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Thu 2nd Apr 2020 - Propel Thursday News Briefing

Story of the Day:

Luke Johnson – ‘lock-down risks 1930s-style depression that may not protect NHS in long run’: Sector investor Luke Johnson has argued the coronavirus lock-down risks a “1930s-style depression” that might not protect the NHS in the long run. Johnson told Sky News’ Ian King Live programme thousands of companies across sectors such as hospitality and retail face going under before the government's help can reach them. He said. "We could be facing a downturn that is not just an average recession but is closer to the great depression of the 1930s. And if you look at the misery and ill health that caused and damage to society as a whole, then I think there is a serious debate to be had about whether we are just relentlessly pursuing the right course of action. The longer the shut-down continues, the more industry will shut down and become insolvent. There is a terrible trade off the country will have to make sometime in the future over the damage to our whole standard of living and whether we are willing to accept the suicides and the collateral damage from the shut-down, as opposed to protecting the NHS so it can keep people with the virus alive. The thing is to ramp up testing to then work out what the fatalities are, work out who is immune, and try to reopen society because ultimately if the country gets into a very serious financial position, we won't be able to afford a decent NHS, so ultimately that won't protect the NHS at all if the economy crashes." Chancellor Rishi Sunak said two weeks ago businesses would be able to get Coronavirus Business Interruption Loans of up to £5m to help them survive the shut-down. But Johnson warned government support money is not getting through yet. He added: “The earliest will be later on this month, and it might not be until May. For some businesses that will be too late because companies will not be able to pay colleagues for the March payroll – let alone April. Time is of the essence and people need that money just to live.” He also claimed banks were struggling to adapt their systems to deal with the new paperwork from the government. He added: “There are concerns at the idea they are being forced to lend to companies, given all the uncertainties, they wouldn't want to lend to even though they are getting an 80% underwriting from the government, while the other 20% they are on risk for. They are probably avoiding taking on that risk where they can. The banks are concerned about bad debts and ultimately their own solvency. So they are not going to be willing to lend to businesses that are likely to go bust anyhow.”

Industry News:

David Roberts to explore how EIS and SEIS could ride to sector’s rescue in latest Premium column: David Roberts, who is head of leisure at global law firm CMS and co-founder of skinny chops concept Blacklock, will explore how Enterprise Investment Schemes (EIS) and Seed Enterprise Investment Schemes (SEIS) could ride to the sector’s rescue in the latest Propel Premium column, which will be sent to subscribers on Friday (3 April) at 5pm. Meanwhile, Premium Diary will rummage through the rumour mill looking for nuggets of hope and inspiration. Subscribers will also receive an updated version of the database of multi-site companies next week. Another 100 businesses have been added to the list, taking the total to 1,600. The database features information such as number of sites, type of operation and key people at the business. Subscribers also receive their morning newsletter 11 hours early, at 7pm the evening before our 6am send-out, discounts to attend Propel conferences and events, and regular columns from Propel insights editor Mark Wingett. An annual premium subscription costs £395 plus VAT for operators and £495 plus VAT for suppliers. Email

NLW increases by 6.2%: A 6.2% increase in the National Living Wage (NLW) came into effect on Wednesday. (1 April). The increase was announced at the end of last year and was heralded by the government as “the biggest cash increase ever”. The rise is more than three times the rate of inflation and takes hourly pay for people aged 25 and above to £8.72. The National Minimum Wage for under-25s has also risen. For 21 to 24-year-olds it is up 6.5% to £8.20; for 18 to 20-year-olds it has increased 4.9% to £6.45; for under-18s it is up 4.6% to £4.55; and for apprentices it has increased 6.4% to £4.15.

HMRC makes temporary changes to destruction of spoilt beer: HM Revenue & Customs (HMRC) has published guidance on temporary changes to the destruction of spoilt beer for brewers and publicans. Normally, the destruction of beer must be supervised by a responsible person from the brewery. However, due to social distancing requirements, brewers can now appoint the publican or an agreed person at the premises to carry out the destruction of spoilt beer. An authorised company representative from the brewery does not need to be present. Andrew Ball, partner at haysmacintyre, said: “The brewer will need to continue to keep an audit trail, a spoilt beer record and evidence of the destruction – perhaps in the form in a video. HMRC will give at least 30 days’ notice before withdrawing these temporary measures.”
haysmacintyre is a Propel BeatTheVirus campaign member

NTIA receives landlord backing in call to freeze economy: The Night Time Industry Association (NTIA) has received backing from UK landlords in its bid to get prime minister Boris Johnson to freeze the economy. The NTIA has proposed all financial commitments to banks in terms of mortgages, loans and financial agreements be frozen, without effect on any current covenants or balances in terms of interest. It said commitments would be reinstated once the coronavirus (covid-19) crisis period ends. The NTIA argued such measures would give landlords the financial freedom to allow tenants to get back to business after a period of economic hibernation. NTIA chief executive Michael Kill said: “While the government has come an enormous distance at the very difficult time, we run the risk of losing a huge amount of our businesses who cannot afford and often do not qualify for further debt in addition to their losses due to the covid-19 shutdown. Landlords and tenants are all businesses that UK plc relies upon. This is now urgent.” Soho Estates managing director John James added: “We have been around long enough to have seen several recessions. This is different. As landlords, we are a keen stakeholder and part of the community. We know we must avoid a situation of empty high streets at all costs. We as landlords also have financial commitments as do our tenants. ‘The Big Freeze’ is a smart solution for all.”

Majority of Brits to eat-out with same frequency as before coronavirus outbreak, JD Wetherspoon most missed brand: The majority (61%) of Brits have said they would eat-out with the same frequency and 7% will do more when the coronavirus crisis ends, according to new research from CGA. Almost a third (32%) said they would eat-out less frequently than before the outbreak. For drinking occasions, the story was similar, with 59% planning to maintaining current visit rates while 35% plan to reduce their frequency. Meanwhile, more than half (54%) of those hit hard financially, either by having lost their jobs, being furloughed, or on reduced pay, said they would continue eating out as often as before, with a similar number for drinking-out, which is only slightly less than the public average. The survey, conducted at the weekend, found half were very concerned about the long- term financial implications of the virus. It also asked people which out-of-home brands they would miss most visiting during the lock-down. Despite some negative publicity in the media, JD Wetherspoon came out top, followed by Nando’s, Pizza Hut, Mitchells & Butlers’ brands Toby and Harvester, and better burger brand Five Guys.

British Takeaway Campaign calls for fair approach to loan scheme: The British Takeaway Campaign (BTC) has called for lenders to act immediately and work within the spirit of the government’s Coronavirus Business Interruption Loans (CBIL) scheme. The BTC, which represents thousands of small independent companies, has written to business secretary Alok Sharma calling for more than just words from the government. It is asking for a fair approach from banks that reflects the fact while they are administering the loans, it is the government that is bearing the lion’s share of the risk. This means providing loans expediently and under fair terms, including reasonable interest rates. BTC chairman Ibrahim Dogus said: “Independent businesses, such as restaurants, are the lifeblood of the economy and the government’s CBIL scheme will be crucial in ensuring they are still standing after we’ve come together to beat back coronavirus as a country. That’s why it is so important that banks don’t strangle it at birth by imposing impossible conditions. The government has said banks must not act as a blockage to access support, however businesses on the brink will need more than just words if they’re to survive. The people running these businesses don’t have banker-sized bonuses or second homes to guarantee against these loans. They are ordinary people providing an important service at a reasonable price up and down the country.”

Job of the day: COREcruitment’s international team is working with a global investor with a collection of dining concepts that is looking to appoint a chief operating officer. The position is based in Riyadh, Saudi Arabia. The business has a strong reputation with operations spread across Asia and the Middle East. The incoming chief operating officer will not only take an active role in operations but also lead future growth plans and brand development. Anyone interested in finding out more can email their CV or profile to 
COREcruitment is a Propel BeatTheVirus campaign member

Company News:

Peach confirms all staff to keep jobs, directors sacrifice salaries until pubs reopen: Gastro-pub operator Peach has confirmed all staff will keep their jobs as it launched a series of measures to support the team while its 19 pubs are closed. Every team member will be paid in full for the first three weeks of the current pay period – from Monday, 16 March to Sunday (5 April). From Monday (6 April), everyone will be placed on furlough and receive 80% of their wages, whether they are salaried or paid hourly. The only exception to this is a skeleton team working to support the team and the pubs during the closure, and the Peach directors who have agreed not to draw a salary until the pubs reopen. Additionally, Peach will top up the monthly pay of anyone whose salary is more than the maximum government grant of £2,500 a month, so everyone gets the 80%, and pay both individual pension contributions and those from Peach into every team member's pension pot. The company has also set up The Peach Hardship Fund – a pot of money to help any of its team in need. It is also keeping in touch with staff and customers through Zoom calls, sharing news and recipes from chefs on Facebook and throwing house parties on Facebook Live. Managing director Hamish Stoddart said: “Apart from health, we all share huge concern about our jobs and wages in the months ahead and have been doing everything we can as a company to negotiate with our banks, suppliers and landlords so that we can keep the Peach team together and secure the future of the business. Despite having no income at all, we can continue to pay this level of wages by taking advantage of government and bank support and sacrificing director salaries. Staying true to our values has never been more important than now."

Vagabond reopens Clapham site for takeaway and delivery: Imbiba-backed wine bar business Vagabond has reopened its Clapham-based site for takeaway and free local delivery, and is assessing whether to do the same in a couple more, Propel has learned. The Stephen Finch-led business had shuttered all of its eight sites in the capital when the government told all bars, pubs and restaurants to close. Finch told Propel: “When it said off-licences were essential we started to look into the viability of doing takeaway and online orders. We’ve now reopened our Northcote branch for takeaway and free local delivery and we’re getting our Battersea unit back up to fulfil online orders. We’ll see how Northcote does and if it’s encouraging, we’ll open Fulham and Battersea for customers along similar lines. Those are probably the only three we’d look to do that for. However, and we are evaluating things on a daily basis.” 

Burger King pledges free meals to NHS workers and vulnerable groups as part of Deliveroo initiative: Burger King UK has become the latest restaurant company to pledge free meals to front line NHS workers and vulnerable groups. It has joined the growing list of companies working with Deliveroo, which has secured donations of more than 350,000 free meals from restaurants to date. Other partners that came on board this week include Casual Dining Group brand Bella Italia; German Doner Kebab, which has pledged 30,000 meals; and Lewis Hamilton’s Neat Burger. They join Pizza Hut, which has pledged 300,000 meals using its network of 700 UK stores, and a substantial offer from healthy Asian food chain Itsu. A new function allowing customers to donate in app has raised more than £130,000 so far – equivalent to almost 35,000 meals. Deliveroo, which is targeting a total of 500,000 free meals, said it would initially focus on London and Manchester before expanding the service, with any excess funds donated to the NHS. This week Deliveroo will deliver almost 20,000 meals to the NHS. Deliveroo is also working with natural fast food brand Leon and providing free delivery to restaurants who are supporting the “FeedNHS” initiative.

Hawthorn Leisure creates dedicated operator managed division: Hawthorn Leisure, the pub operations arm of NewRiver, has undertaken an operational restructure that has seen the creation for the first time of a dedicated operator managed division, Propel has learned. As part of the restructure, Mark Brooke has joined Hawthorn in the new role of operations director – operator managed. He joins from Ei Group, where he was a divisional director, running the company’s Beacon division. At the same time, Elaine Kennedy has been promoted to the role of operations director – Scotland and north east England. Kennedy and Brooke join existing operations directors Andy Parker (north) and Ash Lovett (south), reporting in to managing director of operations Mark McGinty. Hawthorn owns more than 700 pubs across England, Scotland and Wales, with the newly created operator managed division accounting for more than 100 of those pubs. McGinty said: “This restructuring is all about planning for the future and ensuring we’re best set up to support our pub partners going forward. We’re delighted to have secured somebody with Mark’s experience to head up our new operator managed division, and Elaine’s promotion to operations director is richly deserved after the fantastic job she has done with our team of business development managers in Scotland.”

Former Crussh chief executive Kavanagh returns to Benugo: Shane Kavanagh, the ex-chief executive of London-based healthy food and juice brand Crussh, has rejoined Benugo as its new commercial director, Propel has learned. Kavanagh, who was previously managing director of Benugo’s cafe operation, joined Crussh in April 2016. During his four years at the helm, Kavanagh led Crussh from a 28-store London high-street business to an estate of 35, including the brand’s first sites outside London, in Birmingham and Bristol. He also forged franchise partnerships with SSP and Sodexo, initiated an exclusive retail range with Sainsbury’s and introduced workplace catering in WeWork across London. He left earlier this year, to “take on a new challenge”.

Papa John’s founder reduces stake to less than 4%, company sees first-quarter like-for-like sales rise: Papa John’s founder and former chief executive John Schnatter has reduced his stake in the company to just 4% – a threshold low enough that he will no longer have to file public disclosures of further sales or buys. Over the past ten months, Schnatter has shed 87% of his remaining shares in the company, dwindling from a 30% stake in May 2019 to under the reporting prerequisite of 5% for the week of 30 March. Papa John’s has separately updated its financial outlook during the coronavirus crisis. The company has withdrawn its financial outlook for 2020 in light of the uncertainties surrounding the pandemic. Papa John’s said for the first quarter ended 29 March like-for-like sales have increased 5.3% in North America and 2.3% internationally as its delivery business thrived due to lock-downs. However, sales in March have been hit by the cancellation of sports events. Almost no stores have closed in North America, but the situation is different overseas where out of 2,100 franchised locations, about 17% are shut. They are mostly in Ireland, Peru and the Philippines, due to government restrictions, but a few locations in China and Korea also remain closed. Papa John's has introduced free virtual doctor’s visits for staff, and emphasised its already-existing free mental health support, health insurance plan options, and access to the employee-supported team member emergency relief fund. It has not commented on whether it would change or increase its paid sick leave options in light of the crisis, reports Nation’s Restaurant News.

Applegreen reports Welcome Break demonstrates ‘good growth’ in 2019: Roadside retailer Applegreen has said its Welcome Break business demonstrated “good growth” in 2019 as it saw revenue top €3bn (£2.7bn). Applegreen said significant additional synergies from the Welcome Break acquisition in 2018 had been delivered, with £2.5m delivered in 2019. It plans to deliver at least £13m per annum by the end of 2021 assuming normal market conditions return. Applegreen, which trades from more than 550 locations, saw revenue rise to €3.07bn in the year to 31 December 2019, compared with €2bn the previous year. Pre-tax profit jumped to €37.2m from €15.3m. Chief executive Bob Etchingham said: “We successfully integrated a number of important acquisitions, expanded our footprint in the US and significantly reduced our reliance on fuel by continuing a shift in focus to convenience retail and food on the go. Welcome Break has demonstrated good growth, particularly through its core catering brands, driven by the roll-out of self-service kiosks and new drive-thru services that improve the customer journey.” Applegreen said the company had "traded strongly" in the first ten weeks of 2020 but the coronavirus outbreak had an impact on footfall and volumes. The company expects a “material reduction in profitability” for its current financial year. “The scale of this will depend on how the situation develops and over what time-frame together with the impact of any further measures taken by national governments to mitigate the disruption,” Applegreen added.

The Athenian to live-stream cooking classes: Greek street food restaurant The Athenian is launching a series of cooking classes on Instagram. Co-founder Tim Vasilakis will be live-streaming classes via the company’s page every Saturday at 7pm. Vasilakis will teach viewers to make favourites from The Athenian menu starting with tzatziki. Other recipes will include Santorini tomato croquettes, spicy feta dip, homemade gyros and Greek dessert, Mosaico. 

Halewood introduces voluntary redundancy scheme: Halewood Wines and Spirits is introducing a scheme of voluntary redundancies as the business looks to navigate the coronavirus crisis. The company noted it had taken immediate steps to safeguard jobs and attempt to secure the long-term future of the business. However, it had also had to close its US operations and downsize the Australian business. Senior management are also taking significant pay cuts, while operations have been adjusted to reduce working hours and overheads. Chief executive Stewart Hainsworth told Insider Media: “As a business, Halewood Wines & Spirits remains committed to its successful strategy of building a range of artisanal spirits brands with strong provenance. However, like many companies, we've been hit very hard financially by the impact of covid-19. We've lost important sales revenue from bars, restaurants and pubs across the UK and the duty-free trade, while also experiencing a sizeable downturn in export sales. We are looking at government measures to attempt to minimise the financial disruption caused by covid-19 and will continue to take any steps we can to protect jobs and help steer the company through this difficult and uncertain period.”

Domino’s Pizza to hold virtual annual shareholder meeting in US: Domino's Pizza has announced its annual meeting of shareholders in the US will be held virtually. The meeting will take place on Tuesday, 21 April. Shareholders will be able to vote or ask questions by following the instructions available on the meeting website during the event. Whether or not shareholders plan to attend the meeting, the company urged them to vote and submit their proxy in advance by one of the methods described in the proxy materials.

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