Story of the Day:
Famous Brands pulling funding signals ‘death knell’ for GBK: Analysts in South Africa, the home country of Gourmet Burger Kitchen (GBK) owner Famous Brands, have said its decision to pull the investment plug on the UK restaurant chain signals its “death knell”. On Thursday (2 April), Famous Brands, which acquired GBK in 2016 for circa £110m, said it had taken the decision to not provide any further financial assistance to the business. The announcement came four days after the company unveiled a $60m impairment charge linked to sustained underperformance of GBK. For the six-months ended 31 August, the company forecast GBK to record an operating loss of £2.6m compared with a loss of £872,000 the previous year. SmallCaps analyst Anthony Clark said Famous Brands’ decision not to spend money on GBK meant the business would not survive. He said: “When you withdraw funding for a struggling business it is signalling its death knell. It is a sad end to a business that should never been bought.” He said the Famous Brands strategy to move offshore “may have been valid but the timing was awful”. He added: “It was bought (in the wake of) Brexit and the uncertainty regarding Brexit has seen consumer sales sink.” Fellow analyst Simon Brown told media in South Africa while the coronavirus pandemic had made business even harder for GBK, the outbreak was merely the “final nail in the coffin” for a deal that never worked as well as Famous Brands had expected. He said: “It’s never been profitable. Famous Brands have been putting money into GBK since it’s owned it and now it is essentially pulling back. If you read between the lines, it is abandoning the business. GBK was showing nascent signs of recovery but now, with all the uncertainty surrounding the length of the lock-down, it was a time to put a lid on it.” Famous Brands, which also operates the Wimpy and Steers concepts, acquired the then 75-strong GBK in the summer of 2016. At the time, Famous Brands claimed to have saved a fifth on the acquisition price because of a weaker pound in the wake of Brexit. GBK undertook a company voluntary arrangement at the end of 2018, which saw circa 20 sites close.
Mark Wingett talks to Jack Stein in latest 'navigating the coronavirus’ video interview: Propel insights editor Mark Wingett will talk to Jack Stein, chef director of the Rick Stein Group, in the latest of Propel's video interviews with leading operators on how they are navigating the coronavirus crisis. Stein talks about how without the government’s furlough scheme the seasonal business was set to go bust next month; having pandemic cover on its insurance policy but fighting to get it activated; and working with other chefs to feed local communities, schools and hospitals. The video will be released on Monday (6 April).
Andre Johnstone – ‘delivery can be our saviour’: Andre Johnstone, who oversaw the development of delivery at Wagamama into a channel that was achieving up to £1m of sales a week, has argued delivery provides a way forward for the sector. Writing in Propel's Premium Opinion section, he stated: “Recent events have got me thinking about what the recovery in our sector will look like when this is all over. Optimistically we might like to think that everyone will return to pubs and restaurants in their droves and things will carry on the same as before, but I fear social distancing will leave a more lasting scar on the general public. I’ve been worrying people may not be happy to sit in restaurants and pubs in close proximity to strangers. At least not initially, and if that is the case then we may all be having to take on all the costs again (staff, rents and utilities etc) but without the sales to pay for them. A few years ago food delivery was the terrible demon that took too much commission, cannibalised in-restaurant sales and belittled the eating experience. While some of that is not completely unfounded it has taken the current crisis for many to see the opportunity that delivery can present. It is clear the new normal for restaurants, whatever that might be, is definitely going to see them more reliant on delivery than before. In fact, it may prove a vital way of attracting new customers and maintaining a relationship with existing customers while people find their new comfort zone.”
Cote launches ‘at home’ delivery service: Cote, the 96-strong French brasserie chain, has a launched an “at home” delivery option, which it said would “bring the best of our kitchen to your home”. The Alex Scrimgeour-led group has launched an online shop, offering consumers the chance to order main meals, sides, desserts, wine and items from its butchery. It is now taking orders for delivery from Thursday (9 April) within the M25, but nationwide deliveries will be available in the coming weeks. Cote at Home requires a £40 minimum order. There is a £4.95 delivery charge for all orders but a free delivery with purchases of more than £80. Deliveries are made Monday to Saturday only, between 7am to 6pm. In line with government measures to combat the spread of coronavirus, Cote shuttered all of its restaurants two weeks ago.
BBPA welcomes bolstered business interruption loans to help companies in ‘squeezed middle’: The British Beer & Pub Association has welcomed the bolstered business interruption loans, which “if done right” should help those companies in the “squeezed middle”. Chancellor Rishi Sunak has announced a new Coronavirus Large Business Interruption Loan Scheme that provides a government guarantee of 80% to banks making loans of up to £25m to businesses with an annual turnover of between £45m and £500m. New rules will also prevent lenders from requesting personal guarantees for loans under £250,000, and the government has also stated it will make operational changes to speed up lending approvals and continue to cover the first 12 months of interest and fees. BBPA chief executive Emma McClarkin said: “The all-important detail on the support remains to be seen, but if done right it should help out those businesses in the ‘squeezed middle’. The majority of our membership falls into this bracket and so haven’t had access to the support the government intended. It is a shame the loans will be at commercial rates meaning successful businesses, through no fault of their own, will be forced to get into more debt due to this crisis. Nonetheless, it is imperative the banks take heed of this clear direction from government and get the cash to businesses as fast as possible ensuring the great British pub industry survives this crisis and is in the best position to reopen in the future.”
UKHospitality urges city council to rethink Marketing Edinburgh hibernation: UKHospitality has urged City of Edinburgh Council to reconsider its decision to place Marketing Edinburgh into hibernation. The trade body has highlighted the ability of Scotland’s hospitality and tourism businesses to lead the country’s regeneration after the coronavirus crisis has passed – a task that it said will be made more difficult without the support of Edinburgh’s marketing body. UKHospitality executive director for Scotland Willie Macleod said: “Without an organisation to lead the recovery process, the city’s hospitality and tourism sectors, already facing unprecedented adversity, will experience significant barriers to recovery and lose competitive advantage to other innovatively marketed destinations. We urge the City of Edinburgh Council to rethink its decision. At a time such as this, businesses need all the support they can get.”
Sector sentiment shifts to longer-term disruption: The latest covid-19 hospitality sentiment survey from Deloitte showed sector sentiment has shifted more negatively towards longer-term disruption in the past week. The survey, which was carried out by 140 senior figures in the international hospitality sector, found 85% now expect the disruption from the coronavirus outbreak to last four to six months, versus 79% the week before. Respondents sentiment has also shifted more negatively (up 14%) towards longer term disruption (six to 12 months) versus last week. Once the outbreak is contained, respondents believe the industry will take another 12 to 24 months to recover. At the same time 11% believe the industry bounce back will be quicker than three to six months, versus 22% last week. Cash management, workforce health, safety and debt considerations remain top priorities over the next four weeks. Respondents are now putting more emphasis on cash management and stakeholder relationships versus last week. A higher proportion of respondents believe the government’s level of response is good/adequate (83% versus 75% last week), with 16% believing the government can do more to support the industry, versus 25% last week. The majority of respondents (73%) still believe the government should be prioritising wage support for hospitality employees. While a higher proportion of respondents thought financial aid support should be prioritised over tax relief.
Antonio Carluccio Foundation extends grants to £500,000: The Antonio Carluccio Foundation, established by the late Antonio Carluccio, is extending grants to £500,000 in 2020 in response to the coronavirus outbreak. The foundation supports charities in battling hunger and malnutrition and assisting in the training of otherwise disadvantaged people trying to begin a career in the hospitality sector. Funds will be available in support of emergency feeding and to support initiatives involving or benefiting the industry in the UK as well as other projects addressing the impact of the virus in the UK and Italy – Carluccio’s birthplace. Simon Kossoff trustee and chief executive of The Antonio Carluccio Foundation, said: “In these terribly difficult times we want to provide as much support as we can to challenge the impact of coronavirus – both here and in Italy – and we have no doubt Antonio would have wanted the same”. Organisations seeking support are invited to contact the trustees through its website – www.theantoniocarlucciofoundation.org
Robinsons cancels rent until pubs reopen as part of package of support for tenants: North west brewer and retailer Robinsons has cancelled rent for its tenants until pubs are allowed to reopen. The company has also suspended all direct debits and freezed repayments of loans and interest charges. In addition, it confirmed all draught beer and cider that goes out of date during the crisis will be replaced with fresh stock. Robinsons is providing updates and support to its 240 tenanted pubs via e-mail, phone and its licensees’ Facebook group. The board and executive team have taken a voluntary pay cut and the company has not made any redundancies. A skeleton team at the brewery and packaging centre remain on full pay with the rest of employees receiving 80% of their normal salary, most of them since 23 March. In addition, the brewery continues to brew and package beer for export and the off-trade. Robinsons also paid suppliers in full at the end of March to “repay their support for us over the years”. Managing directors Oliver and William Robinson said: “Robinsons has survived two world wars and plan to emerge from this in good shape and surrounded by great customers, suppliers and licensees.”
Crussh launches home delivery service and donates juice to NHS workers: London-based healthy food and juice brand Crussh has launched a home delivery service alongside cold-pressed juice donations to NHS workers. Food and drink packages are available via the company’s website and delivered anywhere within the M25. They include a week’s supply of cold-press juices and booster shots as well as a juice and soup package. Crussh has also started deliveries of its cold-pressed juice to NHS workers, with 500 bottles arriving at Kings College Hospital in London, and deliveries to further hospitals being made over the coming weeks. Brand director Helen Harrison said: “We really want to do what we can to support those in need during this time and we know staying fit and healthy is really important to everybody right now – starting with the NHS workers, who are in need of quick, healthy fixes to help keep them nourished, through to our regular customers. We hope to add more ranges over the coming weeks.” Crussh’s range of wraps and health pots are still available in 300 Sainsbury’s stores across the UK.
SA Brain donates £100,000 worth of food: Welsh brewer and retailer SA Brain has given £100,000 worth of food from its 106 managed pubs to NHS staff, key workers, care homes, food banks and other worthy causes. The donations have helped more than 40 groups across south and west Wales, including Cwmbran fire station, which took some of the food given away by The Blinkin Owl in the town. Brains chief executive Alistair Darby said: “We gave away everything that was going to go out of date while our pubs were closed – much better to have it used by those in need than let it go to waste.”
Starbucks extends US cafe closures and catastrophe pay for staff until May: Starbucks has said it has extended all cafe closures as well as catastrophe pay and other benefits for employees in the US until 3 May. Originally closures, which were announced on 21 March, were supposed to last “at least two weeks”, while sick, elderly, or at-risk employees could initially receive up to 14 days of catastrophe pay if affected by the pandemic. Starbucks is also extending its $3 per hour “service pay” raises for all in-store employees until 3 May. The extensions were confirmed in a letter to staff from executive vice-president Rossann Williams, which has been seen by Nation’s Restaurant News. The letter added: “We will also continue other temporarily expanded benefits for partners, whether they are working a shift or not, like childcare support through Care@Work and our expanded food and beverage benefit and discounts.” The letter also stipulated the company will again be ramping up cleaning procedures and shifting operational procedures to adjust to the “new normal” during the crisis. Starbucks is providing wellness checks for employees before every shift and sending thermometers to company-operated stores for employees who want extra assurance as they come into work. The company is also “looking into” providing “non-medical-grade masks” as options for employees who come into work, though Williams clarified they would not be sourcing medical-grade masks due to the nationwide shortage in hospitals. Starbucks is currently operating on a delivery and drive-thru model-only. “After 3 May, we do intend to slowly begin to adjust back to more normal operating models and benefits plans, recognising the covid-19 situation in each community is still incredibly different and fluid,” Williams added.
Luckin Coffee shares plummet amid probe into ‘fabricated’ sales: Shares in Chinese coffee company Luckin Coffee have slumped after the company said one of its top executives and other employees had faked sales figures. The company has suspended its chief operating officer Jian Liu and staff reporting to him. It comes after the company appointed a special committee to investigate issues in its financial statements for 2019. Luckin, which competes with Starbucks and is listed on the Nasdaq, said its investigation had found fabricated sales from the second quarter of last year to the fourth quarter amounted to about 2.2bn yuan (£250m). That equates to about 40% of its estimated annual sales. It also said it still needed to investigate and verify other costs and expenses that were substantially inflated during the same period. At the same time Luckin warned investors they should no longer rely on its previous financial statements that had showed the company's rapid growth. The company had 3,680 stores as of the end of September, according to its third-quarter 2019 earnings release. That represents an almost six-fold increase since June 2018.
Proove to donate 30 pizzas per day to key workers: Neapolitan pizza brand Proove is to donate 15 pizzas per day from each of its sites in Manchester and Sheffield to key workers. The company switched its operations to delivery as well as offering takeout on weekdays when the government forced restaurants to close – and Proove is now looking to support those on the front line further in the battle against coronavirus. Co-founder Deepak Jaiswal said: “The support shown to Proove over the past couple of weeks has been humbling and we are so proud to be part of our communities in Sheffield and Manchester. This support has included amazing messages from staff at the hospitals who love the fact they can order their pizza to be at home for them after a long shift, day or night. But we recognise there are so many people out there today, working in harm’s way to protect these communities by providing essential healthcare, distribution, infrastructure, supplies and support – the key workers – our heroes of today, and we want to show them how much we appreciate what they are doing.”
Corona brewer halts production amid coronavirus: The brewer of Corona beer has suspended production – at least temporarily – because of the coronavirus pandemic. Mexico-based Grupo Modelo is scaling down its operations to a “bare minimum” in line with the government's orders to suspend all non-essential activities until 30 April to slow the spread of the virus. However, the company suggested it could keep brewing beer if its operations were deemed to be agriculture, which is allowed. Grupo Modelo, which also has other export brands including Pacifico and Modelo, said it would complete the suspension imminently. Grupo Modelo said it was ready to operate with 75% of its staff working remotely to guarantee the supply of beer, if the government agreed.
Hepworth preparing for ‘high demand’ post-pandemic: West Sussex-based brewer Hepworth is getting its brewery in a “condition to meet the high demand” for when the restrictions around the coronavirus pandemic are lifted, with the business also experiencing a surge in shop sales and introducing a home delivery service. In a letter to the company's bank HSBC – seen by Insider Media – managing director Andy Hepworth said the brewery's shop remains open and is trading at three times its normal level. The delivery service is also bringing in “healthy sales”. Hepworth is continuing to supply supermarkets with bottled beers at a reduced level, but said the operation could grow “substantially” in the coming weeks or months. It added: “We are estimating our income to drop to one third in the worst case scenario, where we are still allowed to operate. If we are not allowed operate we expect the government support will cover the costs, albeit in the form of a loan. We are assessing what would be required to keep us running at this reduced level, or even entirely shut down for three to six months. I cannot say I am not worried, or even we will definitely survive the pandemic, however there does seem to be a determination by the government for businesses to survive with its support.”
OYO offers free rooms for NHS workers via gifting scheme: OYO Hotels & Homes is offering NHS workers a free room via a gifting scheme. The company has launched a virtual hotel named OYO Rooms for Carers where people can book overnight stays. The room nights at the virtual hotel will then be passed over to NHS trusts for front line healthcare workers to redeem at their nearest OYO hotel. The campaign was kick-started by OYO with contributions from individual team members, partners and the company covering 1,000 rooms, which will be made available to NHS staff and other key workers between now and the end of May. “We owe a huge debt of gratitude to NHS staff working tirelessly on the front line and OYO Rooms for Carers is our way of saying thank you,” said Rishabh Gupta, head of OYO UK. “We are beginning with rooms for NHS workers, but if the support is there, we’d also love to open this up to more organisations providing vital services.” Last month OYO said it was keeping more than 2,000 rooms at its hotels open for key workers.