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Tue 7th Apr 2020 - Propel Tuesday News Briefing

Story of the Day:

Downey – we need a nine-month rent free measure, time to help suppliers: London Union founder Jonathan Downey, who is campaigning alongside UKHospitality for government sector concessions, has told Propel the industry should be seeking a national nine-month rent free measure. Downey said: “We are going to get to the end of the March quarter and no one will have any money to pay the rent, so no one is going to be able to pay their June quarter. If we get the extension to the forfeiture moratorium – that’s six-months from now – no-one is going to be able to pay the rent then either. So, something has to happen in the meantime and a national nine-months rent free measure feels like something we can all get behind. It would be a pause – let’s then add that nine months on to the end of the lease. This would obviously need to be government funded, as you can’t expect the landlords to cover the cost of that. Maybe that is too much money to be asking for, but perhaps the government pays 80%, the landlords pay 10% and the operators the other 10%.” Downey said he had written to his landlord at Canary Wharf and pointed out “if you don’t give us nine months that’s rent free there is no point in continuing”. He said: “It is that simple and we are saying that to all our landlords, including Land Securities with Model Market. We only open there two nights a week for 20 weeks, and probably won’t be able to open until June – if at all – so our entire year there is probably gone. I appreciate landlords run businesses too and they need to be backed by the government. We have done really well over the past few weeks to get some extraordinary measures of financial support and the focus now has to turn to what are the next measures, what do we need next?” Downey said attention also needed to turn to providing help for the sector’s suppliers. He added: “If we are to restart our businesses our suppliers are essential, and they have been last in line to get paid. We have had our business rates sorted, we’ve had our rent postponed, we’ve had our VAT payments postponed, we’ve had massive help with jobs and we have a loan scheme that we are told we can access – but is not working so well – so now it is time to look to our suppliers and pay them. A lot of businesses are trying to do that but are finding out they haven’t got the cash to do it. Maybe when the loans come through or some other grants come through, but we really need to deal with suppliers. In the meantime we can’t have people suing each other – the infighting has got to stop, we’ve all got to work through this together.” Downey will share more of his thoughts in the latest of Propel’s video interviews with leading operators on how they are navigating the coronavirus crisis. The video will be released on Tuesday (7 April). Meanwhile, readers can support independent sector journalism and get their news 12 hours early (at 7pm each night) with a Propel Premium subscription. It costs £395 plus VAT per annum for operators and £495 plus VAT for suppliers. Email to sign up.

Industry News:

haysmacintyre provides further guidance on furlough pay but troncs remain ‘grey area’: Andrew Ball, partner at sector accountancy specialist haysmacintyre, has provided further guidance on furloughed pay but said the issue of troncs remained a “grey area”. He said: “The legislation says ‘discretionary bonus (including tips) and commission payments should be excluded’. So, as I said not crystal clear but, on balance, I think this includes troncs. Although this will be disappointing news for many, I have a couple of thoughts here. The worst thing companies can do is claim, pay out and then the government retrospectively clarify the law – it’s not like you can ask the employees for the money back and the company will be left ‘holding the baby’. We in the sector have been arguing for years the tronc doesn’t form part of the payroll and therefore not subject to National Insurance Contributions, albeit it is serviced through the payroll. And now we are arguing the flip side of the coin. I worry in the long term we need to be careful what we wish for. I still hope there is absolute clarity before the first claims are made.” Apprentices can be furloughed and can continue to train. However, during training they must be paid at least Apprentice Living Wage or National Living Wage. Apprenticeship levy and student loans should continue to be paid and the grants do not cover these. Agency workers, where paid through the payroll, can be included in the furloughed scheme. Directors on furlough may carry out their statutory duties “provided they do no more than would reasonable be judged necessary for that purpose”. Ball said employees can be furloughed on multiple occasions, suggesting there was no minimum time they can be taken off furlough.
haysmacintyre is a Propel BeatTheVirus campaign member 

Furloughed employees can continue to train, government confirms: Furloughed employees can continue training, the government has confirmed in its updated guidance on the Coronavirus Job Retention Scheme. The guidance also states in most cases the furlough payment of 80% of an employee’s regular wage, up to the value of £2,500, will cover the cost of these training hours. CPL Learning, which delivers hospitality-based training and development, has welcomed the news. Chief operating officer Jamie Campbell said: “In what is a challenging scenario for everyone, this gives an opportunity to support furloughed teams with their personal development as well as keeping teams engaged in the business at a time when communication is more important than ever. We’ve seen some incredible examples in giving support through well-being and mental health initiatives and now this gives the flexibility to extend to broader personal development and readiness for reopening – whenever that may be.”
CPL Learning is a Propel BeatTheVirus campaign member 

Peter Backman – foodservice sales to fall 89% in second quarter: Industry analyst Peter Backman has forecast foodservice sales will be down 89% in the second quarter of 2020 compared with the previous year. He said: “Many foodservice businesses have now been mothballed, with operations being stopped and workforces furloughed. Of course this does not apply to all people and to all businesses. I have adjusted my figures for the foodservice sector in light of how restaurant, quick service restaurant and pub operators have reacted to the requirement to limit their operations to takeaway and delivery services only. Many operators have taken the view additional income available through these channels is inadequate to justify putting their workers at risk; and many workers have, in any case, decided they are unwilling to work given the risks involved. Accordingly, many leading brands have decided to close down their operations completely. Other players have kept some operations going in order to provide food for key workers, especially NHS workers. Smaller operators, especially owner-run independents continue to trade, but at very low levels. Having reduced the value of food purchases that I now believe fell by 9% in the first quarter (and note the figures were trading up on last year until early March – the fall in the past two weeks of the month was, of course, very large), I expect sales in the second quarter to be down by a huge 89% compared with the same quarter last year. In light of the fall in demand, the supply chain has been under severe pressure. Suppliers who focus on foodservice are pivoting to supplying retailers, or directly to consumers – and that especially includes the larger wholesalers. But these initiatives are nowhere near filling the hole created by lost foodservice business. Restaurant delivery has started to pick up but is hampered by the lack of larger brands that no longer feature on delivery platforms, but in normal times act as a major pull for getting customers to visit the apps and websites.”

PCA calls on pub-owning businesses not waiving rent to demonstrate how they will support tenants: The Pubs Code adjudicator (PCA) and deputy adjudicator have called on all code pub-owning businesses not currently waiving rent to demonstrate how they will support every tenant for the duration of the coronavirus (covid-19) crisis. The PCA stated: “The covid-19 emergency creates a threat to the livelihoods of tied tenants. Those tenants will need the support of their pub companies if they are to survive in their pubs and to return to profitability once the crisis has passed. The PCA and deputy adjudicator are aware five of the six pub companies regulated under the Pubs Code are among those who have not yet waived any rent for tenants of their pubs. These are the largest pub companies in England and Wales – each having at least 500 tied pubs. The PCA has made contact with all of the regulated pub companies. We are exploring what they are doing, and what more they can do, throughout this emergency period to support their tenants. While recognising they are all facing their own difficult challenges during this period, there is an opportunity now for them to demonstrate leadership to the wider industry and to show they will go as far as anyone to protect each tenant and how they will do that.”

Independent operators to be given chance to sell cocktails in ‘virtual bar’: Independent operators are to have a chance to sell cocktails in a “virtual bar” as part of a new initiative by spirits company Bacardi. As part of its #RaiseYourSpirits campaign, the company has teamed up with Deliveroo Editions to allow cocktails to be delivered from Thursday, 16 April to customers in London and Manchester. It will give more than 120 outlets and their bartenders a platform to generate revenue from their cocktails. Bacardi UK & Ireland managing director Amanda Almond said: “Our strong relationships with bars and bartenders in the UK is incredibly important to us, and as we face the current challenges together, we’re doing all we can to provide the support they need.” Bacardi has already pledged an initial £1.5m to help the bartender community across Western Europe. Bacardi is also hiring bartenders to host training events or to serve cocktails at events and pay their fees in advance. It will also support the industry through the buying of cocktail vouchers and pre-paying for events held in bars. In addition to its #RaiseYourSpirits initiative, Bacardi is helping to combat the spread of coronavirus in the UK and Ireland through the production of hand sanitisers. The Bombay Sapphire distillery in Hampshire is producing 2,000 litres per week, for donation to local doctors, chemists and care homes. Meanwhile, in Scotland, Dewar’s Blended Scotch Whisky has donated more than 650 litres of hand sanitiser to local front line services.

Job of the day: COREcruitment is working with a Middle East-based food and retail business to prepare for growth in 2021. With a strong portfolio of casual dining and grab-and-go business, the company has significant plans to not only take on new franchise concepts but also expand existing business further into Asia and new regions of the Middle East. Anyone interested in considering an international move later in the year and has experience in an operations director position or above can send their CV to
COREcruitment is a Propel BeatTheVirus campaign member

Company News:

Goodbody – latest TRG action indicates group would now survive on existing facilities until year end in event of very prolonged shut-down: Goodbody leisure analyst Paul Ruddy has said the latest action by The Restaurant Group (TRG) indicates the group would now survive on existing facilities until the year end in the event of a very prolonged shut-down. Ruddy said: “As of year-end the group had cash net debt of £287m and more than £160m of cash and facilities. Working capital was made up of £188m of payables offset by £48m of receivables and prepayments. We would assume there was negligible cash burn in January and February so the group entered this crisis with good room in facilities. TRG set out a scenario at the end of March encompassing a ten-week shut-down in leisure before normalising in the second half, and a 92% decline in concessions with a recovery to minus 32% in the second half. In this scenario net debt would be in a range of £209 to £263m on an Ebitda range of £95m to £105m. It would retain £75m of cash liquidity throughout the remainder of the 2020 financial year. This assumed concession rents are turnover based and assumes a 50% reduction in its rent roll. Its latest update indicates the group will have a minimum of £90m of cash and facilities under its scenario. If the shut-down persists beyond its initial ten-week projection, the group highlighted monthly cash burn will be £15m and this should now be lower given government support for furloughed workers. This indicates the group would survive on existing facilities until year end, in the event of a very prolonged shut down. Overall, it is encouraging to see TRG’s lenders are being supportive. The group appears to be taking very swift and decisive action on costs with board changes and remuneration cuts providing further evidence of this. There was media speculation last week the group needed to do a rights issue. However, our view is the group is focused on getting costs under control and ensuring it has sufficient wiggle room in its existing debt facilities to survive for an extended period.”

McDonald’s seeing delivery grow about 20%: McDonald’s chief executive Chris Kempczinski has said its global $5bn delivery business is seeing a spike as restaurants across the US move to takeaway operations. In an interview with CNBC, Kempczinski said delivery was growing at about 20% and “through this crisis, we're seeing our delivery sales become even more pronounced”. In China, where 95% of the company’s restaurants are open, Kempczinski said delivery growth has sustained post-crisis, which could be the trajectory for the US. Kempczinski said the company has had to close 50 of circa 14,000 restaurants in the US, mostly because they are part of a building or attraction that has shut. He added: “We are better set up than most to continue to operate in what is certainly a very trying time.” Giving further detail about the support the company was giving, Kempczinski said it was working with franchisees and lenders to restructure loan payments and getting payment extensions from suppliers. It’s also offering rent deferrals, which typically were a percentage of sales. “We're all really chipping in and it's incredibly important for us to keep our franchisees viable and open through all of this so they can serve the community,” he said.

Honest Burgers teams up with City Harvest: Active Partners-backed Honest Burgers has teamed up with City Harvest, a charity that distributes surplus food in London, to provide food for those facing poverty across the capital. Since closing its restaurants, Honest Burgers said it had decided to repurpose its “quality ingredients into delicious single serving meals to feed NHS workers on the front line”, and by joining forces with City Harvest it is able reach the vulnerable facing food poverty in London. At the same time, Bidfood has donated some ingredients to Honest Burgers. Tom Barton, co-founder of Honest Burgers, said: “About three weeks ago, with a heavy heart, we decided to close down our business while we fight through this pandemic. It just didn't feel right to put so many of our teams in harm's way. This then left us with lots of surplus food and we couldn't let it go to waste. We set about turning our prep kitchen and butchery into a ready meal production line and have managed to cook up in excess of 5,000 meals with the same quality ingredients we use in our restaurants. City Harvest has been the link to getting these meals to people that need them. We need more charities/people businesses like City Harvest in tough times like these!” City Harvest chief operating officer Nikki Tadema added: “City Harvest is delighted to be working with Honest Burgers helping it distribute their meals to community groups and food banks that are getting them directly to those who cannot afford to eat.”

JD Wetherspoon boss criticises MP for inventing fictitious meeting: JD Wetherspoon chairman Tim Martin has criticised an MP who invented a story claiming he appeared before the Business Energy, Industry, Strategy committee, whose chair is Rachel Reeves, now shadow chancellor of the Duchy of Lancaster. As a result of the fictitious meeting in front of Reeves’ committee, Jo Stevens, MP for Cardiff Central, alleged on Twitter that Wetherspoon changed its policy towards paying staff during the coronavirus outbreak. Martin said: “These comments by Jo Stevens refer to a meeting that never happened. I never appeared in front of Rachel Reeves’ committee, as Stevens and Reeves both know. It’s also untrue to say Wetherspoon had decided ‘not to pay 43,000 staff while pubs are shut’. In a video recorded on Sunday, 22 March – less than two days after the pubs shut, and three days before Stevens comments, I said: ‘All our endeavours are going to be on trying to make sure you get your money and the pubs reopen.’ An email was sent with the video saying ‘all employees will be paid as normal on Friday, 27 March for all hours worked up to and including Sunday, 22 March.’ Stevens comments also appear on a BFAWU (a trade union) website, and so will inevitably mislead the public. MPs made it abundantly clear during the Leveson Inquiry journalists have a duty to correct misleading statements. Reeves and Stevens also have a duty to uphold these principles themselves.”

Tom Kerridge helps raise more than £100,000 for free meals: Michelin-starred chef Tom Kerridge has helped raise more than £100,000 to fund free meals for front line NHS workers and the vulnerable. The money will pay for 600 meals a day for six weeks for hospitals and those in need in the Buckinghamshire and Berkshire areas. The Meals From Marlow campaign – an initiative launched by Kerridge and a group of volunteers from Marlow – raised the money in 48 hours. Kerridge has provided kitchen facilities and supervision while chefs are donating their time and effort to produce the meals daily. The aim now is to raise more funds to expand to 1,000 meals a day for a longer period. Kerridge said: “I know the people of Marlow are a very generous group but I'm astonished by the speed and the level of kindness.” Kerridge runs the two-Michelin star restaurant The Hand and Flowers as well as pub The Coach in Marlow along with The Bull & Bear at the Stock Exchange Hotel in Manchester, which is operated by GG Hospitality. 

Petersham Nurseries launches online grocery initiative: Richmond-based Petersham Nurseries has launched an online grocery initiative. Customers in parts of south west London are now able to order premium organic meat and fresh fruit and vegetables from the family farm, Haye Farm in Devon. There is also a selection of Italian cured meat and cheese and other dairy produce, as well as larder essentials such as dried beans, pulses and pasta, and drinks. Orders are for a minimum of £30 and are available for collection or delivery, with customers picking up provided with a two hour time-slot. 

Kerb to broadcast industry workshops: Street food market operator Kerb has taken over its newly launched television platform to broadcast industry workshops, offering training and advice on running – and launching – a business in these challenging times. With sessions covering everything from recipe development to marketing, finances and how to get that first pitch, Kerb said it was “pulling out the stops with an expert team of industry insiders to deliver unparalleled insight into their experience”. The Kerb workshops have gone on to produce street food operators including Bleecker Burger, Club Mexicana and Biff’s Jack Shack. The workshops will be running online all week to “keep the wheels turning and allow current and aspiring street food vendors to grow their knowledge and insight from the comfort of their own homes”.

Deliveroo to offer ‘Seder-to-go’ kits: Deliveroo is to offer emergency Passover kits to members of the Jewish community who are struggling to obtain special food for the Seder meal that marks the start of the week-long festival on Wednesday (8 April). The company has partnered with the Jewish charity Chabad Lubavitch UK to provide the “Seder-to-go” kits. Each box will have six small containers containing the items needed for the Seder plate and a roll up Seder plate. Also available are a box of Matzah, a bottle of grape juice, a bottle of wine, a Kiddush cup and a Haggadah – the text recited at the Seder. The move is aimed at people who are vulnerable or self-isolating, and are unable to go shopping to buy items for the Seder. Delivery will be free of charge and contact-free. Chabad Lubavitch UK chief executive Rabbi Bentzi Sudak said: “These kits will help to ensure every Jewish person is able to celebrate the festival of our freedom in these challenging times. Not only do the kits provide essential supplies for people who cannot go out to shop for Passover provisions, they mean that vulnerable people who should be staying at home do not have to choose between their safety and having a Seder.” 

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