracks faces and places people in a “dynamically intelligent queue”, I hailed the move as a sensible step forward.

Needless to say my view wasn’t universally popular. Many people, including certain vocal groups, branded it yet another example of a growing invasion of public privacy through CCTV and other digital technology. 

It’s clear facial recognition software has many potential benefits that go way beyond queue control at bars. However, there are just as many downsides with some claiming it will turn the UK into a police state. This is sensitive territory and businesses will have to navigate it with extreme care.

One way to take advantage of this technology is to take the “facial” part out of the equation and replace it with “licence plate”, for example. Such is the difference in people’s minds between the aspects, McDonald’s has felt sufficiently comfortable to say it might look to use licence plate recognition (LPR) software at its drive-thrus.

The idea behind the move would be to create an identifier for the customer or drivers from one household so McDonald’s could use data such as previous purchases to personalise that customer’s experience.

For the leisure and hospitality industry, recognition software – whether facial or licence plate – has the potential to deliver incredibly tailored experiences to customers in a way card-based loyalty programmes have never been able to provide.

Any LPR solution McDonald’s introduces would be integrated into the new digital menu boards it is rolling out at its drive-thrus, initially in the US. The boards are powered by technology from artificial intelligence company Dynamic Yield, which McDonald’s acquired for $300m earlier this year. That move has enabled McDonald’s to shift from using static menus to ones that respond via algorithms to changes in weather, nearby traffic levels, time of day, and popular food choices in a specific location.

The system becomes increasingly smarter the more customers interact with it. For example, if a queue is moving slowly the menu can change to prioritise products that can be prepared quicker to speed things up. Conversely, it can push more complex dishes during quieter times. Hot drinks can be upsold on cold days, ice cream on hot ones.

Eventually the technology could be used to assist decision-making in the supply chain, be integrated into in-store kiosks, and help with kitchen management. Staffing and planning operations are another area that could benefit from dynamic menus at busy times. When LPR is linked into this clever bit of AI kit, McDonald’s will also be able to throw a customer’s ordering history into the algorithms to further personalise the experience.

Dynamic menu boards and the intelligent tailoring that can be achieved through recognition software has so much potential, McDonald’s clearly won’t have the field to itself. KFC has started exploring AI-powered digital menu boards for its drive-thrus to help it automate order-taking and upsell menu items.

I would be surprised if that’s all KFC is planning because such technologies are going to have a massive impact on foodservice around the world because they have myriad applications. Consumers are likely to embrace such solutions because they ultimately improve their experience – as long as they aren’t facially recognised that is.
Glynn Davis is a leading commentator on retail trends

Boutique fitness fuels success by Casey Phillips 

The fitness industry never rests, with the latest trends and concepts providing new opportunities for commercial success. Fuelled by a society that glamorises working-out through the use of social media and fashionable “athleisure” wear, niche fitness activities are growing in number and popularity, challenging traditional gyms by attracting a new band of customer.

A crucial element in boutique fitness’ success is availability of space as operators can work in basements and other traditionally undesirable spaces. Space that was once marketed to retail, restaurants and offices is now deemed suitable for D2 leisure – a more popular, practicable and valuable option that’s in demand. Furthermore, boutique fitness operators usually have fewer initial requirements in terms of fit-out, making them an even more tempting prospect for a landlord that can negotiate smaller capex contributions at the expense of better initial rental terms for the operator, reducing upfront risk.

While machine-led gyms have their place, smaller gyms and studios that offer something different and interesting are ideal for contemporary consumers. A stigma is often attached to traditional gyms in which they are places dominated by regulars who discourage new or casual members. Boutique and niche operators not only offer something different, providing the choice consumers crave, they also tailor classes to different demographics, creating a more inclusive atmosphere.

The combination of helping landlords and bringing a new type of consumer into the market means the boutique fitness sector is performing well. The choice is as vast as ever, ranging from Ten Health & Fitness’ specialist pilates to brands that create bespoke work-outs using traditional equipment such as Rowbots. These offers make it easier for individuals to find something that works for them close to work or home.

While many of these operators are finding success as they expand and seek to stave off competition, they are increasingly tempted to pay above market value for sites. This is a positive indication of where the market is, with young operators looking to take risks to develop their brand, which is common in any market place. The danger associated with overpaying is clear, particularly as niche brands in this sphere can benefit or suffer from fitness “fads”. That said, lessons have been learned from the demise of several A3 restaurant chains in recent years, where too much was paid, over-large spaces were taken or unsuitable locations were chosen.

There are several solutions to mitigate this risk. The location is, of course, crucial and the most successful brands know the right areas for their offer and understand where their target audience works and lives. Although many brands will be deterred by sites dominated by office blocks with a Monday to Friday crowd, the reality is these areas provide such a large volume of salary-rich customers a business can make it work, closing at weekends if necessary to curb costs. Suburban locations can also work well depending on the offer and an operator’s ability to capture evening and weekend clientele, although justifying the rent at quieter times is crucial.

Landlords also play a significant role, with those who appreciate the value of the boutique fitness market most likely to provide the support required to make the business a success. We are now seeing a shift in emphasis at an earlier stage in the process. Rather than retrospectively applying for D2 planning permission, emerging schemes are incorporating this into their overall offer from the outset. This is a much more considered approach that reflects the need for a fitness operator as part of any community-led development.

Some brands are also seeking to expand their remit, moving into fashion and providing a genuine eating and drinking experience. This supplementary offer is likely to be looked on favourably by landlords as it has the potential to significantly enhance dwell time.

Ultimately, future proofing the boutique fitness market depends on an ability to find the right sites at the right price. Landlords are taking this type of operator more seriously than ever and understand the value they can bring to an area. This puts the ball firmly back in a brand’s court to ensure its offer remains relevant and viable.
Casey Phillips is acquisitions agent at Shelley Sandzer

Making a quilt from patchy licensing policies by Michelle Hazlewood

One of the core principles of the Licensing Act 2003 was to bring local input into licensing decisions, something evidenced by the ever-increasing number of so-called “stress areas” – Cumulative Impact Areas (CIAs) – within the legislation. 

The benefit of a locally based approach and addressing local issues can’t be questioned but some experts believe there’s a danger parts of the UK will become a patchy mess of conflicting laws and regulations that could not only damage pub and bar operators but also compound the demise of the high street and hinder regeneration. 

We believe it’s better to stitch these parts together to make a “quilt” of joined-up regional policies.  

York has had a CIA as part of the city council’s licensing policy since 2005. As part of a policy review last year it introduced a “red zone” – an area in which there were a high number of negative “occurrences”.

At a recent licensing hearing we applied successfully on behalf of an operator who was seeking two extra trading hours on Fridays and Saturdays for their site, which sat within the red zone. Despite the happy outcome, the case highlighted such zones can prove a legal minefield for operators.

All responsible operators want to adhere to licensing regulations and licence conditions but difficulties arise when special zones differ widely yet sit within areas formed by a patchwork of local authorities, which sit side by side with an invisible seam but with differing policies and approaches.   

Stitch ’em up
Licensing policies governing special zones are generally aimed at promoting four key objectives – public safety, crime prevention, prevention of public nuisance and disorder, and controlling under-age drinking.

These are all admirable and no doubt necessary in the places they have been introduced but when they form part of policies drawn up and reviewed on a regular cycle by each council’s licensing committee, they can paint a confusing and at times contradictory picture for operators.

The position is compounded by the fact review dates differ. If an operator is looking to develop sites in its region the response can be materially different if a new site is less than a mile away. This could arise in the Birmingham area, where Birmingham City Council has a different policy position than that adopted by Walsall, Solihull or Sandwell. 

This problem is even more acute in the north west when you consider the population density of Manchester and Liverpool and continuous migration between Manchester city centre and the numerous licensing authorities that form a seamless ring around it.

There must be an argument for an over-reaching agreement on principle that would stitch some of these disparate policies – “patches” – together to create something more akin to a quilt that would wrap up the main hospitality economy objectives within an area to create jobs, support the economy and promote regeneration.

Once council in the north west is examining the possible benefits of taking a conurbation-wide view rather than micro-managing its own authority area. Such an approach would avoid creating potential trip hazards and levels of red tape differing from street to street.

Cohesive approach
Trade bodies worry that without a cohesive approach, towns and cities could miss out on much-needed inward investment, job creation and regeneration as foodservice operators and developers become discouraged by a tangle of polices on the horizon.

Indeed, some operators told us their investment and development plans have been directly affected by widely differing responses they received from neighbouring licensing authorities. They want a consolidated approach to licensing not, as some have described it to me, “uncertainty, inconsistency and conflicting requirements”.

They would also like to see dialogue between the various licensing authorities, which they believe would encourage joined-up thinking rather than councils operating in vacuums to produce their own policies.

Returning to the UK-wide picture, there’s also a compelling argument for revisiting the legislative framework to see if the same approach could be adopted as that taken by some of the bigger pub companies, which establish close working relationships with their “home” authority concerning food hygiene and fire regulations. Could this be an option for licensing too?

Acting for operators, large and small, we see first-hand the frustrations, delays and unnecessary administration that often make the difference between successful sites and those that struggle in an increasingly competitive hospitality market.

While we must accept the strictures placed on us by legislation and licensing authorities, it would make life significantly easier for operators if councils revealed their ambitions concerning the hospitality industry’s role in the regeneration of their town centres and acted as one.

A quilt comprising regional licensing authority patches stitched together to cover parts of England and Wales is something we believe could work and make the world of licensing compliance a whole lot more comfortable for operators.   
Michelle Hazlewood is partner at licensing firm John Gaunt & Partners

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